How the China Trade Deal Impacts U.S. Cotton
January 16, 2020 As the United States-China Phase 1 trade deal was being signed in Washington, DC, High Plains cotton growers gathered for the Plains Cotton Growers Board meeting in Lubbock to discuss the 2019 crop, the cotton market and the trade situation.
Reece Langley, vice president, Washington Operations for the National Cotton Council, discussed the new trade deal and its potential impact on the U.S. cotton industry.
With the signing of the deal, China’s import of U.S. agricultural products would reach at least $40 billion per year, with the potential for $50 billion per year. Langley stated that itemization by commodity is not yet known, but cotton should benefit. U.S. cotton sales to China during the 2017 calendar year totaled 2.5 million bales worth about $1 billion. Total sales of agricultural products to China that year was about $24 billion. The new trade deal is expected to enhance this value by $16 billion.
Langley hoped that the U.S. cotton’s market share in China would at least reach the pre-tariff volume, noting that the tariffs reduced the U.S. cotton share in China to about 18% last year.
Producing and delivering high quality and clean cotton will help to regain the market share. Dahlen Hancock, a Lynn County, TX farmer, 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 pass the U.S. Senate soon, also provide certainty for the existing marketing condition, stated Langley.
“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,” stated Steve Verett, chief executive officer of Plains Cotton Growers, Inc. “Confirmation of that will be actual sales to China, and we hope that comes to fruition soon.”
We now await the details on how China is going to implement the terms of the trade deal to achieve the import target.
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