Sorry, I am not referring to the Texas High Plains. I just got back from a week in the world’s largest cotton patch, which is in the Chinese frontier province of Xinjiang (“SHIN-john” is a close enough pronunciation). Xinjiang is about as far west from Beijing as Las Vegas is from Washington, D.C. And it sort of looks like Nevada, too: flat desert with mountains in the distance. The region’s cotton is 100 percent irrigated and very productive. Representing less than 40 percent of China’s cotton acreage, Xinjiang accounts for 50 percent and 60 percent of China’s production.
The largest cotton growing entity in Xinjiang is the Xinjiang Production and Construction Corps. This is a quasi-government/military organization, a vestige of China’s military presence in this frontier region. The apparent mission of the Corps is to build infrastructure and grow cotton. Some estimates are that the Corps farms account for over 40 percent of all production in Xinjiang. If you are keeping up with percentages, that means that perhaps a quarter of Chinese cotton production comes from Corps land.
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On our trip to Xinjiang we toured a Corps farm which was being custom picked (see photo), as many of them are. Here are some observations from that tour (for which I am mostly indebted to Dr. Steve Hague, an A&M cotton breeder). The cotton we saw was beautiful. The bolls are big and fluffy and the color was very white (see photo). This might be expected in a place with plenty of sun and little rain. The staple length for this particular field looked good, but Dr. Hague noticed that strength of these fibers was lacking. Both staple length and fiber strength are inherited traits of a given variety, with the latter often in a trade-off with yield. That is, this variety may have been developed for high yield at the expense of strength. Dr. Hague estimated yield of the field we saw at around four bales per acre. The grower indicated yield potential had been hurt from cool weather during the growing season.
Mix of technology
The production system was an interesting mix of technology. Corps growers use drip irrigation, which is laid in the rows covered by plastic mulch (which helps warm the beds for spring planting). Curiously, these plants were all “topped” (e.g., like you would see in an orchard), reportedly by hand clipping around the twelfth node. The field we saw was reportedly only sprayed a couple of times for spider mites.
In our other driving around, we saw less productive cotton fields being hand harvested. We also saw a fair amount of pima cotton acreage.
So what does any of this have to do with the price of cotton? The (multi) million dollar question for U.S. and foreign cotton markets remains the outlook for Chinese imports. Some of the things we saw on our trip highlight some of the relevant issues in determining Chinese cotton imports. First, what will be the production level of China’s new crop? USDA currently has that pegged at 30.5 million bales. Adjustments will depend on yields from fields like we observed.
Quality is another issue. To the extent that there are significant deficiencies in quality in the Chinese new crop (or previous crops now sitting in the government reserve), that will influence their need to import quality cotton for blending.
Policy influences are another, more complicated factor. The Chinese have already indicated they will restrict the amount of duty-favored import quota. They are also implementing a new target price subsidy program where their growers will effectively get the difference between a $1.46 target price and the market price. For growers on Corps land, the market price is just the announced harvest-time price that Corps growers get from the Corps buyer. (The influence of quality premiums/discounts on the subsidy calculation is still unknown.) The grower we talked to appeared very happy with this new policy, and indicated that he would continue to grow cotton under this new policy. From a marketing standpoint, the issue is how much the lower market price will encourage Chinese mills to use domestic cotton versus imports.