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Cotton imports may jump on planting cut

(Agencies)
Updated: 2010-03-18 15:20
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China, the world's biggest cotton importer, may increase purchases 30 percent this year and drive up global prices as growers plant a smaller crop, a State-affiliated researcher said.

Imports may be more than 2 million metric tons compared with 1.53 million tons last year, Mao Shuchun, cotton researcher at the Chinese Academy of Agricultural Sciences, said in a telephone interview from central Henan province.

Domestic farmers, hurt by volatile cotton prices, have begun to grow more profitable crops, including grain and vegetables, Mao said. Increased imports, which account for about 30 percent of global trade, may help extend a rally in New York cotton prices, which have doubled in the past year.

"For sure this year imports will increase," Mao said yesterday. Increased buying may help lift the price of US cotton to about 90 cents a pound on the cash market, he said.

Planting of cotton in China this year may fall 4.9 percent from last year's 74.25 million mu (5 million hectares), "so it'll probably fall below 70 million mu," Mao said. "I don't think boosting planting is possible. The best scenario is we may see the same area being kept."

Cotton for May delivery gained 0.3 percent to 81.37 cents a pound on ICE Futures US in New York. The price is down 3.8 percent since reaching a two-year high of 84.6 cents March 1.

‘Tight supply'

"Cotton supply in inland provinces, outside main producer Xinjiang, is extremely tight," Dong Shuzhi, an analyst at Jinshi Futures Co, said by phone from Henan. "We think the government will issue another million tons of import quotas" on top of the 1.89 million tons already alloted. China controls its cotton imports by issuing permits to qualified users.

China's plan to boost commodity stockpiles will also reduce the amount of commercial supplies, forcing mills to seek imports, Mao said. Supply from the US, the biggest exporter, "won't be abundant" because of its policies to boost corn-based ethanol. That in turn is forcing other cotton-growing countries to plant more grain instead of fiber crops, he said.

Related readings:
Cotton imports may jump on planting cut Cotton acreage shrinks in Xinjiang in 2009
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Cotton imports may jump on planting cut Cotton prospers in the Yellow River Delta
Cotton imports may jump on planting cut China's cotton planting area down 11.34% for 2009

China is forecast to buy 2.1 million tons this year, out of 7.5 million tons exported worldwide, according to the USDA.

Farmers throughout China have cut cotton acreage and boosted grain planting since 2004, when the central government started price-support policies for wheat and rice and stockpiling of corn, Mao said. The policies favoring grain gave farmers more assurance than the volatile cotton prices, he said.

In 2008, when cotton prices plunged amid the financial crisis, many farmers lost money, Mao said. Even as prices recovered last year, farmers on average made only 500 yuan ($73) per mu, Mao said. Growing fruit or vegetables can generate 10 times more revenue than cotton, Mao said.

"The fruit trees have already been planted, so you'd have to cut them down" if cotton acreage is to be expanded, he said.