Namoi sees ‘challenging’ FY21 despite widespread rain

Grain Central June 26, 2020

Split Rock Dam. shown here in 2018, is one of many NSW storages with little or nothing to offer irrigators at present. Photo: TripAdvisor

SOAKING rain over New South Wales in recent months has done little to buoy prospects for a big cotton-planting this spring, and has Namoi Cotton Limited as Australia’s biggest ginner and marketer ready for yet another challenging year.

In its 2020 Annual Report released to shareholders today, Namoi chief executive officer Michael Renehan said Namoi’s current financial year to ending February 2021 would not be without its difficulties.

“We know that FY21 will be a challenging year, with the Australian crop just over a record low forecast of 600,000 bales,” he said.

“Namoi Cotton has prepared itself for this volume by scaling back our ginning footprint in line with customer forecasts.

“We have strong support from our banks, and have put in place robust capital-management processes to ensure our financial sustainability.”

Mr Renehan said Namoi Cotton would complete its modernisation in coming months and be positioned to meet the industry’s requirements.

This follows a major restructure announced last year.

Namoi Cotton chairman Tim Watson said widespread rain in all Namoi’s growing areas early in 2020 had been “extremely positive”.

“Whilst this has not translated into large cotton-planting intentions, it has enabled our growers to plant a significant area of winter crop,” Mr Watson said.

Low dams

Namoi owns and operates gins from Goondiwindi in the Macintyre Valley on the Queensland-New South Wales border to Hillston in the Lachlan Valley of southern NSW.

Irrigators in those valleys who have not been able to harvest rainwater landing on their farms, or do not have bores for irrigation, or carryover from previous seasons, are looking at small to zero irrigation allocations on which to plant a crop this spring.

However, significant inflows to public storages, and downstream of them in cotton-growing valleys, could improve the production outlook for cotton grown over the upcoming summer. Current percentage of full capacity storage levels in public dams are shown in table 1.

Valley Dam Storage level per cent
Macintyre Pindari 12.6
Gwydir Copeton 13.3
Namoi Keepit 14.6
Namoi Split Rock 4.6
Macquarie Burrendong 22.9
Lachlan Wyangala 16.4

Table 1: Dam levels of public storages which supply allocations for cotton-growing areas: Source: Water NSW

So while the drought has all but broken in most of NSW, cotton area will not rise markedly without a widespread rain event by October.

Drought hit in FY19

As announced in its FY20 results on 30 April, Namoi ginned 449,913 bales of cotton in FY20, down 63 per cent from FY19.

“FY20 was a very challenging year and Namoi Cotton was impacted by many factors including the worst drought in recent history, subsequent reduction in ginning volumes, and volatile market conditions which have challenged all aspects of our business,” Namoi chairman Tim Watson said.

“Despite the extreme drought conditions, Namoi Cotton ginned 21pc of the reduced Australian cotton crop.

“This is in line with our previous year’s market share of the Australian crop.”

Namoi’s seed-trading business shipped and handled 112,000 tonnes of 2019 crop, less than half the 2018 volume of 260,000t, with a strong positive contribution recorded.

Losses from NCA increased substantially in FY20 compared with FY19 as a result of volume decreases as well as shipping delays, contract renegotiations and a decline in the cotton futures market.

In the directors’ report released within Namoi’s 2020 Annual Report, the 2019 Australian cotton crop ginned last year was pegged at 2.15 million bales (Mb), down 53pc from 4.54Mb in 2018.

Early season forecasts estimated the crop at 2.3Mb, but continued dry conditions almost completely decimated the dryland crop, and also adversely impacted irrigated yields.

The latter fell back to 10 bales per hectare in 2019, down from 11.5b/ha in 2018.

Several Namoi gin sites did not process cotton last year, while others operated single shifts and five-day weeks.

Grain Central understands Namoi has opened only five of its 11 gins this season in response to the very small crop picked this year.

Source: With Namoi Cotton Limited





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