Drought and severe water shortages, followed by flooding and high rainfall, have affected industry revenue.
Melbourne, Australia (PRWEB) January 26, 2015
The fortunes of operators in the Cotton Growing industry in Australia are largely determined by external factors such as global cotton demand, the world price of cotton and domestic growing conditions. According to IBISWorld industry analyst Ryan Kerin, “although Australia is a small cotton producer on a global scale, the industry is reliant on exports through downstream industries”. Over 80% of ginned cotton is sold abroad due to the small size of domestic textile manufacturing industries, and the increasing penetration of fabric and garment imports. Other cotton products, such as cottonseeds, are used by food manufacturers and within the industry to grow new crops.
Trading conditions for Australian growers have fluctuated over the past five years due to increased volatility on the global cotton market. “There have been steep declines in global cotton stocks and erratic swings in prices,” says Kerin. Prolonged drought conditions and severe water shortages, followed by some flooding and beneficial high rainfall levels, have also affected revenue. These factors pushed up the cost of growing cotton and forced smaller, less-viable operators out of the industry. The industry underwent a brief period of resurgence between 2010-11 and 2011-12 as global cotton prices spiked. This spike was short lived, and falling prices and a smaller area sown in cotton is expected to result in industry revenue declining 47.3% to $874.8 million during 2014-15. The industry displays a low level of market share concentration. Major companies include Cubbie Group Limited.
Annualised revenue growth is expected to be 1.4% over the five years through 2014-15. As farmers increased plantings around the world in response to high prices, global production increased, causing world prices to then tumble. However, this has been offset by higher domestic production volumes. Australian cotton producers are expected to enjoy better trading conditions over the five years through 2019-20 as global cotton prices halt their current slide and the total area of cotton farmed increases from the current slump. A projected fall in the Australian dollar will also help the Cotton Growing industry. Increasing global demand from developing countries is likely to sustain demand for the industry.
For more information, visit IBISWorld’s Cotton Growing industry in Australia report page.
Farms in this industry grow cotton. Cotton is the white downy fibres grown on shrubby plants of the genus gossypium. These fibres are used to make textiles and other products.
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