Dr. Jody Campeche Believes the Key for Cotton Price Strength in 2020- China Buying US Cotton- and a Lot of ItThu, 23 Jan 2020 10:44:43 CST
Dr. Jody Campeche of the National Cotton Council spoke yesterday at the Red River Crops Conference in Altus. Radio Oklahoma Ag Network Farm Director Ron Hays caught up with the Oklahoma native afterward to talk about what the Phase One Trade deal with China would mean for the Cotton industry, "Yes, we know based on the information that's come out so far that they will increase ag purchases and of course Cotton's in that mix. So that's definitely good news, we don't know the details yet of exactly how many more purposes for cotton there will be, but I think it's great news to get China back into becoming a larger customer of U.S. cotton."
Right now, there is a 25% tariff on U.S. Imports of cotton into China and Campeche says those tariffs will remain in place. Even with the Phase One Trade deal, China will be able to make some changes to import quotas to get cotton in without the tariff. She says we have a lot of ground to make up when it comes to imports to China, "So while this U.S./ China trade dispute has been going on, China has turned to other export markets to get their cotton, and Brazil is one of the large ones. So U.S. Cotton used to have about 45% market share in 2017, and in 2018 that dropped to about 17%, and Brazil has gained a lot of our market share in China."
Campeche says the good news is that China likes U.S. Cotton, and we have a good relationship with China. "I think the big thing is just kind of how this trade deals going to work out, and they're able to get cotton in without that tariff."
Campeche also spoke about some of the disaster programs available to Cotton farmers, "The WHIP disaster program originally did not include drought, excess moisture, and quality losses, but they went back and added coverage for those factors, and that will impact a lot of the southwest region, a lot of Texas and Oklahoma. For the drought counties, not all the details are not out yet from USDA, but we do know a bit how the formula works, so we'll have a lot of producers looking closely at that." For those who would like information on those programs, you can work with your local FSA agent.
Starting in the 2021 crop year, producers will have to decide between STAX( stacked income protection plan) or support for Seed Cotton which is based on ARC or PLC. Campeche says she expects most will probably choose PLC in the Southwest, "Because we had lower STAX coverage, lower STAX participation in the southwest just being lower STAX expected yields in this region."
Dr. Campeche says that you may want to plug your production numbers into the Texas A&M Farm Bill Decison Aid Tool- details about it are available here- and that may help you work thru the pros and cons.
Overall as 2020 plays out- Dr. Campeche says the primary thing for producers this year is the focus on is the U.S./China Trade deal, "Getting that move forward and moving on to phase two and eventually getting those 25% tariffs off, that's, that's a huge deal for U.S. cotton. And not just for China, but whenever this U.S./China trade deal and trade situation started it really disrupted a lot of other countries as well that export yarn to China and import fabrics. So, looking ahead, especially with World demand being a little bit lower than it has been and last year, some final resolution to the trade deal would really benefit cotton."
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