AUSTRALIAN cotton producers have found their prospects plunging on news that the local arm of a major Chinese buyer has gone out of business, leaving them to resell output at a sharp discount, reports Bloomberg,

Administrators were appointed to Weilin Trade Pty Ltd at the start of July, Australia's Securities and Investments Commission documents show. Weilin Trade was set up by China's Weilin Group in 2012.

The shutdown of the Chinese buyer comes as the world's biggest consumer faces a glut of US cotton, after buying US$1 billion worth of American fibre in the past three months as part of the phase one trade deal between the two countries, despite the pandemic closing clothing stores and slashing demand.

"The fibre market has witnessed phenomenal stress in the supply chain due to Covid-19," said Rabobank analyst Charles Clack.

Weilin Group in China also has operations in Shandong and Dalian, according to its website. Aside from buying and shipping fibre, the Australian arm owns and operates a farm in Coleambally, in the Riverina region of New South Wales.

Citing a reason for the business failure, Brisbane-based administrators from Vincents Accountants in a July 23 report simply said "customers failed to pay". Vincents and Weilin Trade did not respond to emailed requests for comment. The collapse has ensnared about 100 growers and could leave them A$20 million (US$14 million) out of pocket.