Australia cotton output blighted by dry spell, may sink 50pc

Cotton production in Australia may plummet as much as 50 per cent next season as drought curbs water supplies in the world's third-biggest exporter, according to growers and shippers.

Output might be between two million and 2.5 million bales in 2014-15 from about four million this year, said Cotton Australia, the Sydney-based producers' group. Production may total about 2.25 million bales, according to the Australian Cotton Shippers Association. An Australian bale weighs 227 kilograms.

Cotton futures slumped 24 per cent this year as output in the United States, the largest exporter, is set to climb, adding to record global reserves. Australian farmers might plant less after a record drought in Queensland and dry conditions in parts of New South Wales, the biggest producer, said Cotton Australia chief executive Adam Kay.

"Unless we get some pretty serious rainfall in the next two to three months, we're going to see a reduction in area due to lack of water," Kay said, giving the crop estimates for this year and next. "Dryland producers would probably be a little nervous about the price and would be looking at the price for small grains and doing the gross margin comparisons."

Cotton dropped to 62.02 US cents on ICE Futures US on August 1, the lowest for a most active contract since October 2009, before capping a 13th week of losses, the longest decline since at least 1959.

The predicted harvest would be the smallest crop since 2009-10, when output was less than two million bales, Cotton Australia figures showed.