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China signals it will buy U.S. cotton

April 26th, 2019 / By: / In the Industry

by Seshadri Ramkumar

China has started showing interest in buying cotton from the U.S., which is a positive signal. This is in anticipation of a positive trade deal between China and the United States.

Cotton industry stakeholders who met recently at Lubbock, Texas-based Plains Cotton Growers’ (PCG) Inc., focused their attention on the planting season ahead. With the ginning process completed this week in the High Plains of Texas, it is hoped that the High Plains’ cotton production will cross the 4 million bales mark.

“Demand for cotton is there,” said one merchant at the meeting. This is evident, given the December Futures value for the new crop (77.60 cents). This is somewhat high, given the volume of cotton left to sell, somewhere about half to three quarter of a million in the U.S.

China’s buying is certainly hampered with the 25 percent tariff. Future buying in volumes depends on a favorable trade deal. While China normally goes for high quality cotton, they are interested in lower grades (31 and 41 color grade) at a discounted price. A trade deal would make it possible to push these cottons into the China market.

“Everybody is hopeful that a deal can be finalized sooner to clear the way for cotton to move into China,” says Shawn Wade, director of policy analysis and research at PCG.