China's major cotton-growing region to cut cultivation area

Market News

China's major cotton-growing region to cut cultivation area

China, the world's No. 2 cotton producer, is targeting a 6.5% reduction in cotton cultivation in its top growing region this year, as it attempts to create conditions more favourable to a release of some of its huge state stocks. China's northwestern Xinjiang region, producer of more than 60% of the nation's cotton, will reduce planting of the fibre by 1.5 million mu, or 100,000 hectares, to 23 million mu in 2016, according to local media reports citing an agriculture work conference held late last month. A cut would be the third consecutive annual reduction and bring the elimination of land given to cotton since 2014 to more than 400,000 hectares, Cncotton.com said.

The plan comes as Beijing looks to offload a portion of its bulging state cotton reserves into a market already showing its weakest demand for the fibre in years.

Beijing is estimated to hold around 11 million metric tons of cotton stocks, about half of the global warehouse total, after a three-year stockpiling programme aimed at supporting farmers. The government is under pressure to sell the ageing stocks, which degrade over time and are racking up storage fees. But the U.S. agriculture department slashed its forecast this month for Chinese cotton consumption in 2015/16, putting it at just under 7 million metric tons due to factors such as the falling prices of polyester and the weakening Chinese economy.

British cotton merchant Plexus said in January that demand from Chinese mills was expected at only 6.2 million metric tons. Traders said it was too early to say whether reduced cotton cultivation in Xinjiang would have much impact on supply. "The yield of the (previous) crop was greatly influenced by the weather, so it may be normal to see a rebound of 10% this year, which could easily offset the loss in acreage," said a China-based trader.

China produced 5.6 million metric tons of the fibre in 2015, according to the National Bureau of Statistics, but many traders put actual output at less than 5 million metric tons after summer heat hurt yields. The government is also aiming to promote better varieties of cotton seed and offer more training to farmers to raise the quality of the Xinjiang crop, according to reports from the work conference.