The cotton industry is an integral part of the Australian economy, worth more than $2 billion per-annum in export earnings and helping to underpin more than 50 rural communities.
Cotton is produced in more than 100 countries in the world, but six of them - China, India, Pakistan, USA, Brazil and Uzbekistan - contribute about 80 percent of production. On average 33-34 million hectares are planted to cotton annually around the world, producing about 26 million tonnes of lint.
Australia produces three percent of the world’s cotton but is the third largest exporter, behind the US and India. More than 99 percent of Australia’s cotton is exported.
For Australia’s growers to compete in a heavily subsidised world market (where government’s essentially pay their growers to produce cotton) they must be extremely efficient, grow high yields and keep their costs as low as possible.
Cotton growers “sell” their cotton to one of a number of Australian merchants who then sell it into the world’s markets, aiming to get the best price possible.
Australian cotton prices vary due to the world cotton price (denominated in US dollars) and the Australian-US dollar exchange rate. This is reliant on a number of factors including world supply and demand, the value of the Australian dollar, quality, ability for growers to fulfil their contracts and shipping the cotton on time. The price that a grower receives goes up and down depending on how all these factors come together at a given point in time.