National Australia Bank reduced estimates for production of cotton in Australia by as much as 10 percent after more than three-quarters of the state of Queensland was designated a disaster zone thanks to flooding, Bloomberg reports.
As a result of the heavy rains in the fourth-largest exporter of cotton, production might fall by as much as 400,000 bales, according to Michael Creed, an agribusiness economist at National Australia Bank. The rainy season typically runs through late March.
"We really won't know until the floods recede and people actually assess what the damage is," Creed told Bloomberg. "It could be higher and it could be lower."
March delivery cotton futures increased 1 percent to $1.494 per pound on ICE Futures U.S.
The U.S. Agriculture Department did not change figures for Australian cotton forecasts. The numbers remain four million bales; a bale comprises 480 pounds of cotton.
"They have obviously started on the conservative side and at this stage it is still a little bit too early to make firm adjustments to the crop from their point of view," Watson said.
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