The second monthly decline in cotton imports will continue to drive up prices in China, despite the government’s willingness to sell some of its stockpile and increase the import quota by one million tons. The 177,000 metric tons imported in June represented a drop of 11% from the previous month and a 45 percent drop since April.

China’s State Council has upped the 2010 import quota to 3.6 million tons, with year-to-date imports standing at more than 1.5 million tons. The government also plans to sell 600,000 tons from its inventories to cool the scorching price increases.

Those same price increases are fueling an expansion in Indian cotton production (even though bigger crops in India and other major cotton exporters such as the United States could increase the global supply and drive down prices in the future). Farmers in India, the world’s second-largest cotton importer, have been watching prices rise across the globe but especially in China, the world’s largest importer. Approximately 57% of the Indian cotton exported from October 1, 2009 through July 15, 2010 was sent to China. To take advantage of the favorable economic conditions, Indian farmers planted 8.3 million hectares of cotton as of July 15, a 20% increase over the previous year.