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Chinese cotton sowings to drop amid policy doubts

The China Cotton Association has backed ideas of a further drop in Chinese cotton plantings although not to the extent of the International Cotton Advisory Committee, which forecast area tumbling to a 15-year low.

The association said that a survey of Chinese growers suggested a fall of 8.9%, to 4.25m hectares, in cotton plantings this year in the world's biggest producing country.

The decline to the smallest plantings in more than a decade reflecting rising costs and pessimism over profitability prospects, the association said, with reluctance being further stoked by uncertainty about China's support policy for cotton growers.

Ideas that China will revise its regime - whose high guaranteed prices for cotton have supported values worldwide - gained support on December 27 when Chinese Finance Minister Lou Jiwei said that policies for the fibre, and soybeans, would "turn toward" subsidies to growers.

Weak plantings

The International Cotton Advisory Committee last week came in with an even more gloomy outlook for Chinese plantings, pegging them at 3.9m hectares, a historically low figure.

According to US Department of Agriculture estimates, Chinese cotton area, on a harvested basis, has fallen below 4m hectares only three times since 1960.

China has supported domestic cotton production as a means of guaranteeing supplies of a commodity of which it is the world's biggest consumer too, in a textiles industry which employs some 23m people.

However, a side-effect of its cotton price support policy has been, in lifting the price of domestic supplies, to leave domestic spinning mills at a disadvantage, and prompt many textiles companies to turn abroad for cheaper yarn, which is subject to far less restrictive import rules than cotton itself.

Huge inventory

"Although China's production is expected to be lower in 2014-15, its consumption is also declining, and its government currently holds enough stock for one-and-a-half years without any further imports or production," the ICAC said.

China's cotton inventories reached 11.8m tonnes (54.2m bales) as of December 27.

The committee's comments came as it, for the first time in 2013-14, lifted its estimate for physical cotton prices this season, by 3 cents to an average of 91 cents a pound, as measured by the Cotlook A index.

Prices averaged 88 cents a pound last season.

Stockpile grows

Separately on Monday, official data showed China's state stockpiling so far in 2013-14 reaching 5.01m tonnes, up 331,160 tonnes week on week.

The full-season figure is deemed unlikely to match the 2012-13 total of 6.5m tonnes thanks to a smaller harvest last year.

New York cotton futures for March delivery stood 0.7% higher at 83.50 cents a pound in late morning deals.

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