Higher expectations on the 2019 crop and unsettled trade disputes between the United States and China are leading to an unsettling situation in the cotton industry.
Planting has taken a momentum this week in the High Plains of Texas with good soil temperature in most parts. “Moisture is the dream come true,” said one seed company representative in a recent meeting at the Lubbock-based Plains Cotton Growers (PCG), Inc.
“20-30% of region’s cotton acres have already been planted and next week will see greater activity due to the time limit posed by crop insurance,” stated Mark Brown, Director of Field Services of PCG.
The market is in distress primarily due to the continuing trade issues with China. With the Trump administration imposing additional tariffs on Chinese imports.
“We have not had such good moisture in many years,” said Steve Verett, Executive Vice President of PCG.
While the industry is happy with the weather conditions, so far, not all is rosy for the United States’ cotton sector. As the United States’ cotton sector is dependent on exports, with a higher yield, comes higher stress to sell cotton.
The market is in distress primarily due to the continuing trade issues with China. With the Trump administration imposing additional tariffs on Chinese imports, retaliation by Chinese is evident, which affects the cotton market.
In the past two weeks, cotton futures have dropped by 10-cents and today, the December future is in the mid to upper sixty cent range. Huge crop expectation this season, is adding pressure to the market. The United States’ is expected to produce 22 million bales of cotton (480 lbs. each).
How to sell the 17 million bales that is targeted for export, asked one participant in the meeting. Because of the trade situation, there might be some cotton bales rolled over from last year’s trading, adding more pressure.
The need to continue the market facilitation program is being felt strongly in the cotton sector. It looks like the United States Department of Agriculture will soon make an announcement on the continuation of the program for the 2019 crop.
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