PwC report says NT gin for expanding cotton crop stacks up

Grain Central June 11, 2020

Tipperary Station in the Northern Territory planted 300ha of cotton in January this year. Photo: Tipperary Group

A REPORT released this week points to the Northern Territory Government supporting the building of the region’s first cotton gin to improve the economics of an already expanding industry.

Commissioned by the NT Farmers Association (NTFA) and funded by the NT Government, the PricewaterhouseCoopers report pinpoints Katherine as the most desirable location for a gin ahead of Darwin, Edith Springs and Mataranka in the NT and Kununurra in Western Australia.

The building of the NT’s first gin is currently being considered as a part of the NT Government’s proposed Katherine Agribusiness and Logistics Hub, with Queensland Cotton mentioned in the report as the likely processor stakeholder.

“Securing funding from the Northern Territory Governments Local Jobs Fund will underpin the viability of the project,” the report said.

“The grant funding, coupled with Queensland Cotton’s proposed funding contribution, will give financiers the confidence that the gap between feasibility and bankability will be closed.”

Decade of growth

Entitled Business Case for the Construction of a Cotton Gin in the Northern Territory, the report said up to 400,000 bales of cotton could be grown in the NT within the next decade as growers fine-tuned their production to make the most of wet-season rain.

Graph 1: Projected growth in NT cotton production. Source: PwC

It said at least 10 new local and interstate growers and international investors were expected to enter the NT industry in the short term.

“These growers will have to rely on back-loading rates for transport to Queensland while the rates are available, but will expect to see a transport cost uplift of 60pc once the backload capacity is fully utilised.”

The report said the journey of more than 3000 kilometres into Queensland for ginning was unsustainable for a strong cotton industry, which the NT Government has said it wanted to be a “reliable cornerstone” of its agricultural industry.

NT cotton is now being picked and will be trucked to Queensland Cotton’s Cubbie gin at Dirranbandi.

Last year, a total of five growers in the NT and WA Kimberley region filled more than 4500 bales of cotton, all ginned 3000km away in south-east Queensland.

This year, the NT is growing its biggest ever cotton crop of 1000 hectares at Tipperary Station, Douglas Daly and Katherine.

The report said even with cost-effective backload rates, NT growers were charged an extra 34 per cent to their overall costs to gin their cotton and export it from Queensland, and because of prohibitive costs and biosecurity constraints, could not access their seed ex gin to feed to local livestock.

“A local cotton gin therefore has the potential to create significant cost savings for northern cotton growers and added-value benefits for the northern beef industry.”

Right time for cotton

Cotton farming in the NT started in the early 1900s. The NT Government has invested in cotton research for many years, but the industry has had trouble gaining traction because of agronomic, insect and logistics issues.

NTFA chief executive officer Paul Burke said better genetics and improved agronomy made cotton an ideal crop for NT farmers wishing to diversify, and 80pc of it could be grown as dryland.

“The remaining 20pc is likely to be supplemented with irrigation due to variable nature of rainfall which uses around 2-3 megalitres of water per hectare as opposed to full irrigation which uses 6-7mL/ha.

“The development of a cotton gin would create a significant manufacturing investment in the region, creating jobs and ongoing training opportunities, as well as providing significant cost savings for northern growers and value adding to the Territory’s beef industry through local feed production.”

The study suggests a sustainable cotton industry in the NT has the potential to contribute $200 million annually to the NT economy and employ 88 full-time equivalents.

The report said an opportunity existed for the NT Government to use the cotton gin as the hub’s first industrial anchor customer by 2022, even though this may over-service demand in the gin’s early years.



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