Australian (ASX) Stock Market Forum

NAM - Namoi Cotton Co-Operative

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"[Cotton] Prices in the last 30 years have only been above $600 a bale about 10 per cent of the time. We’re in rare air above $650”
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Adam Kay, CEO, Cotton Australia [peak industry body]
 
The high cotton prices are great for the farmers planting the cotton, but the high prices only affect NAM in a sort of roundabout way.
The high prices encourage more plantings , which is good for them as the incremental costs go down as throughput increases.
It will also help their cotton seeds sales, as well as their marketing arm.
Mick
 
NAM hit another 52 week high today.
Was talking to an AG pilot this morning.
He has so much potential work lined up for the cotton season, he is desperately looking for experienced US and Canadian pilots for pre harvest cotton defoliation.
With so much water around, should be a good season.
Mick
 
NAM quarterly out.
Much better quarter than last year, ginning nearly 500k bales versus last years 124 k bales.
The forecast for next season is for 4.6million bales, just shy of a tenfold increase.
Kinda surprisngly, the market was not impressed after hitting another 52 week high, it fell about 8%.
Maybe the market did not like the fact that free cah flows were negative for the quarte as they gear up for the season.
Or perhaps the fact that floods in NSW and Queensland may cause a drop in the forecast ginning.
Was gonig to add more, but held off.
There might be further falls yet.
Mick
 
As stated by Mick, thinly traded, however, that may change.
Chart looking ok, just sitting on bottom of range, which ain't bad for the tizz we've just had...

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yes cotton prices are at multi-year highs , just like several other commodities

just maybe it could get exciting
 
Cotton futures rose for the seventh straight month, the best run since 1959.
Whatever the reason for the price increases in cotton (and there have been many stated), the end result is that standard items like Americas
staple workwear, blue jeans, is going to go up by somewhere near 10%.
"Supply disruptions and soaring costs pushed the industry to draw on stockpiles, which have practically vanished at ICE Futures U.S., with higher prices unable to lure supplies into the exchange-tracked warehouses," Bloomberg said.
High prices for the fiber indicate inflation is coming to shirts, blue jeans, dresses, sweats, and so much more.
Demand for cotton worldwide "is simply not being met," said O.A. Cleveland, a consultant and professor emeritus at Mississippi State University.
"Industry group Cotlook on Friday shifted its global outlook for 2021-22 back to a deficit, the second shortfall in a row, citing diminished production in top exporter U.S. and India. More plantings in the coming season have been put into question by soaring costs for crop inputs including fertilizer," Bloomberg continued.
Cleveland said the cotton dynamics are "extremely bullish," and the "last time I recalled such a situation, I stopped forecasting futures prices once the market reached $1.50 a pound. Will the May or July futures price ascend to such a level? I do not know. This is a no man's land."
It's still unclear how consumers will act when their favorite clothing brand prices continue to rise. But since clothes are considered discretionary spending, there will be a point where consumers will buy fewer of them due to higher prices.

May well be good for Namoi.
Mick
 
From ABC News
Australian cotton growers are forecast to produce the second-biggest crop on record this season, with an export value tipped to reach an eye-watering $3.5 billion at current prices.

Key points:​

  • The export value of this year's cotton crop could be a record-breaking $3.5 billion
  • COVID-related supply chain disruptions are driving near-record global prices
  • China is no longer buying Australian cotton, but marketers are redirecting exports

Cotton Australia general manager Michael Murray said it will be a good result for the industry.

"We think it's going to be somewhere between 5 million and 5.2 million bales, so that'll make it the second-largest crop on record," Mr Murray said.

"[It's a] huge bounce back from just two seasons ago when we only produced 590,000 bales and last season about 2.8 million bales."
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Flooding in some areas of NSW does not seem to have affected production (yet), so fingers crossed the prices stay high and we get a bumper crop.
Mick
 
NAM quarterly cash activities out.
Gearing up for start of harvesting season to start in a few weeks.
Nothing terribly exciting, except for the statement that they expect the cotton production to top 5 million bales, compared an historical average of 3.5 million bales, so obviously any losses due to floods were minimal.
My aerial ag spraying mate still flying max hours per month, so things look good.
Still holding.
Mick
 
Fin Year report out.
Big increases in everything, which is not surprising as it was coming off such a low base during a prolonged drought.
Expecting a 5 mill bale thus year, and forward estimates are suggesting another above average year in 2023 given the continued water availability and demand for cotton.
Might even see a renewal of dividends next year.
Mick
 
Got out of NAM today after it hit 17% above my last buy in price.
May well go higher, but I don't like to be too greedy.
Mick
 
Back into NAM as cotton prices are soaring again.
from Zero hedge
US cotton prices continued to surge above the boom days of 2010-11 after a massive crop estimate cut by the USDA, shocking Wall Street analysts and traders, due primarily to a megadrought scorching farmland of Texas, according to Bloomberg.

