Na­tion’s cot­ton out­put to shrink

Tex­tile mills turn to buy cheaper In­dian cot­ton yarn to cut costs

China Daily (Hong Kong) - - BUSINESS - By ZHONG NAN zhong­nan@chi­nadaily.com.cn

Af­fected by ad­verse weather, a re­duced plant­ing area and lower In­dian cot­ton prices, China’s cot­ton out­put is ex­pected to drop sharply this year com­pared with 2012, which will re­sult in in­creased cot­ton im­ports. Lu Huaiyu, vice-pres­i­dent of the China Cot­ton As­so­ci­a­tion, said that the cold weather dur­ing the cot­ton seed­ing sea­son, heavy rains and then a drought in ma­jor cot­ton- plant­ing re­gions such as Hu­nan, An­hui, and Jiangsu prov­inces be­tween June and Au­gust have se­verely cut the na­tion’s cot­ton pro­duc­tion.

The Min­istry of Agri­cul­ture fore­cast that the na­tion’s cot­ton out­put will be around 6.3 mil­lion met­ric tons in 2013, down 540,000 tons from last year’s fig­ure.

An­hui’s agri­cul­tural au­thor­i­ties es­ti­mated that the prov­ince’s cot­ton out­put de­creased 17 per­cent this year and that cot­ton qual­ity is lower than in 2012, mainly due to the heavy rains.

China has 13 ma­jor cot­ton­plant­ing prov­inces and au­ton­o­mous re­gions, and nearly half of them were hit by ad­verse weather con­di­tions this year.

Lu said that cheaper In­dian cot­ton prices and shrink­ing cot­ton farm­land are another two im­por­tant fac­tors be­hind the coun­try’s lower cot­ton out­put.

The Chi­nese gov­ern­ment in­tro­duced a floor for cot­ton prices in 2011 to en­sure that cot­ton farm­ers get a fair in­come. Do­mes­tic cot­ton prices are now be­tween 18,000 and 18,500 yuan ($ 2,950 to $3,032) a ton, while In­dian cot­ton is priced be­tween 17,200 and 17,600 yuan a ton in the Chi­nese mar­ket af­ter cus­toms clear­ance, ac­cord­ing to the Bei­jing-based China Na­tional Cot­ton Ex­change, the coun­try’s big­gest cot­ton trad­ing plat­form.

Lu said that China’s tex­tile mills are buy­ing cheaper In­dian cot­ton to re­duce their raw ma­te­rial costs and tackle the ris­ing costs of la­bor, en­ergy prices and lo­gis­tics ser­vices.

And many Chi­nese tex­tile com­pa­nies in Zhejiang, Shan­dong and Jiangsu prov­inces have also started to or­der cot­ton

To pre­vent un­cer­tainty in the mar­ket, China will use its abun­dant cot­ton re­serves to meet mar­ket de­mand if the coun­try’s cot­ton­plant­ing re­gions re­port a cer­tain level of out­put losses.” DING LIXIN RE­SEARCHER AT THE CHI­NESE ACADEMY OF AGRI­CUL­TURAL SCIENCES

yarn from In­dia.

Com­pa­nies save on cus­toms fees when they buy In­dian cot­ton yarn com­pared with raw cot­ton, be­cause no tar­iffs are charged for im­ported cot­ton yarn. Mean­while, Chi­nese tex­tile com­pa­nies have to pay a 13 per­cent value added tax if they buy raw cot­ton from do­mes­tic producers.

Since Jan­uary, most of the raw ma­te­rial used by China’s tex­tile mills came from the coun­try’s re­serves and from cot­ton im­ports. Sup­ply from the re­serves reached 3.72 mil­lion tons from Jan­uary to the end of July, while the amount of im­ported cot­ton bought by tex­tile mills hit 3.37 mil­lion tons from Jan­uary to Oc­to­ber. In­dia and the United States are the big­gest ex­porters to the Chi­nese mar­ket.

Due to in­creased com­pe­ti­tion af­ter 2010, the in­come of Chi­nese cot­ton farm­ers has de­creased and many of them started plant­ing rice and wheat, which brings them higher gov­ern­ment sub­si­dies than cot­ton.

Lu said that about 4.2 mil­lion mu (280,000 hectares) of China’s cot­ton farm­land has been turned into grain or veg­etable farm­land this year. The coun­try’s to­tal cot­ton-plant­ing area now stands at 66 mil­lion mu.

Ding Lixin, a re­searcher at the Chi­nese Academy of Agri­cul­tural Sciences in Bei­jing, said it’s too early to as­sess whether China’s cot­ton out­put will see a sig­nif­i­cant drop as the na­tion’s cot­ton poli­cies are based on the im­port quota and the gov­ern­ment re­serves.

“To pre­vent un­cer­tainty in the mar­ket, China will use its abun­dant cot­ton re­serves to meet mar­ket de­mand if the coun­try’s cot­ton-plant­ing re­gions re­port a cer­tain level of out­put losses,” Ding said. “Cot­ton prices surely won’t be­come a big con­cern for Chi­nese garment and tex­tile fac­tory own­ers.”

With 9.6 mil­lion tons of cot­ton re­serves, which rep­re­sent half of global stocks, China be­gan to sell cot­ton from its re­serves on Nov 28 and will start auc­tions that will run un­til Au­gust 2014.

The coun­try’s cot­ton re­serves are ex­pected to in­crease to 11.4 mil­lion tons in 2014, up by al­most 2 mil­lion tons from the stock­pile ear­lier this year. The coun­try will hold nearly 60 per­cent of the world’s stocks then, ac­cord­ing to a re­port by the US- based In­ter­na­tional Cot­ton Ad­vi­sory Com­mit­tee.

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