China´s cotton growers have experienced a sharp increase in domestic input costs during the 2008 season, with total costs up 30 to 50 percent. This situation has farmers depending on a major increase in 2008/09 seed cotton prices to recover their costs and to ensure adequate returns. A recent survey in Anhui Province revealed that growers are expecting prices of 7.0 to 8.0 yuan per kilogram. Cotton merchants indicate that such prices appear very unlikely to occur. For the average seed cotton price in the area to reach 8.0 yuan per kilogram, T328 lint prices must soar to 18,000 yuan per ton -- they are currently 13,700 to 13,800 yuan per ton. Ginners are also indicating that they have no intention of acquiring seed cotton at such prices due to the risk to their financial health.

In past years, the overcapacity of ginners has caused heavy competition among gins, pushing seed cotton prices to levels far above the outturn values, a circumstance that will probably not happen this season given the financial situation of gins and tightness of funds. Instead, if seed cotton prices are in the 6 to 7 yuan per kilogram range, grower returns will sharply drop below other crops causing growers to turn their attention to other crops in 2009.

Source：Globecotnews