On one hand, there’s a certain understanding surrounding the current tariff war between the U.S. and China. Intellectual property and unbalanced trade issues are valid reasons for the current (at press time) standoff.
Yet, on the other hand, anything that disrupts the flow of cotton and other agricultural commodities to a major importer leads to concerns at the farm level – and the markets, too.
“Since September, the cotton market has been in a somewhat narrow band,” explains Dr. John Robinson, professor and Extension economist with Texas A&M University. “We were left there by the discussions of the tariffs in August and September, which was really just another round of ‘We’re going to do this. Oh yeah, well we’re going to do this.’ That scared a lot of speculative money out of the cotton market, and we dropped to the upper 70s to low 80s level where we’ve been stuck.”
Any optimism about a 90-day negotiating period that came out of the G20 summit meeting between President Trump and Chinese President Xi in late November/early December was short lived. A quick price bump was immediately followed by a slide back to the same range bound prices.
“It seemed like the air went out of that optimism,” says Robinson. “The interpretation was that there wasn’t anything hard and fast in this tentative agreement, or truce, that the U.S. and China would work out over 90 days and not add additional tariffs.
“That’s not enough of a bullish event to break the market out of its range,” he adds. “And frankly, it’s typical of the uncertainty of this tariff influence that we’ve had for six months. It’s hard to call. It’s totally unpredictable. And the market doesn’t like that.”
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