BEIJING (Commodity Online): With the Chinese farmers keen to invest more in grains than in cotton, the cotton rally may be spurred further recovering from the current slump.

With subsidies in place and mechanisation taking over the fields, the farmers find it more profitable and convenient to grow grains, said a Bloomberg report.

Despite record prices, cotton cultivation in China’s Xinjiang has come down along with production in Yellow, Huai and Yangtze river plains. The Bloomberg report, quoting National Development and Reform Commission, further elaborated that Henan and Shandong provinces in China has ramped up grain output instead of cotton, making the cotton cultivation along the plains diminish in acreage terms.

Cotton prices have turned bearish on recent projections of surplus by many agencies:

Recently International Cotton Advisory Committee had projected global cotton output to the tune of 126 million bales (27.4 million ton) in 2011-12 that would outstrip demand by 9 million bales.

Last year, the production stood at 112 million bales at a 12% difference.

High prices of cotton and competition from chemical fibers will dent demand; ICAC had said.

Xinjiang is the rock-solid foundation in which Chinese cotton stands.

In the 2011-12 crop year, Chinese production of cotton is expected to climb 13% to touch 34 million bales, said a USDA report; a share of 27% of global harvest in the year beginning August 1. Cotton area in China may go up by 9.8 percent to reach 84.55 million mu (13.9 million acres) this year, the China Cotton Association said in a statement in February, Bloomberg said.

But with the news that Chinese cotton acreage may come down, especially in the Xinjiang province, a cotton rally may pick up pace in a while.

ICE Cotton futures in New York had climbed a high of $2.1970 per pound on March 7. But since then, the rally has lost 23%.