After China abandoned stockpiling last year and offered new subsidies connected to market prices, Chinese farmers have started to plant significantly more top quality cotton, known as extra-long staple (ELS) cotton. As the result China’s production of ELS cotton, could be three times last year’s crop in 2015/16, traders estimate, pressuring prices and demand from global exporters like the United States.
ELS acreage hit 1.9 million mu, equivalent to 127,000 hectares, trade website Cncotton.com reported on Friday, citing a Xinjiang agriculture official, up from less than 1 million mu last year.
A cotton dealer who recently visited growers in Aksu in northwestern Xinjiang, who produce most of China’s ELS cotton said that it may be as high as 2.2 to 2.3 million mu.
Output could be as much as 180,000 tonnes, triple last year’s level of 60,000 tonnes, traders said, adding that there were no official estimates and it was still too early to accurately predict yields.
The ELS premium over regular cotton has risen significantly in recent years, after drought and competing crops in California reduced production in the world’s top exporter. Beijing’s subsidy for the fibre is 1.3 times the regular cotton subsidy.
ELS cotton, also known as pima, makes up a tiny portion of total cotton consumption. It is mainly used by luxury shirt brands and in high-end bed sheets.
Chinese mills consume most of the fibre but local output declined under a government stockpiling policy that paid generous prices to farmers for regular cotton, and offered no incentive to growers of higher quality ELS.
A smaller US crop will do little to support prices, given China’s surge in output however. There are currently no enquiries for US imports, said traders, pointing to expectations of lower Chinese prices.
US pima is currently quoted at about $1.60 per pound, more than double the price of regular cotton. US output is estimated at 432,000 bales or 94,118 tonnes, 24 percent lower than last year, according to the U.S Department of Agriculture.
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