May 4, 2012

China's 2012 cotton area to contract 4%

The cotton-growing area of China is seen to drop 4% this 2012, according to data from the National Bureau of Statistics show.

But the acreage shrinkage is not likely to drive cotton prices higher in the short term, market analysts believe.

A cotton market analyst from SCI, a leading commodity information portal, said "The drop will mainly have an impact on the cotton market next season, from September to next August."

"Cotton prices will only change with textile business demand and state policy changes before September. China currently has 3.13 million tonnes of home-grown cotton stocks and 900,000 tonnes of imported cotton stocks, sufficient enough to adjust to changes in market demand," he added.

Textile manufacturers also faced a strain on cash flow due to increased inventories of cotton yarn, said the analyst.

Li Qingtao, General-Manager of a Shandong-based textile company, said local cotton prices will not see a surge as imported cotton is now cheaper than the domestic alternative.

China is the world's largest producer of cotton, and Shandong in its eastern region ranks first among China's provinces in cotton production.