Textile mills may suffer from higher
cotton prices next year
Chinese cotton mills may
suffer from higher cotton prices next year as the government
continues to buy cotton from the market and planting acreage
shrinks, The adjustment of cotton import tariff for
sliding-tariff quotas may also raise costs for mills which need
the high-quality crop.
Cotton prices have tumbled since earlier this year, with
rolling three month cotton futures traded on the Zhengzhou
Commodity Exchange falling more than 40% since mid-February.
Chinese mills do not have much high-quality cotton available
for use as the government has been actively buying the crop from
farmers to support local prices.
The government bought 1.62 million tonnes of cotton from
farmers, while analysts expected it to purchase a total of 2.5
million to 3 million tonnes of the crop, 35% -42% of 2011's
output estimated by the National Development and Reform
The cotton purchase price was 19,800 yuan ($3,100) per tonne,
and some analysts said the government was unlikely to sell them
without profits of between 2,000-3,000 yuan per tonne. China
issues cotton import quotas of 894,000 tonnes each year, subject
to an import tariff of 1%.