Summary of Congressional Relief/Stimulus/Funding Package on COVID-19 (Phase 3)

Funding for Government Operations 
$340 billion across Federal agencies and state and local communities.  More than 80% ($275 billion) would go to state and local governments and communities.
•    $117 B for hospitals
•    $45 B for FEMA
•    $16 B for Strategic National Stockpile
•    $4.3 B for Centers for Disease Control
•    $11 B for Vaccines, Therapeutics, Diagnostics, and Medical Needs
USDA Funding – $49 billion total
•    Of this amount, $9.5 B to support agricultural producers, including livestock and specialty crop producers to respond to the COVID-19 losses.
•    The Commodity Credit Corporation (CCC) is provided restored funding/borrowing authority of $14 B.
•    The Secretary of Agriculture is given the authority to extend the term of marketing assistance loans to 12 months from the current 9 months.  This authority expires end of September 2020.
Department of Commerce Funding 
•    Manufacturing Extension Partnership (MEP) – $50 million to be distributed among the 51 MEP centers to help small- and medium-sized manufacturers recover from the economic impacts of coronavirus. The bill also waives the statutory cost-match requirements for all FY 2020 funding.

Coronavirus Aid, Relief, and Economic Security Act (CARES Act)

Paycheck Protection Act (Small Business Loan Program) – $350 billion
•    Eligible to businesses with up to 500 employees – loan period of Feb. 15, 2020 to June 30, 2020
•    Loan provided through banks, credit unions and other traditional lenders
•    Gives Treasury the authority to set criteria that would allow farm credit institutions to be eligible lenders under the paycheck protection program until the national emergency for COVID-19 expires
•    Also allows not for profit entities, sole proprietors, and self-employed individuals to qualify
•    Maximum loan amount of $10 M through end of 2020
•    Expands use of loan funds to include payroll, paid sick or medical leave, insurance premiums, salaries, mortgage and lease/rent payments, utility, and other debt obligations
•    Government guarantees the loans at 100% through end of 2020; 75% to 85% after 2020
•    Waives borrower and lender fees and collateral and personal guarantee requirements
•    Loan forgiveness – establishes process for borrowers to have loan forgiven in amount used for payroll, mortgage interest, rent, and utility for a period of 8 weeks after loan origination.  Amount forgiven reduced proportionally to the number of employees laid off during the period relative to prior employment level.  Eligible payroll costs do not include compensation above $100,000 in wages.

Unemployment Insurance Provisions
•    Temporary unemployment assistance program through December 2020 for those not typically eligible – such as self-employed, independent contractors, and limited work history
•    Provides payments to states to reimburse nonprofits and government agencies for half costs incurred through end of 2020 to pay unemployment benefits
•    Additional $600 per week payment to each recipient of unemployment insurance for up to 4 months
•    Pay costs of first week of unemployment benefits through 2020 for states that pay recipients as soon as become unemployed
•    Provides additional 13 weeks of unemployment benefits through 2020
Individual/Family Relief
•    Checks up to $1,200 per person/$2,400 per couple and increased by $500 per child.  Phases down at adjusted gross income over $75,000 single/$150,000 married; completely phased out at $99,000 single/$146,500 head of household, one child/$198,000 joint filing with no child based on 2019 if filed (or 2018) tax return.
•    Extends tax filing date to July 15; tax payment deadline already extended by IRS to July 15
•    Waives 10% penalty for early withdrawal for distributions from retirement accounts
•    Waives required minimum distribution rules for defined contribution plans and IRAs for 2020
Businesses Relief
•    Refundable tax credit for 50% of wages paid during COVID-19 crisis.  Available if operations were fully or partially suspended due to COVID-19 shut down; or gross receipts declined by more than 50% compared to same quarter in prior year.  For eligible employers with 100 or less full time employees, all wages qualify for the credit regardless of business status.  Credit is provided for first $10,000 of compensation including health benefits.
•    Employers and self-employed individuals can defer payment of employer share of Social Security (payroll) tax.  Deferred tax must be paid back over the next 2 years with half paid by end of 2021 and half by end of 2022.
•    Allows net operating losses (NOLs) from 2018, 2019, or 2020 to be carried back 5 years.  Temporarily removes the taxable income limitation to allow a NOL to fully offset income.
•    Allows pass-through businesses and sole proprietors to benefit from NOL carryback provision
•    Temporarily increases from 30% to 50% of taxable income for 2019 and 2020 the amount of interest expense that businesses are allowed to deduct
Medical, Healthcare, Education, and Drug Provisions
•    Hospitals and health care workers: $100 billion into hospitals and the nation’s health system.
•    Schools: $30 billion in emergency education funding.
Economic Stabilization and Assistance To Severely Distressed Sectors – $500 billion
•    Large corporations: $500 billion in loans, loan guarantees and other investments, overseen by a Treasury Department inspector general. These loans will not exceed five years and cannot be forgiven.
•    Airlines will receive $25 billion (of the $500 billion) for passenger air carriers and $4 billion for cargo air carriers.
•    Transportation: $25 billion is dedicated to emergency transit funding.

