China will not increase its cotton import quota next year beyond the 894,000-tonne quota it promised when joining the World Trade Organization, a Chinese official said Monday [22 September 2014]. “We will guide domestic textile enterprises to use more homegrown cotton,” Liu Xiaonan, an economic and trade official with the National Development and Reform Commission (NDRC), said at a press conference. The official’s remarks came after the government removed its long-held temporary cotton purchasing policy and introduced a target price system for homegrown cotton this year…Full Article: The Global Times Sept 2014

Key Points

  • As of September 2014, the Chinese domestic price for ginned cotton totaled CNY 14,000 (~US$ 2284.50) per metric ton. At the same, in the US futures markets, the price of ginned cotton stands at approximately CNY 11,800 (~US$1,925.50) per MT. It is hoped that the quota will narrow the difference between the two prices and reduce China’s reliance on cheaper cotton yarn imports.
  • According to the Chinese official, China will produce 6.5 million MTs of cotton in 2014 (versus 7 million MTs produced in 2013), a shortfall of the 2 million MTs when considering domestic demand will total approximately 8.5 million MTs.

ChinaAg Comments

  • In April 2014, China’s NDRC announced it would abolish the minimum purchase price for cotton and instead would set CNY 19,800 (~US$3,224) per MT as the reference price. If the free market price falls below the reference price, then farmers will receive a subsidy based on the quantity of cotton sold in February 2015.
  • China has three major cotton growing regions, the Xinjiang Autonomous Region (in the northwest), the Yangtse River Basin Region (which includes principally Jiangsu and Hubei), and the Yellow River Basin Region (principally, Hebei, Henan, and Shandong provinces). In 2011, Xinjiang produced 2.9 million MTs of cotton or roughly 44% of China’s total output. Shandong province was second at 785,000 MTs or 12% of total output.
  • From 2006 to 2011, Chinese imports or yarn and sewing thread averaged approximately 850,000 MTs per year. In 2008, imports hit a low of 653,651 MTs due in part the global economic slowdown. Imports hit a high of over 1 million MTs in 2010. From 2006 to 2009, the import value averaged roughly US$2,180 per MT, but rose to US$3,825 per MT in 2011. Import values have since tapered off to an average of ~US$3,200 MTs from January to September 2012. Pakistan is China’s largest supplier of yarn and sewing thread, with India acting as a secondary supplier. Other suppliers of note include Vietnam, South Korea, Indonesia and Thailand.

Similar Posts by ChinaAg

Spread the word. Share this post!