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Trade War Fallout: Brazil Sees Big Jump in Share of China’s Cotton Import Market

Brazil’s share of China’s cotton import market increased 170 percent in 2018-19, as U.S. exports to China wilted under the 25 percent tariff imposed during the U.S.-China trade war, the International Cotton Advisory Committee (ICAC) said in a new report.

China is expected to remain the world’s largest importer of cotton, with projected imports of 1.8 million tons in 2019-20. This is a 12 percent decrease from the previous season, attributed to trade tensions with the United States and a slowdown in manufacturing during the COVID-19 containment, ICAC said in its July report.

“The COVID-19 pandemic has turned the cotton world upside down, but not everything has changed in the past six months,” ICAC said in its monthly report. “China and the United States, for example, have suffered from the virus like every other country and continued to batter each other with tariffs, as well, but they will remain the world’s largest cotton importer and exporter, respectively. Although Phase One of their trade agreement went into effect on Feb. 20, the cotton industry had already seen several changes as a result of the troubles.”

The U.S. is expected to export 3 million tons globally in 2019-20, and from August through April saw its shipments to China reach 277,000 tons. This marked a 29 percent increase from the previous period, according to ICAC, as tensions eased after the January Phase One trade deal was signed that required China to increase its agricultural imports from the U.S., including cotton.

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For the 2019-20 season, most other countries and regions are expected to find their shipments to China decrease, with West Africa’s exports declining 48 percent and other countries that export to China seeing contractions ranging from 7 percent to 73 percent.

With global cotton consumption revised down to 22.5 million tons for 2019-20, a 13 percent decrease from the previous season, trade is expected to decrease to 8.25 million tons, or 11 percent. Imports to China have shifted again during this period of reduced demand from both COVID-19 containment and trade agreements.

Comparing the August through April period for the 2018-19 and 2019-20 season, global imports for the nine-month period are estimated at 1.25 million tons, a 22 percent decrease from the previous period.

As for the impact on prices, ICAC’s projection for year-end 2019-20 “A” Index, an average of global cotton prices, has been revised to 71 cents per pound this month from 72 cents in June, while the price projection for the year-end 2020-21 average of the A Index is 58 cents per pound compared to 59 cents.

U.S. spot cotton prices averaged 57.56 cents per pound for the week ended July 2. That was up from 56.23 cents per pound from the prior week, but down from 60.50 cents a year earlier.