Brazil exports of cotton from China and other Asian countries are expected to rise for the 2018/19 marketing year, partially stemming from US-Sino trade tensions, the US Department of Agriculture (USDA) said in a report published on Thursday.
Exports are forecast to reach 6 million bales, up from 4.2 million bales from the banner 2017/18 season, according to the USDA. The Brazilian Cotton Producers Association "expects increased interest in Brazilian cotton from buyers in China as well as from Chinese-owned textile mills in other Asian countries, stemming in part from the US-China trade tensions," the USDA report said.
The USDA also cited "continued improvement in grading and quality of Brazilian product," as a secondary reason why demand of Brazilian cotton from China is expected to rise. This report comes a day after the USDA said US cotton exports to China tumbled nearly 50 percent in the first two months of the 2018/19 marketing year, "hindered" by the US-China trade war.
China's decision in July to impose the import tax on American farm commodities, including cotton, came in retaliation for tariffs enacted by US President Donald Trump's administration. Earlier this week, the cotton market was rejuvenated after the world's two economic superpowers had agreed on a 90-day trade truce period to hammer out a more permanent agreement.
That excitement later faded on Thursday as the arrest of a top Chinese technology executive cast further shadows on US-China trade relations. Meanwhile, Brazil's 2018/19 marketing year cotton area is expected to reach 1.4 million hectares, an increase of 19 percent compared to the previous marketing year. The planted area expansion is a result of rising cotton prices and strong export demand, the USDA said. Domestic consumption is forecast at 3.5 million bales, which is a marginal 3 percent increase compared to last marketing year, based on increased investment and "an increase in economic activity that is expected on the back of positive market sentiment for the incoming administration of President-elect Bolssonaro," the USDA report said.