The Australian heatwave, which has prompted official
meteorologists to add new colours to their weather maps, has underpinned an
uptick in sentiment on cotton prices reflecting US dynamics too.
Australia on Monday saw its hottest day in history, with
temperatures across the country averaging 40.3 degrees Celsius (105 degrees Fahrenheit),
0.1 degrees higher than the previous record set 30 years ago.
The extent of the heatwave, which saw temperatures in the South
Australian town of Oodnadatta hit 48.2 Celsius, has prompted the Australian Bureau
of Meteorology to add dark purple and magenta to its colour-coded forecasting
maps, representing temperatures of 51 to 54 degrees Celsius, "to better
understand what temperatures we might see".
And, on agricultural commodities, it has supported prices of
sorghum, which stood at Aus$262.50 a tonne on Wednesday, remaining above its
highest levels of the last six months, supported by fears that the heat will
harm harvest prospects already diminished by dry spring sowing conditions.
It has also sparked concerns over production of cotton, a
commodity in which Australia has been expected to gain second rank among
exporting countries in 2012-13.
'Cotton may suffer'
"Although the wheat-growing areas in the west and south-east
of the continent are being affected by the high temperatures, harvesting of the
wheat is now largely complete, so no significant negative effect on the quality
and quantity of the harvest is likely," Commerzbank said.
"By contrast, the cotton crop may suffer – some cotton is
grown in those parts of eastern Australia which are experiencing the heat wave."
Australia's cotton is grown almost exclusively in the eastern
states of New South Wales and Queensland.
The US Department of Agriculture - whose world crop estimates
are up for revision on Friday in its benchmark Wasde report - currently estimates
Australian cotton production in 2012-13 falling 27% to 4.0m bales, with sowings
depressed by lower prices.
With high carryover stocks from last season, this would
still enough to support exports of 4.2m bales, a figure second only to that of the
US exports jump
Indeed, as another support to cotton prices, Commonwealth
Bank of Australia's Luke Mathews highlighted strong US export sales data.
"Cumulative US cotton sales over the past four weeks are
408% above year ago levels, supporting the recent firmer tone in global prices,"
He also highlighted an estimate by the US Department of
Agriculture's New Delhi bureau that the Indian crop looks like coming in at
25.3m bales, 200,000 bales below the official USDA figure.
The lower figure "suggests global supplies will be trimmed" in
the USDA's Wasde report, and that "India will only be a small cotton exporter
in 2012-13 compared to the past few seasons".
cotton to be planted'
Meanwhile, US production this year may be squeezed by a drop
in sowings, as in Australia, prompted by the relatively low price of cotton,
down two-third from 2011's record highs, at a time when values of many
competitor crops, such as corn and soybeans, remain historically elevated.
US cotton acreage will shrink 16% to 10.3m acres, a survey
by Reuters showed.
"Considerably less cotton is likely to be planted in the US
in 2013 on account of the low prices," Commerzbank said.
"In the past 26 years, the only times the cotton acreage was
any lower was in 2008 and 2009. The acreage cut at that time sparked a massive
price rise to over 200 cents per pound until early 2011."
The comments follow an assessment by Macquarie on Monday
that "2013 should be the turning point for cotton as supply falls to more
manageable levels versus demand".