The 2013 Australian Cotton Comparative Analysis (ACCA) is the ninth report produced by Boyce Chartered Accountants in conjunction with the Cotton Research & Development Corporation (CRDC). In this report, we present an analytical review of the 2011 results, a comparison with prior years and comments on emerging trends.

The 2013 was a very hot and dry season, with corresponding excessive water usage. Heat and flooding

impacted yields and profitability.

Net profit per hectare was well down on 2012 and the three year average. A low profit year puts pressure

on the industry, with less money being available for debt reduction or reinvestment.

In the 2012 report, we predicted that 2013 and 2014 would be tough financially for the industry. This has

played out in 2013 and seems to be playing out with what looks like low water allocations for the 2014 year.

This will obviously impact the ability of growers to further reduce debt.

The data in the Cotton Comparative Analysis has in previous years been affected by low water; this was an

issue in 2013 and 2014 is likely to be similarly impacted. While much effort continues to be invested in arguing

whether or not climate change is real, our view remains that growers should spend their efforts on ensuring

they can survive and indeed profit during extreme events. If this can be achieved, profit will be maximised

regardless of the outcome of the climate change debate.

Although we have not attempted to analyse in detail the return on assets from a capital growth perspective,

we have noted that in the past, many growers have obtained a large increase in their net assets from the

increase in the value of land and licences, rather than the accumulation of profits. It is probable that capital

growth of water and land has slowed in established cotton growing valleys; for some growers this has formed

the majority of their increase in net assets over time.

The agricultural sector in general and the cotton industry in particular are known for their early adoption

of technology. The technology available today, whether it is genetic, machinery-based or relating to systems

and process, is no doubt leading to increased yield and reduced labour. The question is though, at what cost?

If maximisation of profit is the goal, we think growers should establish the impact of technology on profitability

before it is adopted.

A slowing to the increase of asset values will see a greater focus on profits. This focus should hopefully result

in farmers understanding what it takes to be in the top 20% and striving to ensure their business implements

the necessary changes to achieve this objective. A healthy irrigated cotton farm cannot survive on capital

growth alone.

The 2013 Australian Cotton Comparative Analysis maintains our goal to measure and analyse the

components that provide farmers with a stronger financial bottom line.

The Australia cotton industry, through providing reinvestment in best management practice, sustainability

programs and in the communities in which it operates, plays an important role in the agricultural sector

of this country