Cotton imports by China, the largest consumer, may increase on an expanding supply deficit as the country struggles to boost output, the National Development and Reform Commission said.
“Although there’s some scope to raise China’s cotton output, the gap between China’s cotton supply and demand will exist for a long time and may expand,” Liu Xiaonan, vice director of the economy and trade division, said at a forum in Dalian. The commission is China’s top planning agency.
Cotton surged to a record in March, mainly on rising demand from China. Acreage in China may be capped after rebounding this year by more than 6.6 percent as high costs and shortages of labor and land limit expansion, according to a survey of traders and analysts. Imports surged 86 percent last year to 2.8 million metric tons, customs data show.
“Our reliance on cotton imports, the percentage of imports in total consumption, may increase in the future,” Liu said.
Crop area may increase 6.6 per cent to 82.08 million mu (5.47 million hectares) this year as a state purchasing program and surging prices boosted planting, the China National Cotton Exchange said June 7. Planting dropped to 4.85 million hectares last year, according to the National Bureau of Statistics. That followed a 10 per cent decline to 5.09 million hectares in 2009, according to the Ministry of Agriculture.
“Given that the cotton farmers do not have enough incentives to plant the fibre, we suggest the government to support the sector through more subsidies on quality seeds, infrastructure and machine tools,” Fang Yan, vice director of the commission’s rural economy division, said at the same conference.
Acreage may rise by more than 6.6 per cent this year after a 66 percent jump in the prices in the past year, according to the median estimate of five people surveyed by Bloomberg News. One said cotton acreage may rise by more than 8 per cent this year.
Still, high production costs compared with other crops mean farmers will struggle to expand planting, said Ke Bingsheng, president of the China Agricultural University.
“China’s grains and cotton will compete for acreage,” said Ke. “Given the fact that it is almost impossible to increase arable land in China, it is more favorable for China to import cotton than grains, because cotton demand is more elastic than grains, and cotton is more land-intensive.”
Three times more land is needed to produce one ton of cotton than grain, said Ke, who was speaking at the Dalian industry forum.
Cotton for December delivery gained 0.3 percent to $1.3223 a pound on ICE Futures US in New York. The fiber has plunged about 40 percent from the March 7 record of $2.1970 on concern a slowdown in economic growth in China may damp demand and as crops in India expand.
China imported 145,000 tonnes of cotton in May, according to Cottonchina.org, down 27 per cent from 197,938 tonnes in the same month last year. US exporters saw more canceled orders for the fiber than purchases last week for the eleventh straight week, government data show.
“We have lowered our estimate on China’s cotton imports this year to 2.8 million tonnes from the previous 3 million tonnes, as the high prices of raw material may have reduced demand,” said Gao Fang, deputy executive president of the China Cotton Association.
Cotton consumption may be 10.6 million tonnes to 11 million tonnes in 2010-2011, depending on cotton prices and the sales of yarn, Gao said at the forum.