Liu: Cotton Outlook under Worldwide Coronavirus Outbreak

Along with the life-and-death struggle and the rising cases of Covid-19, financial markets worldwide have lurched lower. The sell-off of the U.S. stock market started on Feb. 21, 2020. Since then, the great coronavirus crash has been frightening in its speed. Even U.S. Treasury bonds and gold, traditionally a safe harbor in times of crisis, have come under pressure. Crude Oil May 2020 (CLK20) future prices slide to the lowest point at $20.52 per barrel on Mar. 18, 2020.

As investors’ recent pessimism over a coronavirus-induced business slowdown, the cotton market also shadows the pandemic of the coronavirus as well. May 2020 cotton futures for old crop closed at 54.93 cents per pound, and new crop December futures closed at 56.10 cents on Mar. 19, 2020.

Cotton growers need to be aware of the rising volatility and uncertainties in the cotton market. Since the disease outbreak, the cotton supply chain has been severely interrupted. Countries worldwide are implementing social distancing or lockdown, hoping to slow down the spread of the virus. The cotton industry suffers tremendously as the temporary closedown of factories to control the virus.

The long-term impact of the virus is also expected. The aftermath of the coronavirus pandemic is highly likely to result in a global economic slowdown or recession. Cotton products are discretionary items. Thus, the consumption of cotton goes up or down with the economy. Cotton demands are likely to continue decreasing due to the slowing down of the global economy. The world cotton demand is currently forecasted at 118 million bales, down 5 million bales from the last peak in 2017.

On top of everything discussed so far, the U.S. dollar appreciates during the time of crisis as investors are seeking a safety harbor. This appreciation of the U.S. dollar further hinders the export opportunity for cotton. In 2019, 83 percent (16.5 million bales) of cotton produced in the U.S. were exported and traded in the global market. U.S. cotton relies on the global market and international trade to consume excess supply and support domestic prices. The decline in oil prices is likely to increase the competition of synthetic fiber down the road, similar to what we observed after the drop in oil prices during the 2008 financial crisis.

The uncertainties in trade make cotton profitability more challenging. The signing of the Phase 1 trade deal between the U.S. and China on Jan. 15 gave the cotton market a short period of optimism. China agreed to purchase at least $40 billion worth of agricultural products for each of the next two years. However, no details are released so far about how China will be able to fulfill this large purchase of agricultural products. The outbreak of the coronavirus further increased the uncertainty in trade.

USDA Farm Service Agency announced the weekly average adjusted world price (AWP) and loan deficiency payment (LDP) rate every Thursday in the Upland Cotton Announcement. The AWP is currently at 49.95 cents per pound. The LDP rate of 2.05 cents per pound is available from Mar. 20 through Mar. 26. The LDP rate is the difference between the base loan rate of 52.00 cents and the AWP. If taking the LDP, the producer should be aware that there is no further protection from prices going even lower. Producers can wait until Mar. 25 or Mar. 26 in poping their cotton to see what the prices hold for next week. If a producer is willing to take the risk and feels that cotton prices are going to improve, then the producer could take the LDP and market the cotton later.

Looking ahead, producers need to be aware of the continuous risk of down-side price weakness and volatile cotton prices.  It might take a while before we see a recovery of cotton prices. Strategies to improve productivity or cutting costs are highly recommended during the time of low cotton prices.

Additional Information

Georgia Department of Public Health reports daily of the confirmed cases of Covid-19 in Georgia (https://dph.georgia.gov/covid-19-daily-status-report ). The latest news about the Covid-19 in the U.S. can be found on the CDC’s website (https://www.coronavirus.gov/). Keep your distance, and stay safe.

This article was written by UGA Extension Cotton Economist Dr. Yangxuan (Serinna) Liu.

Marketing Assistance Loans and Loan Deficiency Payments for Upland Cotton

Dr. Yangxuan Liu, University of Georgia Extension Cotton Economist, has collaborated with Anukul Bhattarai, University of Georgia, and Dr. John Robinson, Texas A&M University, to release this publication.  For more information, please email Dr. Liu at yangxuan.liu@uga.edu.

The Agricultural Act of 2018 (2018 U.S. Farm Bill) extended the cotton commodity loan programs for the 2019 through 2023 crop years. Cotton commodity loan programs include the marketing assistance loan (MAL) program and the loan deficiency payment (LDP) program. These programs provide cotton producers with alternative marketing tools during periods of low cotton prices. Cotton producers can receive marketing loan benefits in the form of marketing loan gains (MLG), loan deficiency payments (LDP), commodity certificate exchange gains, and forfeiture gains. Producers can participate in the MAL or obtain an LDP on all or part of their production at any time during the loan availability period, from harvest until May 31 of the following calendar year.

