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End of stockpiling policy to put pressure on China's cotton output

After China decided to end its famous and controversial cotton stockpiling policy, experts feel cotton output in China, the world’s biggest user, may fall 24 per cent next year as the government ends direct purchases from farmers. With policy makers not clarifying how they are going to sustain planting in central and eastern China as the new measures only cover northwest Xinjiang province, national output in 2015 will decline to about five million tons from estimated 6.6 million tons this year.

According to research nby, Chinese officials are seeking to implement a trial program of direct subsidies to growers in Xinjiang, replacing state-funded stockpiling but there is no indication, whether the same measure will be extended to other inland provinces. Cotton for December delivery fell 0.2 per cent to 62.76 cents a pound on ICE Futures US, in Beijing. The fiber is experiencing its longest run of weekly losses in more than five decades on signs that global demand will trail output.

The end of government stockpiling in China has already impacted plantings this year. Area sown to cotton fell 12.5 per cent from a year ago to 4.2 million hectares, according to Xinjiang accounted almost half the nation’s official output of 6.8 million tons last year, according to the China Agricultural Yearbook published by the Ministry of Agriculture. China’s imports will probably fall despite declining domestic production because the government is auctioning as much as 10 million tons of state reserves, as per the research. The country holds more than half the global cotton inventory, said the US Department of Agriculture.