2013 Cotton Report Published
16 July 2014
In a year where heat and flooding impacted profitability, Australian cotton growers won’t be surprised that analysis of the 2013 crop reveals results well below those achieved in 2012.
The recently published Australian Cotton Comparative Analysis (ACCA) report for 2013 shows the ‘average grower’ attained a value per bale of $427 compared to $486 the previous year. The result for the ‘top 20%’ of growers was a similarly disappointing $445 per bale, a decrease of $33 from the 2012 result.
This report is the ninth to be produced by Boyce Chartered Accountants in conjunction with the Cotton Research and Development Corporation (CRDC). From 1986 to 2004 the report was published independently by Boyce. The study is regarded by the cotton industry as the benchmark for the economics of cotton growing in Australia.
The ACCA includes detailed information about the income and expenses associated with growing fully irrigated cotton on a per hectare basis. The aim of the study is to collect and critically analyse data to assist the industry to grow and develop sustainably through a focus on best practice techniques.
The 2013 report is based on sample figures from participants who produced just over 520,000 bales of cotton – representing approximately 11% of total cotton production in Australia. The average hectares planted per participant declined to 1,518 in 2013 from 1,676 hectares in 2012.
The 2013 growing season was a difficult one with very little in-crop rain and severe heatwave conditions prevailing throughout January. Some areas experienced twice the average number of days with temperatures in excess of 35 degrees Celsius. The heatwave was followed by flooding rains over most of eastern Australia.
Despite the challenging growing conditions, the average yield increased by approximately half a bale against the three year average.
Report co-author, Paul Fisher, Director Boyce Moree, noted that yield is the most significant difference between the top producers and the average. This increased yield has two impacts; increased income and reduced cost per bale. In 2013, the cost of production for the top 20% of growers was $281 per bale, $75 lower than that achieved by the average.
The focus for growers wishing to improve their cotton operations should be on understanding how to improve yield as cheaply as possible.
Long term average figures for the top producers prove that it is possible to achieve a benchmark cost of production in the range of $290 to $350 per bale in a ‘normal’ year.
The cotton industry as a whole continues to embrace new technology to drive production although the report cautions growers to carefully consider the impact to the profitability before adopting new technology.
As noted in previous years and again in the 2013 report, many land-holders have achieved large increases in net assets from the increase in the value of land and water licences, rather than through the accumulation of profits.
Our view is that it is likely that the capital growth of water and land has slowed in the established cotton-growing valleys which will lead to a renewed focus on profits. This will hopefully result in growers seeking to identify and implement changes to their businesses as they strive to achieve results to match the top producers and sustain a healthy cotton industry.
Boyce and the CRDC encourage all growers to consider participating in the benchmarking study as a way to greatly enhance understanding of the key drivers that consistently define the top cotton producers in Australia.
The 2013 Australian Cotton Comparative Analysis can be downloaded here or for more information about the report or how to participate in the 2014 study, contact Paul Fisher or David Newnham at Boyce Moree on 02 6752 7799.