Chinese Cotton Purchases Lifting Market Out of Doldrums

DENVER, CO – China took the headlines in cotton as the standout overseas buyer for the quarter, helping lift cotton prices from the multi-year lows dredged in March and early April.

China’s imports of U.S. upland cotton at the end of June were 50 percent higher than last year’s pace while outstanding sales of unshipped cotton were up almost 450 percent, year-over-year.

According to a quarterly report from CoBank, as China makes progress in fulfilling the Phase One Trade agreement with the U.S., the high volume of purchases still on the books and yet to be exported to China puts even greater importance on bilateral relations. State-owned enterprises made most of the recent cotton purchases, which raises questions about the level of cotton inventory within China.

Lack of strong demand from other major importing countries like Vietnam signals that the economic strains of the COVID-19 pandemic are dampening global market demand. Political tensions between the U.S. and China raise questions as whether the purchase pace is sustainable and if China could switch unshipped purchases of U.S. cotton to other destinations.

Markets will remain fixated on U.S.-China relations and crop conditions in the U.S. – particularly in the important West Texas region – in the next quarter. USDA is projecting domestic cotton plantings at 12.2 million acres, down from 13.7 million last year.
(SOURCE: CoBank Knowledge Exchange)