China's cotton output this year is likely to fall 10 percent from last year to about 7 million tonnes and the government will continue to stockpile cotton in Xinjiang region, an industry website cited government officials as saying on Sunday.
The output fall will increase the shortage of cotton in China, the world's largest cotton consumer and importer, Zhang Xiaoqiang, a deputy director of the National Development and Reform Commission was cited as saying, according to a transcript posted on an industry website www.cncotton.com. The output fall was anticipated earlier by the market as Chinese farmers have reduced planting areas by about 10 percent due to lower returns.
But industry analysts have forecast even lower output due to weather damage in August. "The (10 percent ) figure did not reflect weather damage in the later stage. Rains in mid-August had damaged cotton in areas along the Yellow River," said Dong Shuangwei, a researcher with Capital Futures Co Ltd. The company foresees an output fall of as much as 15 percent.
The rainy weather has also delayed harvesting by one to two weeks, said Cheng Jie, a manager with the China National Cotton Information Center. "Supply right now is very tight. There is a supply gap as the harvest has been delayed." Beijing has increased sales of its reserves by 600,000 tonnes on top of 1.52 million tonnes. The government had stockpiled 2.72 million tonnes of last year's crop to support prices.
The agricultural ministry said it could try to stabilise cotton acreage next year, which indicates the government will be willing to support higher cotton prices this year. The commission's Zhang said import quotas would be set at an appropriate level and at the right time to account for a shortfall in supply amid a recovery in demand from textile producers and exporters.
But analysts did not expect the government to increase extra import quotas immediately as the domestic harvest is due next month. "Everybody agrees there is a tight supply, but any increase of import quotas would not happen now, maybe later in the year or next year," said Dong. Beijing has issued an additional 400,000 tonnes of import quotas for textile mills which produce for the tolling trade. Earlier in the year, Beijing issued the low-tariff quotas of 894,000 tonnes.