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2014 Dryland Cotton Season (with Pete Johnson)

If you are growing or somehow involved in the dryland cotton industry, you will have already heard about the bumper season we are expecting next year. But by the same token, you will also be aware of the varying elements that come together to achieve the bumper season and crop.

This week we chatted to Pete Johnson, who is the Managing Director of Left Field Solutions, about the 2014 season. Pete is also the part owner of Cotton Compass which is an interactive cotton marketing news service that is published weekly.

“Clearly, there are many factors to a good dryland cotton season, including timely planting rain, availability of sub-soil moisture and other agronomic factors.

“However prospects of a good financial return are also critical, and a major reason why dryland cotton will increase in 2014 is the current price of cotton,” Pete said.

“Although cotton prices will fluctuate at planting and ginning, in recent weeks we have seen prices top A$500/bale for the 2014 season – and this is seeing some very solid interest in dryland planting. Recently, wemade some historical comparisons between the dryland cotton area and the Cotton-Sorghum price ratio, and this suggested a very positive outlook for dryland plantings next season.

“For instance after charting the cotton area against the ratio, we know that a cotton-sorghum price ratio of 2.0 means cotton is twice the price of sorghum – or as another example, $500 for a cotton bale against $250 for a tonne of sorghum.

“Generally when the price ratio rises above this 2.0 threshold, then so does the area of dryland cotton, like we saw in 2008/09 and again in 2009/10.

“After coming out of a dry 2007, the Australian dryland cotton area began to increase over two seasons (2008/09 & 2009/10), and then exploded in 2010/11 in response to the good moisture and the ratio pushing above 2.0.

“For the 2013 crop year the ratio backed down closer to 1.5 around planting, and while undeniably there were also other factors at play as well as the ratio, the overall dryland cotton area fell.

“The good news is the current price ratio has recently pushed back above 2.0 and even towards 2.2, suggesting the possibility of a rapidly rising dryland cotton area again this spring.

“Although we haven’t updated our forecast since March, our current plantings estimate suggests we have 65,600 (green hectares) pencilled in for next season which is heading towards a very healthy dryland cotton season.”