China is set to curb ballooning cotton prices, which are currently benefiting farmers but may imperil the country's textile industry and hinder national efforts to optimize agricultural balance in the long run.
The rocketing prices, fuelled by a temporary shortage of new cotton and fears of yield shrinkage in the wake of bad weather, have prodded the authorities to move 700,000 tons of cotton reserves to the market so far this year, Zhu Dongfang of the State Development Planning Commission said Monday.
Cotton is now trading at 13,600 yuan (US$1,638.5) per ton in some areas, up by 1,000 yuan (US$120.48) from the same period last year, according to sources with the All-China Federation of Supply and Marketing Cooperatives. The federation plans to cap the price within an average of 11,000 yuan (US$1,325) per ton.
Zhu, a division director with the commission's Economic and Trade Circulation Department, said China had increased the amount of cotton reserves put up for sale on the national cotton exchange from 10,000 tons daily in early October to 30,000 tons a day in November.
The textile industry, which has experienced robust growth this year, is projected to consume 4.4 million tons of cotton between this September and next August, according to Zhu.
Textile industry consumption, combined with cotton use from other sectors, is expected to drive total cotton demands up to 4.8 million tons between September and August, creating a shortage of 140,000 tons of new cotton in the period, he said.
Zhu added, however, that the country's cotton reserves and commercial stocks would be sufficient to satisfy the needs of textile companies for quite some time.
Cotton Yields to Drop
Chronically overcast skies and rainy weather in the past two months in the country's major cotton producing regions is partly responsible for recent drops in production, Zhu explained. Farmers have produced 250,000 fewer tons of cotton than they did last year.
Zhu also said the appearance of new cotton on the market would likely happen roughly three months later than usual.
Cotton farmers, already benefiting from the price surge, have held off selling their crop to wait for even higher prices and enterprises have rushed to purchase and store cotton instead of processing the product, Zhu said.
High Prices Will Have High Costs
Analysts said the continued rise in cotton prices threatens to derail the country's textile industry. Textile exports in particular will be seriously affected, they alleged.
Textile exports increased by 29.2 percent to US$12 billion in the first nine months of this year on a year-on-year basis, according to statistics from the State Administration of Textile Industry.
Cao Hua, an official with the Market Information Department of the Ministry of Agriculture, said she was not surprised by high cotton prices, which she said were just "rebounding to the 1998 level."
But she said the dramatic price fluctuation may disrupt the country's campaign to improve the crop growing structure, as the lofty prices this year will allure many farmers to rush head on to devote more acreage to cotton next year, which in turn will cause oversupply and low prices in the years ahead.
(China Daily 11/28/2000)
