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China cotton consumption trends up

Consumption of cotton by Chinese mills is expected to grow by at least 13 million bales over the next 10 years as Chinese textile “moguls” continue to solidify their gains in the U.S. and European markets.

Texas Tech University's Cotton Economics Research Institute is forecasting that China's cotton mills will spin 54 million bales or nearly 42 percent of the world's total cotton textile output by the 2015-16 marketing year.

But those numbers, which were presented at the Cotton Economic Outlook Symposium at the Beltwide Conference in San Antonio, could already be out of date. The World Fiber Model CERI economists use is based on a 2005-06 figure of 41.5 million bales. Since then, USDA has upped its 2005-06 estimate for Chinese mill use to 43 million bales.

“Trade liberalization in the textile industry has opened market opportunities which are projected to expand further as temporary tariff impositions by the United States and the European Union expire in 2008,” said Don Ethridge, director of the Cotton Economics Research Institute, who spoke at the Jan 5 symposium.

Ethridge said Chinese farmers are expected to expand their acreage and yields in response to higher cotton prices and increased domestic usage. “But production is not expected to keep pace with mill use, resulting in further import growth.”

Chinese textile manufacturers have spent the last several years gearing up for the time when the multi-fiber arrangement or MFA would expire, removing all remaining textile import quotas in the United States and Europe. Mill use has more than doubled — from 20 million to this year's projected 43 million bales — in the last 10 years under China's aggressive industrialization policies.

Shipments of Chinese textile and apparel products literally exploded after those quotas went away on Jan. 1, 2005, but the U.S. textile industry persuaded the U.S. government to impose temporary restrictions on China's imports last fall. Those restrictions will expire in 2008.

The CERI Global Fibers Model projects China's mill consumption to increase 31 percent from 41.5 million to slightly more than 54 million bales in 2015-16. Chinese raw cotton production could rise from 2005-06's 24.5 million bales to 31.9 million bales in the same period.

Import growth

“Production is not expected to keep pace with mill use, resulting in further import growth,” said Ethridge. The model says Chinese imports could jump from the current projection of 15.8 million bales to 22.5 million bales by 2015-16.

Harvested acreage could edge up from the recent high of 14 million acres in 2004-05 to the equivalent of 14.8 million acres. The model expects yields to improve about 11 percent from the current 1.94 bales to 2.15 bales per acre.

The widening gap between production and consumption in China could give a boost to U.S. exports, which are expected to range between 7 million and 8.5 million bales this year. But the model indicates Brazil may gain a larger share of the market than the United States.

“Brazil continues to emerge as a major force in cotton production,” says Ethridge. “Static mill use combined with a sharp increase in production is expected to rank Brazil only behind the United States in cotton exports by 2015-16.”

Thus, Brazil would go from exporting no cotton to speak of as recently as 2000 to exports of almost 5 million bales by the end of the baseline period, says Ethridge.

“Cotton's share of new agricultural production in the frontier regions of Brazil is expected to increase harvested acres from 2.5 million in 2005-06 to 4 million by 2015-16,” he notes.

Visitors to Brazil have marveled at the vast acreages that have been cleared in Mato Grosso in northwest Brazil. Those new lands and technological innovation borrowed largely from the United States have raised Brazil's yields.

“While this rate of yield growth is not anticipated to continue, yields are projected to be sustained at these higher levels (the equivalent of 2.2 bales per acre, according to the CERI model, which was developed in collaboration with The Food and Agricultural Policy Institute at the University of Missouri).”

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