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Cotton stands tall in field of high returns

by Grain Central, 03 July 2017

THE ‘average’ group of cotton growers achieved a profit per hectare of $1706 in 2016, according to the latest cotton industry economic benchmark report, the Cotton Comparative Analysis.

The report, released for the 2016 crop by Boyce Chartered Accountants and the Cotton Research and Development Corporation (CRDC), shows the 2016 profit was down on the 2015 average of $1899, but well above the five-year average of $1106.

The ‘top 20 per cent’ group of growers achieved a profit of $3159 per hectare – down on last year’s profit of $3388, but well up compared to the five-year average of $2272.

This result was a combination of a reduction in yield, price and total expenses from the previous year.

The report is based on figures from growers who produced 340,000 bales, or 12 per cent of total Australian production.

Final estimates for the 2016 crop were 263,339 hectares planted, an increase of 34pc on the previous year.

The average hectares planted per participant were 878ha in 2016, down from 926ha in 2015 and 1593ha in 2014.

The report notes some interesting trends over time – measured from 1997 to 2016:

  • The value per bale continues to increase slightly (although the authors have seen no real growth).
  • The trendline in growth of cost per hectare continues to rise.
  • Although the yield per hectare fell for the ‘top 20 per cent’ growers, the upward trend continues. (Important to note that the industry is moving towards ‘statistical yield’ – a fixed ceiling beyond which yield cannot exceed – whereas there do not seem to be similar cost constraints).
  • This years’ reduction in profit per hectare for both ‘average’ and ‘top 20 per cent’ growers sees some downward pressure on the profit trendline.

Table: Profit – comparison of ‘top 20 per cent’ to ‘average’ grower

Source: CottonInfo, http://www.cottoninfo.com.au/

Full Cotton Comparative Analysis: http://www.crdc.com.au/publications/australian-cotton-comparative-analysis

Boyce Chartered Accountants: http://www.boyceca.com/

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