Futures in New York for December delivery were up 4.5% to $1.1359 a pound and up more than 21% this month.
Last Friday, the USDA's bigger-than-expected cut to domestic cotton crop stunned many on Wall Street. Crop output plunged to 12.57 million bales, the lowest in a decade. The cut also pushed down the US from the world's third-largest producer to the world's fourth.

Barbera said the western Texas region (around Lubbock and Lamesa), the epicenter of America's cotton-growing belt, has "literally nothing" in fields that are just desert sand. He said fields that had drip irrigation were harvestable, but ones that weren't weren't salvageable.
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The US based National Weather Service's Climate Prediction Center as well as the Oz BOM have upped the chances of a threepeat La Nina event this year to 70%.
Generally, these events signal more rain for the East Coast of Australia, and less rain for the west coast and mid west of the USA, so the droughts do not appear to be ending anytime soon.
Mick
 
NAM released quarterly results.
The ginning season was completed at the end of October 2022 with ginning volumes reaching 1,173,497 bales1.
In comparison to prior seasons, payments for operating costs and cottonseed inventory previously weighted to Q1 and Q2 moved into Q3 with ginning finishing later than the previous season as the result of wet conditions.
Receipts from customers for ginning services, cottonseed marketing and maintenance costs are also weighted to Q3 and Q4.
Net cash inflows from operating activities in Q3-FY23 totalled $0.05 million (Q3-FY22: net cash outflows $9.0 million).
Receipts from customers totalled $256.3 million during Q3-FY23 (Q3-FY22: $59.3 million), compared to operating costs of $248.3 million for the same period (Q3-FY22: $64.6 million).
With the delay in ginning due to rain, 2022 ginning volume and the procurement of cottonseed from growers for marketing continued into Q3-FY23 whereas in seasons without delays in commencement, it would have peaked in Q2.
The delay has resulted in higher cottonseed inventory stocks for marketing which will be executed over an extended period from Q3-FY23 to Q1-FY24. As a result, operating payments are in balance with receipts from customers in Q2.
This inventory was funded from the Company’s operating cashflow and working capital facilities.
Proceeds from issues of equity securities totalled $13.2m in Q3-FY23 from the renounceable entitlement (rights) offer2., the $13.2m is net of costs. Refer to our ASX release dated 2 November 2022 titled “Namoi Cotton completes underwritten renounceable entitlement (rights) offer to raise $14.1 million”. ASX Listing Rules Appendix 4C (17/07/20) + See chapter 19 of the ASX Listing Rules for defined terms Page 1 Appendix 4C Quarterly cash flow report for entities subject to Listing Rule 4.7B bales (21 November 2022)

Australian cotton production in the 2023 season is forecast to be above average, but less than the 2022 season of ~5.6 million bales.
Cotton Compass (www.cottoncompass.com.au) is forecasting 4.9 million 1Include 100% of bales at joint venture gins
and ABARES is forecasting 4.3 million bales (6 December 2022). This forecast range of 4.3 to 4.9 million bales is down from our previously announced cotton production range of 5.0 to 5.5 million bales3. Based on forecast production, we expect to gin 0.9 to 1.1 million bales of cotton in 2023 (FY24), down from our previously announced range of 1.1 to 1.3 million bales4. Our outlook for FY23 remains as previously announced, being a forecast EBITDA5 of $19-21 million in FY23 from the ~1.2 million bales ginned in the 2022 season6.
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Like so many othe Ag industries, the massive wet this winter/spring has curtailed what looked like a record harvest, and also impacted seed plantings for next year, but it should be a greatly improved reult next year, as much of the receipts from this season will be pushed into next seasosn results.
Still looking to exit with a small profit if it can get to .58
Mick
 
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NAM released quarterly activities provides a slightly improved ginning forecast, with ABARES forecasts of cotton planting increasing.
Problem is, in a good year for cotton, they still managed a negative cash flow.
Sold out the few I had left this morning as part of my pre EOY cleanup.
Will be unlikely to waste any more money on this one.
Lesson learnt.
Mick
 
WEll, it looks like NAM will join the long list of Aus companies taken out by overseas interests.
From ABC News
A multibillion-dollar company linked to acclaimed actor Julia Louis-Dreyfus has launched a takeover bid of Australia's biggest cotton processor.

Key points:​

  • Louis Dreyfuss Company wants to increase its stake in Namoi Cotton to 100 per cent
  • It already owns gins in Queensland and NSW
  • A cotton farmer says he can see positive and negatives in the proposal

French agricultural giant Louis Dreyfus Company (LDC), which was founded by the actor's great, great grandfather Leopold Louis-Dreyfus in 1851, owns 17 per cent of Namoi Cotton and recently made an offer to acquire the remaining 83 per cent.

The deal is subject to several clauses and shareholders will vote on the offer next year.
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The SP had been in decline since late 2022 when the first rumours of a an end to the cheap water as the La Nina was coming to an end to be replaced by drier times of El Nino.
The stock shot up when first news of the offer came in, but it still sits below the recent ATH.
The suitor already owns three other ginning plants in NSW and Queensland.
Mick
 
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