Agribusiness giant Rio Tinto is the biggest buyer of Australian cotton in the world, buying nearly a quarter of Australian producers.
But the global cotton market has been under heavy pressure in recent years.
In Australia, the market is in the midst of a major price war, with Australian producers having lost more than $4.3 billion since 2012.
Now the world’s biggest cotton buyer is taking a more cautious approach.
Rio Tins crop is under pressure in the Australian market with the prices of cotton being pushed down by drought.
In a report to be released today, the Australian Farmers Federation says Rio Tinos crop is being squeezed by low prices and a slowdown in global demand.
But Rio Tino has also been hit by rising costs, as well as the introduction of a new and stricter export control regime.
The Australian Government’s new crop regulation comes after the Government announced its latest plan to protect the industry from market forces, which has seen cotton prices soar.
Australian farmers say Rio Tines price has gone up, with the price of cotton going up by an average of 22 per cent a year since 2012, to around $6 a tonne.
The AFRF report says the increase in cotton prices over the past 12 months is the result of “unprecedented” market pressures.
AFRG president Mike Henshaw says the situation is not sustainable, with Rio Tinas prices having increased by almost 50 per cent over the last three years.
“The situation is unsustainable,” he said.
“If we continue to sell less and less, we will eventually have to sell more.”
Rio Tio’s chief executive officer, David Macdonald, has blamed drought conditions for the increase.
He said the new regulations were necessary to protect Rio Tina’s bottom line.
“It’s a situation we can’t get out of,” Mr Macdonald said.
But Mr Hensaw says Rio is in a tough spot.
“Rio has seen its prices go up by over $4 billion in the last 12 months, so that’s a pretty big jump,” he told the ABC.
Rio Tin is the mainstay of Australia’s cotton industry, accounting for roughly 70 per cent of its total production. “
We know what that means for the farmers who are going to be affected by these prices.”
Rio Tin is the mainstay of Australia’s cotton industry, accounting for roughly 70 per cent of its total production.
Rio is also the largest producer of cotton in China, Australia’s second biggest export market, with nearly $5 billion in sales last year.
Mr Macdon said Rio Tinta had been a major player in Australia for many years.