The 2014 Australian Cotton Comparative Analysis (ACCA) is the tenth report produced

by Boyce Chartered Accountants in conjunction with the Cotton Research &

Development Corporation (CRDC). From 1986 to 2004 the report was compiled

independently by Boyce.

In this report we present an analytical review of the 2014 results, a comparison with prior

years, and comments on emerging trends.

THE NEED TO BENCHMARK

Financial analysis using comparative statistics helps farmers identify relative strengths and weaknesses;

accompanying budgets and long term business plans will then focus on ways to overcome weaknesses and

build on strengths. In other words, this Comparative Analysis is a management tool to implement change and

to identify where effort should be directed on a day to day basis.

Obviously, this analysis does not provide all the answers - it is a benchmark or a standard to strive for. It is up to

management to develop and implement specific action plans based on improved knowledge to set and achieve

new goals.

The reliable, independent figures in the Comparative Analysis provide the starting point for farmers to develop

“best practice”.

If growers or other interested parties require more long term data, note that we started this analysis in 1986.

We encourage participants to discuss the results with us and to clarify any queries so that we all develop a

deeper understanding of the industry.

The primary purpose of the ACCA is to show the income and expenses associated with growing fully irrigated

cotton on a per hectare basis. There are some provisos however to be aware of when considering the information

contained in this report:

• It is important to note that the analysis does not necessarily show the health of the cotton industry.

Where a cotton grower grew skip row cotton or solid cotton that did not receive full water, or grew no fully

irrigated cotton at all, those resulting figures are excluded from the analysis. In most, if not all cases, these

alternate crops would have returned a reduced profit per hectare in comparison to growing fully irrigated

cotton. Therefore, although the grower may have made a healthy per hectare profit on the hectares of fully

irrigated solid cotton grown, the net profit of the total farm would have been significantly less than if fully

irrigated cotton was grown across the full area, allowing for usual rotation practice.

• Readers of this study should be aware that these figures show the average results of participants in the

sample. It is important that users understand this fully.

For example, assume there were only two participants in the sample growing the same area. If one

uses contractors for picking and the other owns their own pickers, the figure for contract picking will

be approximately 50% of the market rate. Similarly, the figures on a per line basis for expenses such as

Depreciation, Repairs & Maintenance, Wages etc. will all be less than market rates. With this knowledge,

users of this information can get additional information from this analysis.

• It should be remembered that if there is a significant change in per line figures, this may not necessarily be

due to price increase.

Line items can be made up of price, frequency of operation and volume per operation. So where there has

been an increase in, for example seed, this could be due to price, number of seeds per metre planted or

the number of plantings, or a combination of all three.

• It is important to understand that where a crop has not been picked due to flooding or some other disaster

other than hail, the expenses relating to the affected area have been excluded from the sample.

So care should be taken when using the results from this analysis. Understanding the basis on which the

analysis is constructed is the key to getting the most out of its study.

OUR SAMPLE

The analysis includes the results for farmers who were able to plant, grow and pick their crop using close

to normal irrigation practices. This year the total number of hectares in the sample decreased due to a

decrease in the availability of water throughout many of the cotton growing areas of Australia and a reduction

in the participants.

The average hectares planted per participant increased slightly from 1,518 hectares in 2013 to 1,593 hectares

in 2014. The total number of bales in the sample was just on 500,000, which is approximately 13% of total

Australian cotton production. Final estimates for the 2014 year were 414,000 hectares and production of

3,830,000 bales.

Whilst recognising marketing as an important part of management, growers and interested parties were

concerned that participants in the top 20% may be there solely due to receiving a high cotton price, not as a

result of good farming practices. Alternatively, good cotton growers, due to adverse currency, lint and basis

positions, may have been excluded from the top 20%.

As many growers review their operation against the top 20% to look for areas of improvement, it was suggested

that the top 20% and bottom 20% be selected using an average price. We have therefore selected the top 20%

and bottom 20% by substituting $473 (the average 2014 net price for all participants) for the average net price

that the individual grower actually received.

Although the average price was used to select the participants in the top and bottom 20%, the growers’ actual

sales figures are reported in this analysis.