This year's severe drought could halve Australia's cotton output in 2004 the processing and marketing concern Namoi Cotton Cooperative Ltd warned today.

The drought has restricted drybed plantings in cotton growing areas in Queensland and New South Wales states, and means there is less water available for irrigation purposes. It has also held back planting of next year's crop, which under normal conditions would now be underway.

In a statement issued on Friday, Stuart Boydell, Namoi's chairman, said: "Due to the severity of the drought, the 2004 season crop forecast remains between 700,000 bales and one million bales."

This compares to 2003 output of 1.46 million bales.

Namoi said its half year net profit to 31 August was A$10.3 million, down from A$16.8 million in the year-earlier period. It has revised its full-year forecast to between A$7 million and A$8 million, down form last year's A$9.8 million.

The company has also instigated a drought management strategy it says will see it emerge from the crisis in "an extremely competitive position."