China to be Key Player in Cotton Market in the Current Scenario

Seshadri Ramkumar, Texas Tech University, USA

Image courtesy- Agriculture Corner

China will be a key player in the cotton market in the current situation after the recent U.S. Presidential election. It is no surprise that China’s economy has been slowing in the recent past. In addition to this factor, all eyes will be on the United States and China trade relations. United States’ new administration’s policy on China trade will significantly impact the U.S. agricultural export trade, according to Marci Rossell, former CNBC chief economist.

Dr. Rossell recently visited Lubbock to keynote at an economic luncheon hosted by Lubbock Economic Development Alliance. In speaking to a packed room at The Overton Hotel, Rossell presented four economic related scenarios with varying degrees of probabilities as a result of the recent election.

There is a 25% chance that U.S may likely impose 35% tariff on Chinese goods, resulting in varying consequences to the U.S. economy and in particular to the agricultural export sector, as 25% of U.S. soybean gets shipped to China.

As China is a valued customer of U.S. cotton, in a question from this scribe on the impact for the U.S. cotton industry, on the sidelines of her presentation, Rossell, pointed out that it depends on how the new trade relationship will proceed. If tariff scenario happens, then cotton may be in rough spot. However, Rossell pointed out that probabilities and estimates don’t mean anything these days after what has happened in the recent political elections in the United States.

Rossell also pointed out that the slow growth situation in China has already been factored into the current cotton market conditions.

Steve Verett, Executive Vice President of Lubbock-based Plains Cotton Growers, Inc., in reacting to Russell’s economic picture stated, “U.S. agriculture has long relied upon robust export marketing conditions, particularly in the cotton industry where a significant amount of our raw product is exported. Our markets continually evolve so we can remain viable and meet consumers’ demands. As consumer preferences and trends change from year to year, the agriculture and export market sector will continue to adapt in order to maintain a strong and viable market for our growers.”

Rossell urged the best way forward is to reach out to elected representatives and reason with them the importance of sound policies towards trade with Mexico and China.

A useful takeaway message from Dr. Rossell’s talk is that economic literacy is needed to move the industry and economy forward.

As a current resident of Michigan, Rossell stated, Texans believe that trade is good for everyone, which is important when it comes to future trade relationships with valuable partners.