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Commodity prices slump amid trade war.

Lee Allen, Contributing Writer

September 11, 2019

4 Min Read
Cotton in field
The trade war with China is putting a squeeze on Arizona cotton growers, industry folks say.Arizona Cotton Council

“Over the past 50 years, the cotton industry in Arizona has seen incredible advances in technology and the way the industry does business,” according to the Arizona Cotton Ginners Association.

It’s also seen some really turbulent times, the latest of which is in the present moment as farmers of all kinds watch their commodity prices slump while they cope with the loss of sales to Chinese markets in retaliation for Trump administration tariffs.

According to the Arizona Daily Star newspaper, Arizona cotton farmers are among the most hard-hit by the trade war. With this year’s harvest looming, cotton farmer Daniel Pacheco of Marana blamed the tariffs for the recent price of 59 cents a pound that has left no room for profit. “That’s the only thing holding the price down now and it’s about break-even for our 1,000 acres of upland,” he told the Star.

UPLAND UP, PIMA DOWN

Latest figures from the USDA Arizona Field Office show that for 2019 producers expect to harvest 490,000 480-pound bales of upland, up 12% from last year.  Harvested acreage is forecast at 154,000 acres, down 5,000 acres from last year.

Those National Agricultural Statistics Service predictions break out to an estimated 1,527 pounds-per-acre, up 208 pounds per acre from 2018. As of early August, 11 percent of cotton bolls had opened, compared with 21 percent last year. 

Related:Pecan prices plummeting amid trade war

“The crop was rated 13 percent excellent, 56 percent good, and 6 percent poor,” according to USDA.

Pima cotton, harvested on 9,000 acres, was down markedly from last year by some 5,000 acres with an expected harvest of 19,000 480-pound bales (compared with 28,500 bales in 2018) with an expected increase in yield of 70 pounds per acre versus last year.

The trend has been downward, not just in the West, but throughout the industry.  The August USDA Production Report estimated a 2019-2020 U.S. crop of 22.52 million bales (upland production 21.73 million bales, extra-long staple at 790,000 bales).  Harvested area was anticipated to be 12.64 million acres with 1.27 million acres as non-harvested, an abandonment rate of roughly 9 percent.

FARMERS HURTING

Kevin Rogers, executive vice president of the Arizona Cotton Growers Association, notes that with tariffs pushing prices down to levels of a decade ago, many Arizona cotton farmers are feeling the hurt. 

“The industry, production-wise, is good, but pricing is pretty tough because of the trade stuff,” he says. “We’ll probably be a little above average yield, but if you look at the economics of it, we’re struggling to get our margins to where we can pay our bills.”

Related:Loss of exports invites global competition

Tariffs have also been a topic of conversation on the campaign trail with presidential contender Joe Biden, visiting farmers in Iowa, noting the trade war was ‘crushing’ American farmers.

“How many have to face the prospect of losing their farm, losing everything, because of these tariffs?” he asked a receptive audience.

Some relief has been seen via administration support to assist American farmers.  National Cotton Council Chairman Mike Tate calls the assistance “timely, as U.S. cotton’s economic health is deteriorating.”

Noting a fall of 30 cents per pound on cotton futures prices since last summer or about $250 less revenue per acre for a producer with average yield, he noted: “No doubt this downward price pressure is due in large part to cotton sales to China being substantially below the expected level in absence of tariffs. We encourage the administration to look at all options to increase American cotton’s global competitiveness.”

‘PUSH A BULLY BACK’

It will take that, and then some, according to ACGA’s Rogers.

“We’ve dealt with trade issues over many administrations, always been on the front burner as the hammer to help solve those problems,” he says. “Arizona cotton growers are taking it on the chin in this deal, but there’s empathy for the on-going battle to push a bully back a bit because in the long run, we’ll all be better off for it. Although folks are getting tired of it, we need to let the cards play out a bit.

“Guys who sold part of their crop early will probably be in decent shape, but if someone is waiting for the market to bounce one more time, they may be stuck in the low 60 cent bracket while break-even will be somewhere in the mid-70 cent range.”

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