China's cotton farmers could reduce the area planted with the fibre by 20 percent this year after a change in government policy led to lower subsidies for many growers last year, according to a survey commissioned by China's state reserves. Cotton acreage will drop to 51 million mu or 3.4 million hectares (8.4 million acres), down 20.1 percent on last year, the survey found.
The drop in acreage will lead to significantly lower cotton output in the world's top consuming country but would have no impact on demand for imports, with China restricting shipments through a quota system, traders said. Beijing also has a huge inventory of about 12 million tonnes in state reserves that could alleviate any deficit in the market.
"The idea is to make place for a final reduction in (domestic) stocks," said a trader who declined to be identified.
The reduction in planting will be driven in part by government efforts to reduce the crop in Xinjiang, the country's top growing region, said the report, published by industry website Cncotton.com.
Xinjiang is targetting a 15 percent cut in its cotton area, the government said earlier this month, on the back of weaker demand for domestic cotton. The Xinjiang Production and Construction Corps, China's largest grower, is also aiming to reduce its cotton acreage by around 1 million mu, the state-owned People's Daily newspaper said.
Many Xinjiang farmers are expecting to receive lower subsidies this year, according to the survey, which said the growing area in the region will fall 9 percent.
Xinjiang farmers only received about 1.5 yuan per kg of seed cotton for their crop last year, lower than the expected 2 yuan, according to an estimate from another trader. The biggest decline in acreage would take place in Shandong province, where farmers would plant almost a third less than last year. Farmers outside Xinjiang received lower subsidies in the 2014/15 crop year.
While the survey did not offer estimates for the resulting drop in output of finished fibres, many already see next year's output around a fifth lower than the 2014/15 crop.
"Most market observers are now talking about a total Chinese new crop in the range of 5.0 to 5.4 million tonnes," said cotton trading firm Reinhart in a report last week.
Output this year is around 6.3 million tonnes, according to the firm.
Farmers usually start planting cotton in April but some trade sources said it was too early to assess planting intentions.