China buys $300 mln US cotton, will purchase more

MEMPHIS, Apr 8 (Reuters) China signed a deal on Saturday to buy 0 million worth of cotton from the United States and its mills will be purchasing more in the years ahead to feed the expanding appetite of its textile industry.

The agreements were signed here between a Chinese trade delegation and officials of the biggest American cotton merchant houses like Dunavant Enterprises, Allenberg Cotton Co.

and Cargill Cotton among others. Memphis is the center of American commercial cotton operations.

''China will have increasingly more demand of U.S. cotton.

It is my sincere hope that the supply side and the demand side will have a long term and stable relationship,'' Chinese Vice-Premier Wu Yi said in brief remarks.

''China's got an appetite for raw cotton, unmatched in the world with 40 percent of the world's consumption. With the U.S.

being the largest exporter in the world, obviously it's a natural fit for us,'' William Dunavant III, President and Chief Executive of Dunavant Enterprises Inc., told Reuters in an interview.

China has become the world's biggest consumer of cotton.

The U.S. Agriculture Department's March monthly supply/demand report estimated China's 2005/06 (August/July) cotton production at 26.2 million (480-lb) bales and consumption at 45 million bales. Cotton imports in 2005/06 were pegged at 17.75 million bales.

The agreement signed on Saturday would be for 500,000 bales, an official of the American Cotton Shippers Association estimated.

Joe Nicosia, chief executive of Allenberg Cotton Co. which is a division of trade house Louis Dreyfus, said American cotton producers have found a good market at a time of record output.

USDA forecast U.S. 2005/06 cotton production at a record 23.72 million bales. It pegged U.S. cotton exports at a record 16.8 million bales, with China the biggest recipient of the fiber.

''Without China, the U.S. cotton industry, and U.S. cotton producers, would be in a great deal of trouble,'' Nicosia said.

''Over the last couple years, the U.S. cotton crop has grown dramatically, and all of that extra cotton's got to go somewhere.'' Dunavant said the only problem in getting the cotton to China were logistical problems here like delays in getting the cotton out of warehouses where they are stored.

U.S. cotton industry sources said there was also a shortage of trucks to transport the fiber after Hurricane Katrina last August. The trucks were used in disaster operations in New Orleans and other parts of the U.S. Gulf Coast.

REUTERS CS HT1140