cotton production

Phase-One Deal’s Impact on Cotton

Clint Thompson Cotton, General

cotton production
Cotton acreage is expected to decrease this year.

By Clint Thompson

The phase-one deal the United States signed with China on Jan. 15 should eventually improve cotton prices for farmers, according to Adam Rabinowitz, University of Georgia Cooperative Extension ag economist.

The deal stipulates that China will increase its purchases of agricultural products by $32 billion over two years. Rabinowitz believes this will only help cotton prices that currently sit between 70 and 71 cents per pound.

“That’ll definitely help stabilize some of the demand for U.S. cotton. Losing that market was certainly significant for the cotton industry. Being able to really move back into that market full force is going to be a great opportunity,” Rabinowitz said. “The challenge, of course, is we’ll need to be competitive because that’s part of that phase-one agreement. It’s very specific with market conditions and market prices, based on what the demand is going to be in China. I think there will be opportunities for cotton in that market.”

Rabinowitz said optimistically, farmers should expect between 69 and 75 cents for prices this year, but those prices could drop to between 62 and 66 cents.

“These are not prices that growers are excited about. They certainly would prefer prices in the 80 cents per pound range. I don’t think we’re at a position in the market to really get there at this point,” Rabinowitz said. “Will we be able to maintain in the 70s? I think if China starts coming in and buying, and we don’t have any increase in acreage or if the acreage drops to where we expect it to be, I think we’ll be able to maintain prices in the low 70s moving forward.”

Hank Reichle, president and CEO of Staplcotn, a grower-owned cooperative in 11 states, including Georgia, Florida and Alabama, was a guest speaker at the Georgia Cotton Commission’s annual meeting on Jan. 29 at the UGA Tifton Campus Conference Center. He praised the phase-one deal but believes the current coronavirus outbreak in China will impact how quickly the country follows through on the deal.

“The only concern I have with the coronavirus today is that the government will be focusing on that and probably less on the implementation of this new phase-one deal. I don’t think it necessarily changes things in the long run. It may just delay a bit because the government’s focus is elsewhere,” Reichle said.

Since cotton prices remain low, it could lead to an expected decline in acreage for the upcoming season. That’ll also depend on how other row crops, like corn and peanuts, are faring in the market.

“Unfortunately, peanuts are not in a position to take on more acres. Corn potentially could and that could be an opportunity. One thing to think about for growers would be if they may have foregone some of their rotations in the past years and maybe this is an opportunity between peanuts and corn to bring things back in line,” Rabinowitz said.

About the Author
Clint Thompson

Clint Thompson

Multimedia Journalist for AgNet Media Inc.