Bumper cotton output expected (China)

China is likely to have enough cotton harvest this year and the government will not allow additional cotton imports beyond the quota this year, in order to ease the pressure on domestic cotton stocks, the China Cotton Association (CCA) said Monday.

The country's cotton planting area this year is smaller than last year but the cotton crop is much better compared to the same period of 2011, and the domestic cotton output is expected to be sufficient as long as there are no floods in autumn, the CCA said Monday, citing a report by the Cotton Research Institute of the Chinese Academy of Agricultural Sciences.

The price of domestic cotton was 5,248 yuan ($824) per ton, higher than that of imported cotton in the first half of the year, prompting many textile manufacturers to import cotton, leading to more pressure on domestic cotton stocks, the report said.

The domestic price of new cotton is expected to be around 20,400 yuan per ton and is unlikely to climb further due to rising stocks, expectations of a decline in cotton output in the US as well as weak demand amid economic slowdown, the report said.

The report suggests that the government will continue the domestic cotton stockpiling policy and raise the procurement price by 3 percent to 20,400 yuan per ton to maintain farmers' enthusiasm.

"Due to the ongoing drought in the US, imported cotton prices are likely to rise. At the same time, with high expectations of a bumper harvest in China, domestic prices are likely to fall, narrowing the advantage of imports," said Ma Wenfeng, an analyst at Beijing Orient Agribusiness Consultant.

Cotton output in China is expected to exceed the government's target of 6.99 million tons for 2012, the CCA predicted last week, which is already up nearly 6 percent from a year ago.

China's cotton import quota is 894,000 tons each year, which is subject to 1 percent preferential tariff under the rules of the World Trade Organization.

Additional imports can be allowed based on demand but imports beyond quota will be subject to tariffs between 5 and 40 percent.

Imports in the current cotton marketing year (from September 2011 to August 2012) are expected to exceed 4.5 million tons, the CCA estimated last month.

Meanwhile, the State Council approved last year a plan to stockpile domestic cotton as a way to stabilize domestic prices to protect farmers' interests. State cotton reserves have reached 3.1 millions tons this year.

"Cotton production involves a long industrial chain. It requires wisdom to balance the interests of cotton farmers and textile manufacturers," Wang Qianjin, a senior analyst from webtex.com, an information provider for the textile sector, told the Global Times.