Please click “VIEW PDF” here.

Quail Forever: Georgia Cotton Production a part of National Agriculture Leadership – Precision Agriculture, Cotton, and Bobwhite Quail Habitat

This article was submitted by Chaz Holt, a Precision Agriculture and Conservation Specialist with Quail Forever.  You can reach him on twitter @agrarianlife or via email at cholt@quailforever.org.

MINNEAPOLIS, Minn. – Three individuals, representing Georgia Agriculture, attended the annual Precision Agriculture Workshop hosted by Pheasants Forever/ Quail Forever and sponsored by John Deere.  Trey Davis representing Davis Family Farms of Doerun,  Dusty Engel of Lasseter Tractor John Deere(https://www.lassetereq.com/)  representing GA farmers use of Precision Technology, and Chaz Holt, the Precision Ag and Conservation Specialist for Quail Forever and Cotton Incorporated partnership were all a part of this workshop.

They were recently invited to attend the largest upland hunting, conservation and habitat Convention in the nation, over 30,000 in attendance (https://www.pheasantsforever.org/BlogLanding/Blogs/Pheasants-Forever/Integrating-High-Tech-Farming-and-Conservation.aspx).

Trey & Dusty were a part of farmer and dealership panel groups who presented to the Precision Agriculture workshop, FARM FORWARD, about how their efforts are helping the bottom line on family farms by addressing less than profitable land with potential future wildlife habitat. Corn, soy, cotton and small grain farmers as well as Information Specialist(IS) for John Deere dealerships were on the panel from GA, KS, MN, ND and SD all explaining their own reasoning for being leaders in the way of sub field profit farm planning with a desire to retain biodiversity on the landscape they manage.   The panels were interview by Chip Flory, Host of AgriTalk and Farm Journal Economist, where Trey was a part of farmers from KS, SD, and ND each discussing how their farm businesses are managed.  Dusty sat with a panel of IS management from other dealerships around the country where they answered questions about using technology today and into the future.

Trey explained how the use of the newest technology is helping him, his brother Jedd and Father Bart make the best decisions possible, as he stated “…these days you have the be a businessperson who farms”.  Furthermore, the use of John Deere’s Ops Center and Quail Forever’s Precision Ag analysis on per acre management has the potential to help his APH (actual production history) over time, lower current risk on investments, and increase biodiversity on the landscape that has ecosystem services to offer future crops.  While these goals are personal, they also are helping the farm address goals set forth by the Cotton Trust Protocol (https://trustuscotton.org/)  on an industry wide effort.  Additionally, they both spoke of inventive solutions using the latest precision tools to aid in future crop planning while enhancing biodiversity on the farmscape and building bobwhite quail habitat.  (https://georgiawildlife.com/bobwhite-quail). Bobwhite Quail for the southern landscapes are similar to the canary in the coal mines, their health is raising awareness of ecosystem, soil health, and water quality. To learn more, you can reach out to Chaz Holt, Precision Agriculture and Conservation Specialist offering assistance using these tools to cotton producers addressing profit analysis across the southeast.

Mark McKean Elected American Cotton Producers Chair

MEMPHIS, Tenn. – Mark McKean of Riverdale, Calif., was elected as chairman of the American Cotton Producers (ACP) of the National Cotton Council (NCC) for 2020, during the NCC’s recent Annual Meeting in New Orleans, Louisiana. He was formerly an ACP vice chairman and currently serves as a NCC director. He has served on and continues to serve on various ACP and NCC committees and task forces.

Elected as an ACP vice chairmen were: Mark Nichols, Altus, Okla.; Rusty Darby, Chester, S.C.; and Nathan Reed, Marianna, Arkansas.

Elected as ACP producer directors were Lee Cromley, Brooklet, Ga., representing the Southeast; Jason Condrey of Lake Providence, La., representing the Mid-South; and Dan Thelander of Maricopa, Ariz., representing the Far West. Re-elected as an ACP producer director was Doyle Schniers of San Angelo, Texas, representing the Southwest. McKean will serve as the ACP’s at-large director.

