- Cotton area expected to decline to the lowest level since drought years
- Production forecast drops sharply despite improving global prices
Australia’s cotton industry is expected to face another year of contraction, with production forecast to decline to around 3 million bales in 2026-27 as limited irrigation water availability continues to restrict planting decisions. The projected crop would mark a significant decline from the estimated 4.5 million bales produced in 2025-26, when harvested area fell by 22% y-o-y to approximately 470,000 hectares due to lower water allocations across major cotton-growing regions.
Water availability remains key driver
Lower reservoir levels and tighter irrigation supplies are expected to reduce planted area to just above 400,000 hectares in 2026-27, the lowest level since the drought-affected 2020-22 period. Industry participants indicate that water security, rather than cotton prices, remains the primary determinant of planting intentions. While harvest conditions in 2025-26 were generally favourable and crop quality met expectations, growers continue to face elevated input costs and uncertainty over future water allocations.
Global market may provide price support
The supply outlook comes as global cotton fundamentals tighten. USDA projects lower global ending stocks in 2026-27 as world production declines while mill consumption improves modestly, creating a more supportive pricing environment. Export-oriented suppliers such as Australia could benefit from stronger international demand despite reduced output volumes.
Australia remains a key exporter to Asian textile manufacturing hubs, particularly Vietnam, Bangladesh, and China. With domestic consumption limited, most of the country’s cotton production is directed to export markets. A smaller Australian crop could tighten high-quality cotton availability in the Asia-Pacific region, potentially supporting export premiums if demand from spinning mills strengthens in the coming season.
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