China Cotton Industry to Emphasize Quality Over Quantity

China has 11.5 million acres of cotton and more than 10 million growers. The cotton production of individual growers has no scale effect, resulting in much higher costs and lower income compared with foreign growers who plant cotton on a large scale. Therefore, it is hard for the Chinese government to protect the growers’ interest, given the difference in cost of production and yield between large and small producers. The lack of scale means low efficiency in agronomics. Most growers cannot make a living by planting cotton, though the cotton reserve procurement price in China has been much higher than in foreign markets. Sooner or later, growers will have to find a job in the city. The premium of cotton partly exists in quality, but mostly in brand. Tagging the cotton brand onto the end products will boost the value of cotton to a great extent. Supima, Giza, SJV and Certified FiberMax are good examples. China’s cotton industry has much to learn in acquiring a brand. To achieve a healthy development, China’s cotton industry must:

• Turn small growers into large growers. The government should encourage cooperatives or farming companies to source lands from small growers through contracts. Land conversion in this way has three advantages: 1) small growers can focus on their jobs in the city without sacrificing the income from their lands; 2) economies of scale will be achieved; and 3) cotton acreage will be stabilized because it is not easy for large growers to shift to other crops.
• Enhance brand effect. Every time I make surveys in cotton warehouses, I find some local cotton brands printed on cotton bales. The textile mills know these brands, but they have never passed the cotton brand information on to the end consumers. Domestic cotton brands have never been given full play in the market. I understand it is not easy to set up a complete value chain from field to store shelf, but it seems to be the most efficient way to maximize the premium of cotton.

As I mentioned in the 2013 Cotton International Annual, structural change of cotton consumption in China will take place – lower in quantity but higher in quality. It is the requirement of textile industry upgrading. The fundamental change of the cotton industry will take time. But it seems to me that the government is preparing for it. Urbanization will continue, creating more jobs for small individual growers. The new cotton classing standard started at the beginning of the 2013/14 marketing year pointed out a clear direction of quality-based cotton production in the future. And the huge cotton reserves built up during the last two years will help to mitigate the fluctuation of cotton supply and demand in the next several years, which offers time for fundamental upgrading such as land conversion or other improvements. Moreover, machine picking has started in Xinjiang, the largest cotton production base in China, which can be regarded as the beginning of fundamental change of the country’s cotton industry. This analysis is my personal opinion about the evolution of China’s cotton industry, and does not represent the official perspective of China National Information Center. I look forward to comments or suggestions from the world’s cotton community in regard to the topic.