At the same time China is whittling down its huge cotton surplus, high production costs will discourage its farmers from growing the fiber this year, says the International Cotton Advisory Committee. “Area in China is expected to decrease by 10 percent, to 3.1 million hectares in 2016/17,” says ICAC, and with normal yields “production would fall by 10 percent, to 4.6 million tonnes.”
The government said it would begin sales from the state-owned cotton inventory this month, which ICAC says could lead to a 7-percent drop in stocks, the first decrease in five years, to 12 million tonnes. China’s cotton surplus is equal to a two-year supply. With continued restrictions on imports and further sales, the stockpile could drop 10 percent by the end of the 2016/17 marketing year, says ICAC.
While China scales back, U.S. cotton growers are likely to expand production 9 percent this year, to 3.1 million tonnes, says ICAC, projecting a modest increase in plantings and a return to average yields. Market prices for cotton are low, but more attractive than competing crops such as soybeans, wheat and corn, said ICAC.