China’s Cotton Planting Drops 10% as Labor Costs Increase

China Cotton Planting May Fall By 10% on Increasing Labor Costs
Workers sort cotton at a yarn factory in Dali county, Shaanxi province, China. Photographer: Nelson Ching/Bloomberg

Cotton planting in China, the biggest producer and consumer, has dropped about 10 percent in major growing regions as labor costs increased, cutting profits, according to an industry association.

Spring planting is largely finished, with the Yangtze River and the Yellow River areas, which account for more than 60 percent of the country’s output, falling the most, Lu Huaiyu, president of the farmer cooperation branch at the China Cotton Association, said by phone from Hubei on May 23.

Futures in New York have slumped 19 percent this year amid concern global supply will exceed demand. Planting in China may drop by 9.2 percent in 2012 as high costs and falling prices cut its appeal, Gao Fang, executive vice president of the China Cotton Association, said May 18. The government has pledged to buy new-crop cotton at above-market prices to boost planting.

“These policies were not attractive enough to boost inland farmer interest to plant more cotton,” Lu said. “The crop needs a lot of attention during the growing period and more labor to manage compared with grains, while the harvest is a very lengthy process involving labor throughout.”

The government said it will continue to stockpile locally produced cotton to stem the decline in prices and protect farmer interests. It will buy new-crop cotton at 20,400 yuan ($3,215) a ton, Zhang Xianbin, director at the economic and trade department under the National Development and Reform Commission, said May 17. Cotton for January delivery fell 0.2 percent to close at 19,545 a ton on the Zhengzhou Commodity Exchange today.

High Costs

Cotton farming costs rose 17 percent in the 2011 season, including a 13 percent rise in the cost of materials and a 20 percent rise in labor costs, the cotton association’s Gao said. Labor costs account for 58 percent of the total, Gao said.

Still, Xinjiang, the biggest growing area, will see its acreage fall by as much as 1.9 percent from a year ago, Sun Xuan, an analyst at Jinshi Futures Co., said by phone from Shanghai yesterday. Acreage hasn’t fallen as much as in the rest of China because the land is more suitable to growing cotton, she said.

Cotton for July delivery climed 1 percent to 74.65 cents a pound on ICE Futures U.S. in New York. The contract fell to 70.53 cents a pound May 23, the lowest for a most-active contract since February 2010.

— With assistance by Feiwen Rong

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