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China to be key player in the cotton market

November 29th, 2016 / By: / Industry News

The United States’ new administration’s policy on China trade will significantly impact the U.S. agricultural export trade, according to Marci Russell, former chief economist for CNBC.

Speaking at a luncheon hosted by the Lubbock (Texas) Economic Development Alliance, Russell presented four economic-related scenarios with varying degrees of probabilities as a result of the recent election.

There is a 25 percent chance the United States might impose a 35 percent tariff on Chinese goods, she noted, resulting in varying consequences to the U.S. economy and, in particular, to the agricultural export sector; for example, 25 percent of the current U.S. soybean crop is sent to China.

Regarding U.S. cotton, of which China is a valued customer, Russell noted the future market will depend on how the new trade relationship proceeds. If the proposed tariff scenario unfolds, cotton might be in rough spot, she said, admitting probabilities and estimates are less reliable in the wake of the recent election.

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

Reacting to Russell’s observations, Steve Verett, executive vice president of Lubbock-based Plains Cotton Growers Inc., said, “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.”

Russell suggested the best way forward is to reach out to elected representatives and impress upon them the importance of sound policies toward trade with Mexico and China.

Seshadri Ramkumar, Ph.D., is a professor in the Department of Textile Toxicology at Texas Tech University in Lubbock, Texas.