Acreage may shrink to about 70 million mu (4.7 million hectares) this year, from 87.9 million mu a year earlier, the association said, citing a report on planting intentions by the Chinese Academy of Agricultural Sciences.

Cotton dropped 28 percent in New York last year, the first annual loss since 2004, as demand for textiles plunged amid an escalating global financial crisis. Planting reductions by China and other countries may help ease a global supply glut.

??Output could fall by 15 percent to 16 percent, if acreages turn out to be 20 percent less than last year,?? Dong Shuzhi, analyst at Jinshi Futures Co., said by phone from Shanghai today.

Chinese farmers, who normally start planting cotton in March and April, may favor other cash crops such as wheat and rice because the government has introduced minimum purchasing prices for those crops, Dong said.

??Cotton farmers were hit by both rising input costs such as labor and fertilizers, and falling cotton prices,?? the association??s report said. ??Almost all large-scale cotton farms suffered losses and it has never been so difficult for farmers to sell cotton.?? About 40 percent of new crop cotton remained unsold, the report said.

Government Plan

The lower planting intentions are in contrast with the state plans to stabilize the area sown to the crop. The government aims to maintain planting area at 85 million mu with output at 7.5 million tons, the farm ministry said in a statement on Dec. 30.

China??s government has purchased 1.82 million tons out of a target of 2.72 million tons of new cotton from the local market for stockpiling in an effort to stabilize the market and protect farmers?? interests, the China Business News reported Jan. 20.

China is estimated to harvest a total of 7.9 million tons of cotton in the year ending August, Dong said.

Still, prices may not benefit because a drop in cotton consumption because of slumping textile exports and consumer spending may help offset the reduction in output, Dong added.

??Forty percent of China??s textile exports use cotton as a raw material,?? Dong said. ??Demand may vanish faster than the farmers can reduce their supply.??