Trade War with China an Anchor on Cotton Prices
Sep. 13, 2019
Cotton futures prices rose on Thursday with the nearby and December contracts topping $62 per CWT. While that's a significant market move, the industry has seen prices sputter this year in the wake of a turbulent trade dispute between the U.S. and China.
Recently on AgDay TV, Tyne Morgan spoke with David Hudson, an economist at Texas Tech University, about the trade war's impact on cotton.
He says increased acres are part of that equation.
"As soybean prices fell more acres shifted over to cotton in year two and so now we're seeing the effects in year two of this pretty substantial drop in cotton price," says Hudson. "That is a trade effect, but it's a delayed effect."
Hudson even the strong MFP payments for cotton won't be enough to offset falling prices in 2019.
"We're talking about nearly a 40% decline in prices, year over year," says Hudson. "That market facilitation payment being big is good and it helps but it's certainly not going to make a lot of these producers whole."
Hudson says getting a deal with China but longer-term textile work already seems to be shifting to new areas.
"I think textile processing is already moving out of China anyway," says Hudson. "We see the U.S. moving away from China over the next 5 to 10 years."
Recently on AgDay TV, Tyne Morgan spoke with David Hudson, an economist at Texas Tech University, about the trade war's impact on cotton.
He says increased acres are part of that equation.
"As soybean prices fell more acres shifted over to cotton in year two and so now we're seeing the effects in year two of this pretty substantial drop in cotton price," says Hudson. "That is a trade effect, but it's a delayed effect."
Hudson even the strong MFP payments for cotton won't be enough to offset falling prices in 2019.
"We're talking about nearly a 40% decline in prices, year over year," says Hudson. "That market facilitation payment being big is good and it helps but it's certainly not going to make a lot of these producers whole."
Hudson says getting a deal with China but longer-term textile work already seems to be shifting to new areas.
"I think textile processing is already moving out of China anyway," says Hudson. "We see the U.S. moving away from China over the next 5 to 10 years."
Source: Ag Professional
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