Cotton production set to rise for first time in four years

BEIJING - Cotton output in China, the world's largest producer and user, may rise for the first time in four years in the 2011-2012 season, reducing imports and weighing on prices amid sluggish demand from the textile industry. 

The new-crop cotton output may rise by more than 10 percent to about 7.9 million tons from 7.2 million tons a year earlier because of good weather during most of the growing season and a larger planted area, said Ma Wenfeng, an analyst at Beijing Orient Agribusiness Consultant Ltd. 

Cotton in New York has slumped 52 percent from a record in March on expectations of slowing global economic growth and easing demand from China, the world's largest importer. 

Prices in China may extend a decline in the second half amid slowing demand from the textile industry and a bigger local harvest, according to Weiqiao Textile Co, China's largest textile maker. 

"As long as the weather remains conducive through the harvest season, a good harvest is a sure thing," Ma said. Farmers have started to pick some of the early cotton across the northwestern parts of the country, he said. 

The expansion of planted areas in Northwest China's Xinjiang Uygur autonomous region, the country's biggest producer, has contributed to the increased output. The total planted area for cotton has decreased in the past three years. 

Demand for cotton will be curbed by slower growth in garment and textile exports as Chinese manufacturers battle rising input costs such as labor, transportation and raw materials, Zhang Hongxia, president of the Hong Kong-listed Weiqiao Textile, said in a briefing on Aug 22. 

The appreciating yuan is also eroding China's competitiveness in the low-end market against other producers such as Vietnam and Bangladesh, she said. 

Imports fell 13 percent to 157,100 tons in July compared with a year earlier, according to customs data. 

Cotton for May delivery on the Zhengzhou Commodity Exchange dropped 0.5 percent to 21,745 yuan ($3,402) a ton. Prices have fallen 23 percent this year. 

Still, the yield and quality of the developing cotton might be affected if there are excessive rains and low temperatures in the next two months, said Dong Shuangwei, an analyst at Capital Futures Co, in Beijing. "This has been the case in past years and we still have to monitor the weather very closely," Dong said. 

The planted area may be capped after rebounding this year by more than 6.6 percent as high production costs and shortages of labor and land limit expansion, according to a June survey of traders and analysts. 

Imports may increase on a widening supply deficit as China struggles to boost output, Liu Xiaonan, vice-director of the economy and trade division at the National Development and Reform Commission, said in June. 

China's cotton production decreased for the third year last year to 5.97 million tons, according to the National Bureau of Statistics.