Top of its game
The Australian cotton industry is at the top of its game, and that’s a difficult place to be. When you produce the world’s highest yields of best-in-class cotton lint—three times the global average—with world-class efficiency in your use of water and inputs like pesticides, where do you have left to go?
To the market, says Cotton Australia Chief Executive Officer Adam Kay. Now that Australia has built a world-beating fibre supply chain, Kay wants that fibre, and its supply chain, to get more recognition.
“It’s time to sell the story of Australian cotton and build understanding of what we’ve done here, so the market pulls through Australian cotton as a preferred product,” Kay says. “Brands want to make sure they are using raw materials with a good provenance story, and we’ve got it.”
However much the Australian cotton industry achieves, Kay says, it still produces a globally-traded commodity and its pricing is set accordingly. Australia’s 1,500-odd cotton producers remain highly profitable because of the industry’s decades of investment in yield and quality, which ensures that productivity more than compensates for the high cost of production and that every quality bale can be sold.
But others are catching up, according to veteran cotton trader Cliff White. White spent 15 years as Chief of Queensland Cotton before forming cotton trader Omnicotton Australia. He has watched as industries in the United States and Brazil improve the quality of their much-larger harvests.
Even the Indian subcontinent—helped by the technologically levelling effects of genetically modified cotton—is making strides on quality.
“It’s a question of how we stay ahead of the pack,” White says. Australian cotton’s desirability rests not just on its quality, but its supply chain. “We’re fantastic at getting consignments to customers quickly and efficiently. But while we produce a premium product that gets to where it’s needed fast, we can still lose market share by pricing ourselves out of the market.”
If the Australian industry could maintain its pace of productivity development, that might be less of an issue. But Kay reports that some Australian producers are now thought to be nudging the biophysical limits of the cotton plant’s ability to produce lint. Without some technological revolution to alter the nature of photosynthesis that could set a productivity ceiling that can’t be innovated around.
Which partly explains Kay’s desire to broadcast the virtues of Australian cotton not just to buyers of raw cotton bales, but buyers of cotton shirts and underpants. Fortunately, the Australian cotton industry has quite a story to tell. In 2017, it is set to harvest 4.4 million bales, roughly equivalent to a million tonnes of lint. It is also about three times larger than Australia’s wool clip, signalling just how far one fibre has risen in the nation’s fortunes.
It’s man-made fibres, however, that mostly concern Kay. Synthetic fibres make up about two-thirds of the global fibre market. Cotton contributes to about a quarter of global fibre consumption (of which Australia only contributes about 3 per cent). Wool has shrunk to less than 2 per cent of global fibre. Synthetic fibre is cheap, ubiquitous and able to be marketed based on ‘functionality’, with properties like stretch or moisture wicking engineered into the fibre.
The cotton industry is working on developing similar functional attributes but for now the industry is working on consolidating a general appreciation of the wearability of cotton by building a story around its provenance as a natural fibre.
“This desire for a provenance story is growing,” Kay says. “People want to know where their food comes from and they also want to know where their fibre comes from. We’re well positioned to give them confidence. All that work of the past 20 years of reducing pesticides and increasing water use efficiency and the [fair] way we treat our workers in Australia; globally, this is supporting pull-through of Australian cotton. Brands and retailers want to protect their brand, so they don’t want cotton that has been hand-picked by children, or cotton from somewhere there has been pesticide poisoning.”
Target Australia sells 100-per-cent-Australian cotton ranges and internationally, Kay reports, other brands and retailers are looking at the marketing possibilities of Australian cotton.
Cotton Australia has been aligned with the global cotton sustainability project Better Cotton Initiative (BCI) since 2012.Developed by WWF as part of its project to encourage sustainable practices in the production of key commodities like beef and fish, BCI is supported by major retailers like Gap, H&M and IKEA. Cotton Australia worked with the BCI program to align its Best Management Practices program, myBMP, with BCI’s sustainability criteria.
The Australian cotton industry is also engaged in a second supply chain sustainability program called Cotton LEADS, in partnership with its American counterpart. Intended to give the market “a reliable cotton supply chain solution and confidence that their raw material is responsibly produced and identified”, the program has also attracted a raft of retailers who don’t want their clients surprised by unhappy stories of child labour or environmental degradation.
Kay reports that there is some bemusement about this alliance with a behemoth competitor industry. “People say to us, ‘why are you working with the US? Why are you helping Pakistani farmers produce cotton more sustainably?’” (The Pakistan farmer training project is also being conducted in partnership with BCI.)
“The fact is, our competition isn’t the Pakistani or US cotton industries. The competition is man-made fibre. We need to do all we can to raise the standard of cotton production. We’ve done it in Australia but we need to do more around the world to give retailers the confidence.”
Crucially, that job comes back to the work of the industry as a whole. Cotton growing is not a guild with a code of conduct. Growers come and go, depending on cotton prices and the availability of water. Cotton Australia estimates that good prices and the availability of irrigation water pulled 200 new or returning growers to cotton growing this season who were not working with the crop last season.
That’s partly because growing cotton has become a lot less risky than it once was. GM varieties have played a big role in reducing costs and risk, and the introduction of the self-baling cotton picker and a growing contractor culture means that cotton can be grown with less investment in infrastructure. And right now, the major risk for irrigators is taken care of: water storages are full and set to deliver full irrigation allocations for the next two years.
“I don’t want to talk people into growing cotton, but if someone does want to, we want to work with them,” Kay says. “We also want to remind them of their responsibilities. Back in the eighties we had some big social licence issues. We’ve really worked hard to overcome that, so there are responsibilities when you come into the industry not to drag it back to the old days.”
Cotton's water use efficiency
The Australian cotton industry has had its share of unwanted publicity and has largely dealt with its bogeys, but water is an issue that will not go away—largely because in drought everyone is reminded what a scarce resource it is. The cotton industry has vigorously tackled criticisms that it is a ‘thirsty’ crop.
Its water use efficiency—kilograms of lint produced per litre of water—has improved by 40 per cent over the past decade. It produces more ‘crop per drop’ than any other cotton industry in the world. Besides, Cotton Australia’s Adam Kay says, the water allocated to irrigation will get used regardless of whether cotton is grown or not. It happens that cotton is frequently the most profitable use of water. Therefore, those who can grow it, do, in preference to other crops. Nor, in Kay’s view, should the cotton industry have to carry all the outrage over problems in our river systems. Issues like cold water pollution downstream from dams—cold water released from the bottom of dams stifles native fish-breeding cycles—could, he argues, be readily resolved by the Murray-Darling Basin Authority investing in curtains to direct warm upper water through dam flumes.
“In regional communities, where people get to see directly what we do and how we do it, we have no issues with social licence,” Kay says. “We just have to bring others up to speed on the fact that we’re a modern industry, just as concerned about our sustainability as everyone else.”
Words: Matthew Cawood
The articles represent the views of the authors and not necessarily that of the Bank. You should seek independent professional advice before acting on any matters set out in the articles.