Australia's cotton industry has weathered a period characterised by persistently low global cotton prices, fluctuating production and changing demand dynamics. However, the outlook is improving. Global cotton production is expected to contract in 2026/27, some major producing nations are forecasting lower output, and global ending stocks are projected to fall to their lowest level in eight years. Combined with improving mill demand and growing consumer interest in sustainable natural fibres, these developments provide cautious optimism for Australian cotton producers, who continue to demonstrate strong financial resilience despite recent market challenges. Read the full report.
Executive Summary
- Global cotton prices are showing signs of recovery as global stocks tighten.
- Cotton mill use is forecast to reach a six-year high.
- Australian irrigated cotton producers have maintained strong financial performance.
- Long-term demand for sustainable and natural fibres is expected to support growth.
Major Trends Shaping the Cotton Market
Trend 1: Global cotton supplies are tightening
Many major cotton-producing nations are forecast to reduce production in 2026/27, including China and Brazil. Combined with lower harvested area and weaker yields globally, ending stocks are projected to reach their lowest level in eight years, providing support for cotton prices.
Trend 2: Higher oil prices support cotton demand
Recent increases in oil prices have improved cotton's competitiveness relative to synthetic fibres. As synthetic fibre production remains linked to energy prices, higher oil prices strengthen cotton's attractiveness in global textile markets.
Trend 3: Australian cotton growers remain financially resilient
Despite lower prices and production challenges since 2022 in particular, irrigated cotton businesses continue to demonstrate strong financial performance. Cost management and operational efficiency have helped growers protect profitability through difficult market conditions.
Trend 4: Production and profitability are recovering
Following a significant downturn in 2023/24, the industry experienced a strong rebound in sales and EBITDA during 2025. This highlights the industry's ability to recover quickly when seasonal and market conditions improve, albeit against a backdrop of increasing industry investment and therefore debt.
Trend 5: Sustainable and natural fibres are gaining attention
Consumers are increasingly seeking natural and environmentally friendly products. While synthetic fibres continue to dominate global textile growth, cotton consumption is forecast to increase at around 1.6 per cent annually over the next decade as sustainability considerations influence purchasing decisions.
Figure 1. Australian Cotton Production
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Risks to Watch for Growers, Suppliers and Traders
- Global cotton demand remains tied to economic conditions. A slower global economy could weaken textile consumption and reduce cotton demand.
- Falling oil prices may improve the competitiveness of synthetic fibres, increasing competition for cotton products.
- Fast-fashion trends continue to favour man-made fibres, which now account for a larger share of global fibre trade than natural fibres.
- Irrigated cotton production remains capital intensive, resulting in higher debt levels relative to many broadacre farming enterprises.
- Production outcomes remain vulnerable to seasonal variability and changes in yield performance.
Future Outlook for Australia’s Cotton Industry
Australia's cotton industry remains well positioned despite recent market challenges. Global production declines, stronger forecast demand and falling inventories are expected to provide greater support for cotton prices over the medium term. At the same time, growing consumer interest in sustainable, environmentally friendly and non-plastic products presents an opportunity for cotton producers worldwide, but particularly for high quality traceable Australian cotton. Supported by resilient financial performance, strong margins and a focus on high-quality production, Australian cotton growers are well placed to benefit from these long-term structural trends while continuing to navigate the cyclical nature of commodity markets.
Next steps
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