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 Commission.

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%.