Cotton harvesting area in Australia is estimated at 220,000 hectares which is slightly lower than last year’s level. The cotton production for 2003/04 is estimated at 1.5 million bales, up just slightly at 0.1 million or 7 percent from last year’s drought-reduced crop according to the USDA's Foreign Ag Service (FAS).

"Recent rainfall events suggest that drought conditions experienced in 2002/03 are slightly improved. However, this past year’s severe drought has depleted irrigation water supplies and sharply lowered soil moisture levels," they add.

FAS says short-term rainfall (April-June) improved moisture conditions in Queensland and New South Wales. However, long-term rainfall analysis
for the 24-month period July 1, 2001, to June 30, 2003, shows that
hydrological drought has depleted subsoil moisture and reservoir levels in
these areas, which will constrain cotton production to just slightly
above last year’s level. USDA says water levels in the major reservoirs
within the cotton-producing areas of New South Wales (two-thirds of
Australia’s cotton production) have dropped significantly over the past 2
years.

According to FAS attaché reports and field travel, reservoirs in the
large cotton producing valleys of Gwydir and Namoi are less than 20
percent of capacity. On the brighter side, water levels in the Maquarie Valley catchments (Windamere Dam, 68 percent) and Lachlan Valley (Lake Cargelligo, 56.2 percent) are doing considerably better. Prospects for the 2003/04 cotton crop (September to November planting) are highly
dependent upon the return of normal to above normal rainfall in New South Wales and Queensland during July and August.

"The strong Australian currency relative to the U.S. dollar does not support cotton area expansion, despite the higher Cotlook A-Index, averaging 55 cents per pound for the August-June period, up nearly 14 cents from last year," adds FAS. "During the same period, the Australian dollar strengthened in terms of the US dollar from 1.905 to 1.504. The gain in cotton price has not been enough to offset the rise in the Australian dollar."