MUMBAI (Commoditiescontrol) - China cotton production is forecast to decline at 5.5 million tons in market year 2015-16 that begins from August 2015, amid projected 19 percent fall in planted area in response to the lower government’s price support for cotton planting, according to USDA attaché report.
However USDA has revised cotton consumption slightly up at 7.5 million tons with cotton imports are forecast to plummet to 1.25 million tons in 2015-16 from the 1.8 million tons previous year due to due to the limited issuance of additional import quotas driving the Chinese industry to use imported cotton yarn.
Purchase Rate Of Cotton Reserve Sales Unexpectedly Low
China government in an effort to reduce the state high cotton reserves and satisfy the textile sector’s demand, on July 10, 2015, the government enforced a cotton rotation plan by auctioning cotton reserves at a “market oriented floor price.” However, the expected purchase volume at the auction was much lower than expected mainly due to spinning sector’s weaker demand for cotton. The sector’s concern regarding high imports of cotton yarn, the lower priced cotton substitutes such a polyester fiber, and the quality of the cotton reserves further discouraged purchases.
The government offered a total of 1.85 million tons cotton reserves in open auctions as of August 31, 2015. Total purchased quantity remained low at 63,413 tons, accounting for merely 3.4 percent. Of the total volume purchased 52,695 tons were from the 2011-12 crop, 988 tons were from the 2012-13 crop, and 9,730 tons were imported cotton.
The selling price generally reflects the August 31 rotating floor price with an average price of RMB15,520/ton ($2,425) for imported cotton and RMB13,311/ton ($2,080) for 2011-12 domestic crop. The relatively high floor price for the 2012-13 crop contributed to the low purchase rate. As scheduled, the auction would not impact the marketing of 2015-16 domestic crop. Thus, cotton reserve sales ended on August 31.
2015-16 Domestic Cotton Production Forecast At 5.5 Million Tons
Cotton production is forecast to drop at 5.5 million tons in 2016-16 as a result of a 19 percent fall in cotton planted area. This fall in planting area is in response to the government’s support policy change which lowered subsidies to farmers in the Yangtze River and the Yellow River regions.
In its August report, the China Cotton Association (CCA) reduced 2015-16 production to 5.5 million tons based on a smaller planted area of 3.21 million hectares, down 24 percent from 2014-15. This forecast production is 386,000 tons lower than CCA’s June data. Another major industry source, however, forecasts MY15/16 production at 5.81 million tons.
2015-16 Cotton Consumption Forecast At 7.5 Million Tons
China 2015-16 cotton consumption is forecast at 7.5 million tons, up slightly from the 7.4 million tons in 2014-15. This forecast is based on an estimated weak recovery of the textile and apparel products both at home and abroad, coupled with expected higher imports of yarn.
China’s estimated GDP growth and normal increase of population are expected to support moderate growth in cotton consumption. Leading Chinese industry sources’ forecast for 2015/16 cotton use ranges from 7.35 to 7.68 million tons. However, these estimates are moderately higher than their respective estimate for 2014-15. China’s constantly high cotton price has significantly reduced its spinning competitiveness and has added costs to its textile and apparel production intended for export.
Textile and apparel exports continued to slip for five consecutive months. In July, total export value was down 10.2 percent over the previous year. Total textile and apparel exports stood at $128.4 billion in the first half of 2015, down 3.1 percent over the previous year. That said, the recent depreciation of Chinese currency is expected to facilitate exports in 2015-16.
Cotton yarn imports remained strong in 2014-15 at 2.15 million tons, up from the 1.97 million tons in 2013-14. Given that the government has no intention to issue additional import quotas (outside of the WTO quotas and subject to a sliding duty); industry sources estimate the imported cotton price remains RMB900/ton higher than the domestic market price if the full sliding duty is paid. China’s industry may continue to favor the use of more imported yarn in 2015-16 instead of using imported cotton to spin yarn. Additionally, the current low price for crude oil will continue to support the use of polyester fiber in yarn production and restrict growth in the use of cotton.
2015-16 Cotton Imports Expected To Fall To 1.25 Million Tons
Based on a tight import quota, together with an estimated weak recovery in cotton use, 2015-16 cotton imports are forecast to plunge at 1.25 million tons. This forecast is significantly lower than the 1.8 million tons in 2013-14, and the 3.07 million tons in 2014-15. Industry observers indicate that in the near future, the government is unlikely to add any sort of import quota and imports of cotton yarn are expected to remain strong and satisfy China’s yarn use.
The current devaluation of Chinese currency is expected to cast a shadow on imports in general but its impact on cotton and yarn imports remains difficult to quantify at this time. Forecast 2015-16 cotton imports by China’s industry sources vary and range from 1.38 to 1.78 million tons. 2015-16 imports from the United States are forecast down from the 587,000 tons in 2014-15. However, its share is likely to increase given that the Chinese industry favors the quality/grade of U.S. cotton.
(By Commoditiescontrol Bureau; +91-22-4001533)
0 Comments 
Post Comment 
