China’s cotton output may drop 5.5 percent this year after low-temperatures and rain affected planting and development of the crops, according to a report by state researcher Cncotton.com.
Production may fall to 6.36 million metric tons as planted area planted and yield fell 1.1 percent and 4.4 percent, respectively, from last year, said a report by the researcher posted on the website of the State-owned Assets Supervision and Administration Commission.
Cotton prices in New York have surged 69 percent this year as demand in China gained, and inventories plunged in the U.S., the world’s biggest exporter. Production in China is forecast by the U.S. Department of Agriculture to trail domestic demand for the 12th straight year, pushing the nation’s stockpiles to the lowest level since 1995.
“This forecast will ultimately lend more confirmation to those who believe the market is fundamentally bullish,” Dong Shuzhi, manager of cotton at Shanghai Jinhuicheng International Trade Co., said by phone.
Output of cotton in Xinjiang, China’s biggest producer, may fall 6 percent while yield may decline 7.7 percent, the Cncotton.com report said without elaborating.
The report is a preliminary forecast, and those involved in the cotton sector should “overcome the urge to speculate and operate conservatively,” it added.
Price Curbs
Still “at the moment the market is more preoccupied with policy uncertainties,” Dong said. Global commodities from copper to cotton and soybeans plunged after China’s Premier Wen Jiabao said on national television Nov. 16 the State Council was drafting a plan to slow inflation and curb speculation in commodities. Yesterday the government said it may impose temporary curbs on prices.
Cotton for May delivery on the Zhengzhou Commodity Exchange fell as much as the daily 5 percent limit to 26,100 yuan today and closed at 27,430 yuan. The contract has plunged nearly 20 percent from the record 33,720 yuan a ton on Nov. 11 after the government said it would curb speculation in the commodity.
Cncotton.com is run by China National Cotton Reserves Corp., a state-owned company administered by SASAC.