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Govt may intervene if cotton prices continue to fall

Sep '08
Recently a national teleconference on cotton was organized by the National Development and Reform Commission in collaboration with seven other ministries. During the meeting it was decided that the state will strengthen macro-control over cotton market in order to stabilize cotton production in the country.

The state will start purchasing domestic cotton if cotton prices continues to fall. At the same time, China will also strengthen regulation and control over cotton imports.

Market experts suggest that this year cotton purchase will face prominent contradictions and problems, which will affect the earnings. However, increased input has boosted the expectation of farmers over purchase price, while cotton enterprises are more cautious due to diminishing profit in past two years.

During the meeting general requirements for 2008 cotton arrangement were also discussed. It includes new cotton purchases, ensuring availability of funds, stabilizing cotton market to protect the interests of farmers, strengthening macro-control to meet the needs of the market and speeding up the reform of quality inspection to ensure cotton quality.

Cotton prices have continued to fall since early 2008 but the state has not carried out large-scale interventions as the market expected it to do.

It was only towards the end of August this year, that the state issued a 291,300 tons purchase plan of Xinjiang cotton in order to resolve sales difficulties affecting cotton in the province. However, actual transactions were conducted for just around 81,300 tons.

Some industry analysts believe that China's annual cotton output is expected to be around 8,000,000 tons in 2008, while the nation will import 2,440,000 tons cotton.

Fibre2fashion News Desk - China

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