THE top 20 per cent of cotton growers in 2018 grew 1.5 bales/hectare more cotton than the ‘average’ farmer, and they did it for $518/ha less.
They also achieved a higher price of $550/bale compared to the ‘average’ farmer’s $542/b.
These were among the key findings in the recently-released 2018 Australian Cotton Comparative Analysis which benchmarked the performance of a cross-section of cotton growers representing 15 per cent of Australia’s total cotton production.
Conducted as a joint initiative between the Cotton Research and Development Corporation (CRDC) and Boyce Chartered Accountants, the annual assessment of the cotton industry’s performance has been running for more than 30 years.
Boyce Chartered Accountants director, Hamish Cullenward, said the latest results showed the 2018 season was the most profitable for growers since the analysis began.
He said many producers had been able to lock in high prices and capitalise on the high yields they achieved.
“The average price was up on previous years, but there were also people participating in the $550/bale plus range. So, with the additional yields and continuing to manage costs, it was the highest the top 20 per cent have ever been,” he said.
The 2018 season was an unprecedented result for the top 20pc of farmers, with a profit of $3821/ha, well above the 2017 profit of $2592/ha and the five-year average of $2901/ha.
The fact that, in 2018, the top 20pc of farmers grew more cotton per hectare at a lower cost per hectare highlights the opportunity for many other growers in the industry.
Looking at the wider, five-year averages, Mr Cullenward said there was a stark difference between the top 20pc of growers and the ‘average’.
“In the five selected years the top 20pc of farmers made 79pc more profit after interest than the average farmer – $2900/ha compared to $1600/ha,” he said.
“That difference is attributed to land productivity: 48pc of that difference was attributed to yield; 14pc to price and better marketing; 28pc to direct cost savings; and 10pc to interest savings.”
The report said the message from these figures was that better land productivity, measured by higher yield, was overwhelmingly the major feature of the top performers.
“Farmers should concentrate on growing higher yield within a realistic cost framework rather than searching for dramatic cost cutting measures if they wish to improve their performance significantly.”
Mr Cullenward said the analysis highlighted the differences between the cotton-growing valleys of Queensland and New South Wales which all had their own dynamics.
“Down south the big one is water. Water charges are well above the other valleys. You can really see the price of water and the impact that has on the analysis. You can see that the profit in that valley is lower,” he said.
“But you can also see that the interest in the southern valleys is higher which is probably reflective of people going into the newer industry down south and gearing up. The average hectares are lower than the other valleys in the north.”
Top 20pc of farmers:
For the average farmers, this was the highest net profit per hectare seen in the history of the report. Similar to the prior three years, 2018 was another great season, with net profit of $2234/ha being higher than last years’ $1557/ha and higher than the five-year average of $1621/ha. Based on these figures, a yield of 7.77b/ha was required to cover total expenses, a figure which is well below the five-year average of 8.59b/ha.
For the full CRDC and Boyce Chartered Accountants ‘Australian Cotton Comparative Analysis’, click here.