Chinese cotton imports will remain supressed next season, as the government continues to draw down on cotton stocks, while production recovers, US officials said.

The US Department of Agriculture's Beijing bureau noted that Chinese government's priority remains "to ease the burden of its large cotton stocks following years of state cotton purchases".

This drawdown in stocks will keep pressure on imports.

The bureau reports estimates from industry sources that government cotton sales could reach 3.79m tonnes in 2017, up from 2.66m tonnes.

But the bureau noted that the current uptake at auctions, of below 80%, "does not support this estimated high volume of sales".

Drawing down stocks

Chinese government sales were seen drawing down stocks, from 12.67m tonnes, to 8.90m tonnes by the end of 2017-8.

The bureau suggested that "industry observers believe that China could very well succeed in reducing its state cotton reserves to 5m tonnes by the end of 2018."

"This would be considered a manageable level compared to the 13.9m tonnes, in 2014-15, when China's cotton reserves peaked after three years of state support purchase programs."

Pressure on imports

These cotton sales will keep a lid on imports, the bureau said, despite the steady consumption, with imports forecast at 2017-18.

Imports were forecast at 1.00m tonnes, compared to a 13-year low of 9.59m tonnes seen in 2015-16, and 9.80m tonnes expected in the current 2016-17 season.

Chinese cotton consumption is seen robust thanks to steady economic growth, reaching 8.00m tonnes, in 2017-18.

"Given the expected stagnant cotton imports and increasing competition from other cotton suppliers such as Australia, Chinese imports of U.S. cotton are expected to be lower at 250,000 tons per year," the bureau said.

"That said, seeking to stay competitive in export markets, the Chinese textile industry is likely to continue sourcing higher-grade cotton from the United States."

Rising production

China's 2017-18 cotton production is forecast to recover moderately, to 5.15m tonnes," up 100,000 tonnes year-on-year, thanks to rising plantings, seen up 100,000 hectares to 3.1m hectares.

Plantings are being supported by a price-subsidy policy in Xinjiang, the country's top growing region.

"Similarly, the reduction of government support to corn production in 2016 is expected to encourage farmers to add cotton acreage moderately in other cotton-producing provinces," the bureau noted.