Northern Territory cotton set for huge 2022 expansion

The amount of cotton grown in the region is set to expand significantly next year, with the construction of a new gin unlocking the region’s potential for investors.

After several attempts in the past, and what feels like a few years of slow build-up, it appears that a sustainable cotton industry in Australia’s Northern Territory may have established a foothold.

Agri Investor heard in March 2020 that trial crops had been going well, with the latest harvest earlier this year producing a high-quality crop at decent yields and growers able to make a return, even though the raw product had to be transported hundreds of kilometers to be ginned.

“I think the expansion in the last few years has been very sensible,” LFS Agri managing director Pete Johnson told Agri Investor. Johnson has marketed most of the cotton grown in the NT over the last few years.

“The yields for the crops that have just been picked were generally very good – up to five-and-a-half bales per hectare on rain-grown in the Douglas Daly area, and in general around four-and-a-half bales per ha has been the average in the area north of Katherine. We’ve had pretty good prices for both cotton seed and lint, and the quality has been excellent – I’d say among the best cotton Australia has produced this year.”

This combination of factors has enabled growers to secure decent gross margins, Johnson says, despite the “natural limiting factor” of no operating cotton gin in the region.

Riparian Capital Partners is one of the early movers in the region as part of a joint venture that is share farming with a property owner in the NT. It grew and harvested its first cotton crop this year after observing its operating partner’s first cotton crop in 2020.

Partner Michael Blakeney told Agri Investor: “Even though we had to transport bulk unprocessed commodity across to southeast Queensland for ginning, this year the margin has been sufficient to make a competitive profit.”

High cotton prices contributed to turning a profit this year and Blakeney said that without local ginning infrastructure, transport costs in the future “could be the difference between profitability and a negative return.”

That is set to change, however, with construction underway for the new Northern Cotton Gin in Katherine, although it is still uncertain whether it will be operational in time for the 2022 crop, which is generally picked between June and August.

Another gin has since been announced for the Ord River region in northern Western Australia too, with the crop in that region usually picked in the months following the end of the NT harvest.

Growers and investors are now moving forward with confidence, thanks to the combination of successful trials and the imminent infrastructure upgrades, with multiple sources citing crops grown at Tipperary Station, among others, as helping to lay the groundwork for expansion.

To put this in perspective, Johnson says his analysis of this year’s harvest saw the Ord region produce around 15,000 bales of cotton, with another 21,000 in the Northern Territory. For the 2022 harvest next year, Johnson’s modelling shows that the Ord crop will increase to 50,000 bales, with another 64,000 from the NT.

“The confidence to go forward is there now,” he says, with evidence that the production system works allowing growers to forward sell more cotton than before.

Blakeney says that a combination of factors are contributing to the renewed focus on northern Australian cotton.

“Interest in northern Australia typically ramps up through a dry period in southeastern Australia – and the good yields seen from the initial efforts, combined with strong cotton pricing in the last 12-18 months, are contributing to the growth,” he says.

Even with lower yields than the southern irrigated crops, the fact that the crop is rain-grown rather than relying on irrigation can provide inherent advantages in terms of cost.

With investors increasingly on the hunt for new opportunities in northern Australia – an area seen by many to have huge untapped potential – cotton seems to be proving itself as a good option for those who have got on board early.