The prolonged trade dispute between the United States and China is affecting the US cotton market. With the cost of inputs rising, excess supply compared to demand, US cotton farmers are starting to think about alternate strategies. A solution to the dispute is in the interest of agribusiness, particularly cotton, as China is a major importer of US cotton.
With the expectation that there will be increased cotton acreage in the United States in 2019, the supply-demand situation is going to play a pivotal role in the cotton sector this year. The trade issue with China primarily centers around intellectual property rights that has been going on for over two decades, and therefore finding a resolution is complicated.
If the ongoing trade war is not resolved soon, mills in China could move away from US cotton permanently and toward Brazilian or West African cotton. The US cotton industry enjoyed a 46 per cent share of all imports going into China. But that changed when China issued a 25 per cent tariff on US cotton in retaliation for tariffs placed on Chinese goods by the US.
However, China is still seen as a key market for US cotton and the US will promote the benefits of its cotton. Chinese mills like US cotton for its quality, its consistency and its low contamination.