By admin       2018-05-04

In its latest monthly update, Cotton Incorporated, the research and marketing company representing US growers of upland cotton, says that while it remains unclear if any of the proposed tariff increases will actually be enforced, there would undoubtedly be an impact on trade patterns. "One outcome that could be expected is that US exports to China would decrease because with the additional 25% duty US cotton would become more expensive relative to other origins. "However, the size of the decrease would be smaller than if the tariffs were imposed several years ago. A reason for this is that China sharply reduced its imports from all origins in recent years as it encouraged the mill-use of government-controlled reserve stocks over imports. "As a result, US exports to China in the past two crop years have been 0.9m and 2.3m bales, much lower than the longer-term average over 4m bales. With US exports to China already lower, there is simply less room to fall than there would have been several years ago." As US sales to China have fallen, they have increased to other markets, notably to Vietnam and South Asia. Even so, "the importance of China as a customer of US and global cotton exporters should not be understated," Cotton Inc says. "Given the drawdown in reserve stocks over the past several years, China is approaching the transition point when it should begin to import significantly more cotton. The prospect of China eventually returning to import volumes between 10-15 million bales should be encouraging for cotton exporters all over the world." Should tariffs coincide with increases in Chinese imports, it would affect the volume of US cotton that could go to China. But Cotton Inc believes that if China pulls in more cotton from other exporters, this would in turn push up US exports to other markets. The group also notes that when it was announced that cotton was listed among the US products that China could hit with an increase in tariffs, NY futures declined sharply. But prices have since completely recovered and have been relatively stable. The latest values for the May and July contracts have been holding near 83 cents/lb while December futures have been holding near 78 cents/lb.

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