US forecasts rise in Brazilian cotton exports to China as trade war tariffs bite
- Report by Washington agency says trade stand-off and improved product from South American exporter will result in increased sales to Chinese buyers
Brazilian exports of cotton to China and other Asian countries are expected to increase in 2018/19, stemming in part from US-China trade tensions, the US Department of Agriculture (USDA) said in a report published on Thursday.
Exports are forecast to reach 6 million bales, up from 4.2 million bales from the 2017/18 season, according to the USDA.
The Brazilian Cotton Producers Association “expects increased interest in Brazilian cotton from buyers in China as well as from Chinese-owned textile mills in other Asian countries, stemming in part from the US-China trade tensions”, the USDA report said.
The USDA also cited “continued improvement in grading and quality of Brazilian product” as a secondary reason why demand for Brazilian cotton from China is expected to increase.
The report came a day after the USDA said US cotton exports to China tumbled by nearly half in the first two months of the 2018/19 marketing year, “hindered” by the US-China trade war.
China’s decision in July to impose the import tax on American farm commodities, including cotton, was retaliation for tariffs enacted by US President Donald Trump’s government.
Earlier this week, the cotton market was rejuvenated after the world’s two economic superpowers agreed on a 90-day trade truce period to hammer out a more permanent agreement.
That excitement faded on Thursday as the arrest of a senior Chinese technology executive cast a shadow on US-China trade relations.
Meanwhile, Brazil’s 2018/19 marketing year cotton area is expected to reach 1.4 million hectares (3.4 million acres), an increase of 19 per cent compared to the previous marketing year. The planted area expansion was a result of rising cotton prices and strong export demand, the USDA said.
Brazilian consumption was forecast at 3.5 million bales, which is a marginal 3 per cent increase compared to the last marketing year, based on increased investment and “an increase in economic activity that is expected on the back of positive market sentiment for the incoming administration of president-elect [Jair] Bolsonaro”, the USDA report said.
