Jan. 13 (Bloomberg) — National Australia Bank Ltd. cut its cotton production estimate for Australia, the fourth-largest exporter, by about 10 percent after more than 75 percent of Queensland state was declared a disaster zone because of floods.
Output may drop by 400,000 bales following the flooding, Michael Creed, an agribusiness economist at the bank said today by phone. The bank last month estimated production at 3.8 million bales, each weighing 227 kilograms (500 pounds).
Flooding in Queensland has killed at least 13 people, destroyed roads and inundated properties in the state, which produces about 40 percent of Australia’s cotton, according to Rabobank Groep NV estimates. Prices of the fiber rose to the highest level in more than two-weeks in New York yesterday as loss estimates are reviewed.
“We really won’t know until the floods recede and people actually assess what the damage is,” Creed said. “It could be higher and it could be lower.”
Cotton for March delivery rose 1 percent to $1.4940 a pound on ICE Futures U.S. at 2:13 p.m. Melbourne time. The price yesterday jumped by the exchange limit of 5 cents to $1.5225, the highest level since Dec. 23.
Estimates for the Australian crop were mostly between 3.8 million to 4 million bales following the floods, FCStone Australia Pty Senior Advisor Markets David Watson said today.
Flood-related damage of 500,000 bales may be partly offset by yield potential in New South Wales and areas of Queensland not affected by inundations, he said. Improved weather over the next one to two weeks would also help crops recover, he said.
The U.S. Department of Agriculture left its Australian cotton forecast unchanged yesterday at 4 million bales of 480 pounds each. That would equate to 3.8 million Australian bales.
“They have obviously started on the conservative side and at this stage it is still a little bit too early to make firm adjustments to the crop from their point of view,” Watson said.
Cotton Australia, which represents growers, processors and merchants, would complete a more detailed survey of the damage before revising its forecast made last year of 4.2 million bales, spokesman David Bone said today.
There remained the risk of further flooding in the St George cotton area as waters from the inundated Condamine River flow westward, he said.
National Australia Bank’s revised estimate would drop output below the previous record in 2000-2001, based on data from the Australian Bureau of Agricultural and Resource Economics and Sciences. Output that year was 819,000 metric tons, equating to 3.6 million Australian-sized bales.