A recent Australian Bureau of Agricultural and Resource Economics and Sciences report identified opportunities for Australian cotton growers to capitalise on increasing tensions between the US and China.

In July, China imposed a retaliatory 25 per cent additional import tariff on US raw cotton.

With import tariffs on US cotton into China now reaching 26 per cent for cotton within the 890,000 tonnes quota, and up to 65 per cent for out-of-quota imports, the competitiveness of US cotton into the Chinese market could provide opportunity for Australian cotton, as Chinese buyers could turn to other markets in South-East Asia.

The ABARES report said the impact of the US-China trade dispute on world cotton trade and prices was uncertain.

“However, China is likely to import more cotton from other sources,” the report said. “The trade dispute is also likely to lead to Chinese and world cotton consumption being lower than it would have been.”

ABARES reported the area planted to cotton in Australia is forecast to fall 50 per cent to 250,000ha in 2018-19 due to below-average rainfall.

But returns to Australian cotton growers could reach 16-year highs.

Australia exported 872,000 tonnes of cotton in 2017-18, worth $2.1 billion.

The September ABARES report forecast a 2 per cent increase in Australian cotton exports in 2018-19 to 888,000 tonnes, worth $2.3 billion.

A Commonwealth Bank market report said opportunities could arise for Australian agribusiness should China lower tariffs for other countries outside the US.

Commonwealth Bank market analyst Tobin Gorey said in the report a pricing advantage may open up against US competitors.

“China cutting tariffs for most other trading partners could well prove to be a tactical masterstroke on so many levels,” Mr Gorey said.

“One would be that China might succeed in trumping the US’s squeaky wheel strategy.

“This potential evolution in trade policy is potentially a good one.”