Which markets are buying Australian cotton? If you play an active role within the Australian cotton industry or have a broad interest there is no doubt you would be correct in assuming that China does not buy as much Australian cotton as it did in past years.
In 2012 China took 3.7 million bales of Australian cotton and in 2016, just 665,000 bales. This is largely a result of China’s Reserve policy – over much of 2011 – 2014 it was procuring great volumes of cotton to hold in reserve.
China is currently liquidating much of this reserve. With the Chinese Reserve on the way down as is their domestic crop production, China have been somewhat active in the market with decent volumes already sold of Australian into China for 2018. China traditionally buys forward and currently this is what has happened which is comforting to merchants with stock positions.
China remains Australia’s biggest market for cotton exports but outside of this hungry dragon, what does the market look like?
Bangladesh is close on the heels of China in terms of volume, taking more than 500,000 bales between March and August alone. It is very possible that once all data is captured and released in full by the Australian Bureau of Statistics that Bangladesh might be Australian’s biggest customer in 2017.
Vietnam ranks as our third highest export destination – a market that over the last five years has increased year on year. It is worth noting however that the emergence of Vietnam is due largely to the increase of Chinese owned mills operating in Vietnam. As the cost of production increases in China, mill owners look for more cost-effective production and Vietnam is one such country where cotton can be spun (and knitted, woven and made into apparel) at a cheaper rate than China.
India is sitting in fourth place as a major importer of Australian cotton. Whilst India has been a consistent purchaser of Australian cotton, in 2016 India experienced lower than expected domestic production and bought up big with Australian cotton. It seems their 2016 experience was positive and we’ve seen excellent volumes exported to India in 2017. ACSA conducted an export market development visit to India at the beginning of this year and it is pleasing to see India make up a notable section of our 2017 export pie.
Another destination that was more prominent many years ago but now has reappeared is Turkey. Why Turkey has reappeared is due to a shortage of low grade availability as the US crop had one of their best quality productions they have had in many years. Last year the US quality was on par and in a lot of cases better than what Australian cotton has its reputation for. A country like Turkey, time will tell if they are to remain as a country of notable importers of Australian cotton. My opinion is if there are low grade shortages from our competing origins and providing Australia has low grade available then yes, they will remain but if there is no shortage of low grades from our competitors then Turkey will disappear or at least will not consist of notable volume.
From a global view, the top five consuming markets which comprise about 75 per cent of the global total include (and in order) Bangladesh, Turkey, Pakistan, India and China. Australian cotton is represented in all five of these markets but most notably in Bangladesh and China.
While we are speaking of statistics, it is interesting to look at Australian services that facilitate Australian cotton to market.
The Australian ports of Brisbane, Sydney and Melbourne are the only east coast ports that can facilitate big container ships that service our markets in north and south east Asia. The Port of Brisbane in any given year handles more than 50pc of the Australian crop with NSW Port’s Sydney facility consistently between 25 and 30pc. The balance out of Port of Melbourne is steadily increasing with the expansion of production in the Riverina and Murrumbidgee.
Logistically, bales make their way to the Port of Brisbane by road whilst exports out of Sydney and Melbourne receive bales by both road and rail however the rail method is the most prevalent mode of moving containerised bales into these ports.
Logistical modes of getting bales to port is a very important part of a cotton exporter’s business as this part of the supply chain can come with significant cost. The announcement of the inland rail project, the Toowoomba bypass project that is currently under construction and the establishment of new intermodal hubs will benefit greatly the cotton supply chain.
For Australia to remain competitive in the export market, projects like this are necessary and long overdue some may say. Some projects will be completed and available for use before others, however having projects like these and the completion of those projects just mentioned are essential to the cotton supply chain so we can remain sustainable now and into the future.
As the calendar year winds down and most focus is on planting, the majority of 2017 season cotton has been exported with likely only 150,000 bales of the estimated 3.8 million bales crop slated for shipment beyond November.