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Trade in the cotton market

January 16th, 2020 / By: / Industry News

The United States-China trade deal (Phase 1) signed in January
raises hopes for the cotton sector.

by Seshadri Ramkumar, Professor, Texas Tech University, USA

On the day when the United States-China trade deal (Phase 1) was signed in Washington, D.C., cotton growers gathered for the Plains Cotton Growers’ Board meeting on Jan. 15 to talk about 2019 crop, trade situation and the cotton market.

Reece Langley, vice president of operations at Memphis-based National Cotton Council, presented information about the trade situation.

With the signing of the deal, China’s imports of United States’ agricultural products would reach at least $40 billion (U.S.) per year, with potential to each $50 billion per year. U.S. cotton sales to China during the 2017 calendar year was 2.5 million bales (480 lbs. each) worth about $1 billion. Sales of agricultural products in that year to China reached approximately $24 billion. The new trade deal is expected to enhance this value by $16 billion.

It’s hoped that the U.S. cotton’s market share in China would equal at least those of the pre-tariff era, according to Langley. The tariff regime has brought down the share to about 18 percent in 2019..

Producing and delivering high quality and clean cotton will help to regain market share. Dahlen Hancock, Lynn county farmer in the High Plains for 39 years, stated, “We have to keep striving to provide superior quality, as the world needs quality cotton.”

Regional and international trade pacts such as the United States-Mexico-Canada agreement (USMCA), which is expected to be passed soon by the U.S. Senate, provides certainty for existing marketing conditions, Langley added.

“The recently signed Phase 1 of the China trade agreement has the potential to provide resumption of access to an important market for Texas cotton producers. Confirmation of that will be actual sales to China, and we hope that comes to fruition soon,” said Steve Verett, chief executive officer of Lubbock-based Plains Cotton Growers Inc.