Cotton output in China, the worldΆs biggest user, may fall 24 percent next year as the government ends direct purchases from farmers, according to a state-affiliated researcher.
Policy makers have given no indications how they will sustain planting in central and eastern China as the new measures only cover northwest Xinjiang province, said Xi Jin, a manager at Cncotton.com, a researcher owned by China National Cotton Reserves Corp. National output in 2015 will decline to about 5 million tons from estimated 6.6 million tons this year, he said.
Chinese officials are seeking to implement a trial program of direct subsidies to growers in Xinjiang, replacing state-funded stockpiling. No indication has been given that the measure will be extended to other inland provinces, Xi said. The commodity is an important tool for helping boost incomes in the area, known officially as Xinjiang Uighur Autonomous Region, which has ChinaΆs highest concentration of Uighur Muslims and boarders Central Asian nations, he said.
“If you are a cotton grower in inland China, youΆd better think about planting grain or something else, because those subsidies are only for Xinjiang,” Xi said in an interview yesterday in Beijing.
Cotton for December delivery fell 1.8 percent to 62.87 cents a pound on ICE Futures U.S. yesterday. The fiber is poised to extend its longest run of weekly losses in more than five decades on signs that global demand will trail output.
Central Decision
“While local officials may try to preserve cotton planting and win some subsidies, clearly the central government doesnΆt see itΆs necessary to extend the program beyond Xinjiang,” said Dong Shuangwei, head of DSW Consulting Ltd., a Beijing-based commodity investment advisory company.
The end of government stockpiling has already cut plantings this year. Area sown to cotton fell 12.5 percent from a year ago to 4.2 million hectares, according to Cncotton.com. Xinjiang accounted almost half the nationΆs official output of 6.8 million tons last year, according to the China Agricultural Yearbook published by the Ministry of Agriculture.
ChinaΆs imports will probably fall despite declining domestic production because the government is auctioning as much as 10 million tons of state reserves, Xi said. The country holds more than half the global cotton inventory, the U.S. Department of Agriculture estimated July 11. China sold 2.2 million tons from stockpiles in the marketing year started Sept. 1, Cncotton.com said in a report July 28.
Textile Industry
Imports in the first half of this year fell 42 percent from a year ago to 1.4 million tons, China customs data show. Imports are mostly controlled by policy makers through quotas, Xi said.
China also said this month it would channel 20 billion yuan ($3.2 billion) to help Xinjiang develop its textile industry.
The National Development and Reform Commission, the nationΆs top planner, first announced the temporary stockpiling program in March 2011, according to its website. Two calls today to Li Pumin, NDRC spokesman, werenΆt answered.
