China Cotton Market

Chinese Cotton production a million bales less?

Though it's wisest to take Chinese estimates with a grain of salt, official numbers fall in line with private estimates.

A Chinese government bureau has lowered its estimate of 2002-03 cotton production by nearly a million bales, supporting industry speculation that the Asian giant will need to import cotton in the months ahead.

Reuters reported Tuesday that China's Bureau of Cotton and Jute it has dropped its estimate of the country's 2002 cotton output by 200,000 tons (roughly 918,000 bales) to 4.5 million tonnes (about 20.7 million bales) due to undesirable weather during planting. If correct, the lower estimate would be 15.4 percent drop from last year's near-record crop and help China's cotton import demand to rise strongly in 2002-03.

Imports could also be helped by firms rushing to use quotas before a September 15 deadline, but a government proposal to raise the criteria for cotton used in its textile industry could dampen the outlook later this year, they said.

“This year's output will hit 4.5 million tonnes,” the cotton bureau's director Shi Jianwei told Reuters. Shi said the forecast was lower than an estimate in early August as the bureau had now taken into account unusually cool and wet spring weather.

The bureau's new figure was more in line with some traders' cotton output estimates of about 4.55 million tons (20.8 million bales) for 2002 and USDA’s forecast of 4.45 million tons (20.4 million bales) for the 2002-03 marketing year.

China, the world's top cotton producer and consumer, picked its biggest cotton crop in a decade last year of 5.32 million tonnes (24.4 million bales), according to a number of sources.

Unfavorable weather and a smaller planted area are the main factors in lower output this year.

Chinese farmers reportedly didn't have good starts in Hunan and Hubei provinces because of the cool and wet weather, and key regions like Xinjiang also had a later start than usual.

China planted 3.71 million hectares (9.167 million acres) of cotton in 2002, down 13.8 percent from the year prior, according to the State Statistical Bureau.

Shi also noted that recent flooding in the southern province of Hunan has had very limited impact on the crop.

Smaller output and firms making last-ditch efforts to exercise their low-duty import quotas are expected to boost imports this year, traders said.

As a World Trade Organization member, China has issued tariff-rate-quotas (TRQs) of 818,500 tons (3.8 million bales) for this year, but importers must return any unused quota to the government by mid-September.

Firms trying to beat that deadline have contributed to a 216.2 percent year-on-year rise in cotton imports in the first seven months to 60,000 tonnes (275,575), which matches 2001 imports. Traders said they expected the full year imports to be 100,000 to 150,000 tons (495,292 to 688,938 bales). Compared to 2001, that would be a substantial rise, but still only a fraction of the cotton TRQs.

One other concern about cotton imports would be a new set of cotton standards. Reportedly, fiber inspectors plan to use new criteria to measure imports for short fiber content and neps. 09-2002

Australian crop could be 30 percent less

Sustained drought and currency relationship could mean fewer acres get planted; combined with lower yields, Far West U.S. cottons could have marketing advantage.

Australia has been suffering from a drought that could reduce the next cotton crop by as much as 30 percent, according to an Australian cotton industry organization.

Reuters News Service reported Wednesday that Cotton Australia, noting the impact on planting intentions as vital reservoirs in the country's cotton areas are drying up, expects a considerably smaller cotton crop than in recent years.

“An internal assessment of the effects of the drought, given to Reuters, shows that cotton growers in the New South Wales-Queensland border region are rapidly scaling down planting intentions and laying off staff,” the wire service story said.

One of the hardest-hit areas is Dirranbandi, a small town on the Queensland side of the border, near bigger Goondiwindi.

The Cotton Australia document reported, water “allocations are down two-thirds from a normal season.

“Some growers have no water for next season. Many staff have been retrenched.”

Australia's 2002-03 crop is expected to be just over two million bales, down from 3.1 million bales in the last crop, according to one Cotton Australia board estimate, Reuters reported.

The Australian equivalent of USDA’s economics research board estimated in June that the crop would be smaller than in years past, but not to the Cotton Australia degree.

Tthe Australian Bureau of Agricultural and Resource Economics (ABARE) two months ago forecast that Australian cotton lint output in 2002-03 would fall to 558,000 tonnes from 684,000 tonnes the year before (2.46 million bales from 3.01 million bales).

Blame the drought, which began last April and shows no signs of breaking. As planting dates near, the drought has reportedly worsened in eastern Australia.

Cotton is grown in the center of the worst-hit drought area, the border area of New South Wales (NSW) and Queensland states. Nearly all cotton growing areas have been hit by drought, with most storage facilities showing very low levels, Cotton Australia said.

The drought is worsening an existing water shortage, and is raising considerable uncertainty about Australian cotton production prospects.

ABARE noted in June that lower prices and less available water had already cut estimated output to 684,000 tonnes (3.01 million bales) in 2001-02 from 795,000 tonnes (3.5 million bales), the year before.

Like the U.S. far western states, irrigation supplies are being restricted by existing and anticipated government regulations.

Corroborating the estimate by Cotton Australia were statements by NSW state government's official drought coordinator Geoff File this week.

He told Australian media that only 40 percent of otherwise intended cotton and rice plantings would go ahead because of low water levels in reservoirs.

The Cotton Australia report shows only 50 percent of the Border Rivers region has water. And the group’s estimate shows only 30 percent of the Queensland side of the border and about 60 percent of the NSW side will be planted if the drought does not break by mid-October.

“Winter crops (mainly wheat) are starting to fail now and only a few will make any crop if no rain (falls) within two to three weeks,” the report said.

In the major Gwydir growing centre in central NSW, just south of the border, cotton was expected to be planted on only 60-70 percent of last year's area, it said, as the area's major reservoir is only 37 percent full.

“Some growers have water left from last year, but without rain before the season begins, others will have none,” the Cotton Australia document says.

This would be a critical blow to the Australian cotton production and export industries, as the land down under is the world’s third largest exporter of cotton, behind the U.S. and Uzbekistan. 09-2002