Bangladesh is likely to benefit in cotton purchase thanks to the 25 percent retaliatory duty on import slapped by China on US goods and commodities -- including the cotton.
The US is the largest exporter of cotton, so the duty imposed by China is likely to lead to a supply glut. China imports more than $1 billion worth of cotton from the US.
The cotton price has already started falling: yesterday, cotton traded between 84 and 85 cents per pound, from 91 cents five days earlier, according to the international cotton futures markets. Bangladesh is the largest importer of cotton. Last year, it imported more than $3 billion worth of cotton, 10 percent of which was from the US.
“Yes, there is a possibility of cotton price falling to 70 to 75 cents a pound as China will feel discouraged to purchase less from the US,” said Mehdi Ali, president of the Bangladesh Cotton Association, the club of domestic cotton traders.
As a result, there is a possibility of an increase in supply in the international market, he said.
“Bangladesh would benefit from the downward trend of cotton price in the global market if the duty imposed by China comes into effect and continues for a long time.”
Cotton price will also not increase in the international market also because of the high yield in the major growing regions like the US, India, Africa and Uzbekistan due to conducive weather, he added.
“It is too early to comment on the real impact of the trade war on Bangladesh's cotton imports,” said A Matin Chowdhury, managing director of Malek Spinning Mills, one of the major local cotton importers.
However, there will be a price pressure on the US cotton if the 25 percent retaliatory duty continues for a long time.
Prices may fall if the move by the Chinese government is ultimately finalised, he added.
Bangladesh's cotton import will creep up to 7.1 million bales in 2017-18, further consolidating its position as the world's largest importer of the fibre, according to the United States Department of Agriculture.
According to a report on cotton by the USDA in May, the world's ending stocks forecast of cotton was down slightly for 2018-19.
However, stocks outside of China will increase for the third year in a row and reach a record at just over 50 million bales.
Global consumption is forecast at a record level of more than 125 million bales.