China Cotton Haul Seen Below Forecast on Too Much Rain, Too Late

Cotton output in China, the world’s second-biggest grower, will probably trail a U.S. government estimate as the country’s farmers suffered from too little rain, then too much.

In the 12 months started Aug. 1, growers will collect 29.31 million bales, the average of 10 analysts and traders in a Bloomberg survey showed. On Nov. 10, the U.S. Department of Agriculture estimated the crop at 30 million bales, or 6.53 million tons, and the agency will update its forecast today. A bale weighs 480 pounds, or about 218 kilograms.

Early in the growing season, farmers were plagued with dry conditions that stunted plant growth. That was followed by a period of unusually heavy rains in September, which hurt crop quality along the Yellow River Basin, according to Drew Lerner, the president of World Weather Inc. in Overland Park, Kansas. A smaller domestic crop means the country, the top consumer, may buy more from overseas, helping to erode global inventories that have swelled to a record.

“China may import more cotton than is currently estimated,” Sharon Johnson, an introducing broker for KCG Futures in Roswell, Georgia, said in a telephone interview. “What’s important is not so much that the crop will be smaller, it’s the poor quality,” which will limit the amount than can be used for textiles, she said.

Cotton for March delivery fell as much as 0.4 percent to 59.65 cents a pound today on ICE Futures U.S. in New York and touched a five-year low of 58.53 cents on Nov. 24.

Prices slumped 29 percent this year as global production is set to exceed demand for the fifth straight year, USDA data show. The rout is lowering costs for clothing companies including Hanesbrands Inc., an underwear maker.

Subsidy Program

After China’s stockpiles swelled to an all-time high, the government scrapped policies aimed at building inventories and instead is offering a subsidy to farmers if prices fall below a pre-set target. The country is one of the main buyers of fiber from the U.S., the biggest exporter. India is the largest producer.

Based on a survey conducted in the second half of October, estimated 2014-2015 production at 6.51 million tons, down 4.3 percent from its August forecast and 6.9 percent less than last year as plantings shrink, according to Xi Jin, manager at the China National Cotton Information Center, owner of

That estimate is a “bit on the optimistic side because there remained a lot of uncertainties of the Chinese government subsidy program during the transition period,” Xi said in a phone interview, adding production may drop to 6 million tons next season. “We have so much cotton inventory waiting to be sold that next year’s output reduction almost doesn’t matter.”

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