Global Markets: Cotton – Rising Production in Mexico Reduces U.S. Exports
Global Markets: Cotton – Rising Production in Mexico Reduces U.S. Exports

Global Markets: Cotton – Rising Production in Mexico Reduces U.S. Exports

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Cotton production in Mexico in 2017/18 and 2018/19 jumped to levels not seen since the late 1970’s and the recent GAIN (FAS attaché) report from Mexico forecasts that production in 2019/20 will likely remain high.

Recent higher production has lowered import demand and affected primarily U.S. exports. Due to the benefits of the NAFTA agreement U.S. cotton accounted for nearly all of Mexico’s imports.

However, Mexico’s imports have not fallen as much as production has risen. This is in part due to downstream contractual agreements requiring the use of U.S. cotton. As a result, larger production and exportable supplies have driven exports to the highest level in over 30 years, buoyed in part by a sharp increase in exports to China in 2018.

If Mexico’s production were to remain high for an extended period, it could make further inroads into domestic mill use as the downstream demand becomes more accustomed to the greater supply of local cotton.

A successful outcome resolving U.S.-China trade tensions could also reduce Mexico’s export opportunities, increasing pressure to use cotton domestically. Neither of these outcomes bode well for U.S. cotton exports to Mexico.

Full report.

Source: Agfax

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