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Cotton industry eyes China trade talks

The CEO of the National Cotton Council says China could purchase up to five million bales of U.S. cotton as part of its $17 billion commitment for additional U.S. ag products.

Gary Adams tells Brownfield this would be an equitable share if China follows through.

“Just going back, based on cotton’s share of China’s ag purchases, which has averaged 10 percent,” he says. “If we look at roughly the value of cotton, you could see where that’s somewhere between 2.5 to 5 million bales.”

Adams says China has historically been a major buyer of U.S. cotton, but purchases have dropped sharply.

“About 195,000 bales is what’s on the books in the new crop marketing year, and in terms of export markets, it ranks ninth.”

He says China used to be near the top of that list, but tariffs have put U.S. cotton at a disadvantage. Adams says that makes the removal China’s 10 percent tariff on U.S. cotton important.

“I guess, China could always mandate purchases and still pay a tariff, but it’s hard to see how that plays out,” he says. “The removal of the tariff is a step toward making these purchases happen.”

He says cotton markets are watching the trade talks closely.

“If the message were to come out for some reason as more negative or neutral on purchases, my guess is it would translate to some short-term pressure on cotton prices, and likewise, if we see something more on the positive front, prices could see more of an increase.”

The U.S. and China met in Washington D.C. this week, and agriculture is awaiting more details.