Serving as ACP state producer chairmen in 2020 will be : Alabama – Nick McMichen, Centre; and Sam Spruell, Mount Hope; Arizona – Gregory Wuertz, Casa Grande; and K.C. Gingg, Buckeye; Arkansas – Terry Pollard, Greenway; California – Bryan Bone, Bakersfield; Florida – Nick Marshall, Baker; Georgia – Matt Coley, Vienna; and Chad Mathis, Jr., Arlington; Kansas – Stuart Briggeman, Pratt; Louisiana – Heath Herring and Russell Ratcliff, III, both of St. Joseph; Mississippi – Ted Kendall, IV, Bolton; Missouri/Illinois – Chris Porter, Essex, Mo.; New Mexico – Dean Calvani, Carlsbad; North Carolina – Brad Warren, Faison; and Rob Fleming, Jr., Zebulon; Oklahoma – Steve King, Hydro; and Phil Bohl, Faxon; South Carolina – James Johnson, Mayesville; and Daniel Baxley, Dillon; Tennessee/Kentucky – John Lindamood, Tiptonville, Tenn.; Texas – Jon Whatley, Odem; Richard Gaona, Roby; Craig Heinrich, Lubbock; and Stacy Smith, Wilson; and Virginia – Paul Rogers, Wakefield.

National Cotton Council 2020 State Unit Officers Named

MEMPHIS, Tenn. — National Cotton Council state unit officers for 2020 were elected at the industrywide organization’s 2020 annual meeting held recently in New Orleans, Louisiana.

Chairmen, vice-chairmen and secretaries, respectively, of the state units are:  ALABAMA – Nick McMichen, producer, Centre; Jim Greene, ginner, Courtland; and Jeff Thompson, ginner, Prattville; ARIZONA – Dan Thelander, producer, Maricopa; Bill Brackett, ginner, and K.C. Gingg, producer, both of Buckeye; ARKANSAS – Nathan Reed, producer, Marianna; Neill Sloan, warehouser, Portland; and Matt Hyneman, Jonesboro; CALIFORNIA – Bryan Bone, producer, and Joseph Cain, warehouser, both of Bakersfield; Charles Meyer, III, producer, Stratford; FLORIDA – B.E. “Sonny” Davis, Jr., producer, Cottondale; Nick Marshall, producer, Baker; and Buster Kimble, ginner, Marianna; GEORGIA – Chad Mathis, producer, Arlington; Barry Strickland, ginner, Pelham; and Duane Bargeron, ginner, Sylvania; KANSAS –Thomas Lahey, producer, Moscow; Stuart Briggeman, producer, Pratt; and Gary Feist, ginner, Anthony; LOUISIANA – Jason Condrey, producer, Lake Providence; Heath Herring, producer, St. Joseph; and Russell Ratcliff, III, producer, St. Joseph; MISSISSIPPI – Ted Kendall, producer, Bolton; David Cochran, ginner, Greenville; and Dwayne Coward, warehouser, Greenwood; MISSOURI/ILLINOIS –Riley James, ginner, New Madrid, Mo.; Chris Porter, producer, Essex, Mo.; and Stephen Harris, ginner, Senath, Mo.; NEW MEXICO – Alberto Pando, ginner, Mesquite; Dean Calvani, producer, Carlsbad; and Alisa Ogden, producer, Loving; NORTH CAROLINA – Brad Warren, producer, Faison; Rob Fleming, producer, Scotland Neck; and Tommy Flythe, producer, Seaboard; OKLAHOMA – Austin Rose, cottonseed merchandiser, and Mark Nichols, producer, both of Altus; and Jeannie Hileman, ginner, Carnegie; SOUTH CAROLINA – Jordan Lea, merchant, Greenville; James Patterson, cottonseed merchandiser, York; and Drake Perrow, ginner, Cameron; TENNESSEE/KENTUCKY – Bradley Williams, ginner, Burlison, Tenn.; John Lindamood, producer, Tiptonville, Tenn.; and Mark Korn, producer, Dyersburg, Tenn.; TEXAS – Barry Street, ginner, Kress; David Wyatt, ginner, Woodsboro; and Elmer Braden, producer, Coyanosa; VIRGINIA – Steele Byrum, producer, Zuni; Clay Lowe, producer, Wakefield; and Bruce Alphin, ginner, Windsor.

National Cotton Council Names 2020 Directors

MEMPHIS, Tenn. – The National Cotton Council directors for 2020 were announced at the NCC’s recent 2020 annual meeting held in New Orleans, Louisiana.

Elected to the NCC Board during segment caucuses were:

Producers – Lee Cromley, Brooklet, Ga.; Jason Condrey, Lake Providence, La.; Doyle Schniers, San Angelo, Texas; Dan Thelander, Maricopa, Ariz.; and Mark McKean, Riverdale, California.

Ginners – Drake Perrow, Cameron, S.C.; Curtis Stewart, Spade, Texas; George LaCour, Morganza, La.; Tom Pires, Riverdale, Calif.; and Gary Feist, Anthony, Kansas.

Warehousers – Joe Tillman, Cordova, Tenn.; Jay Cowart, Altus, Okla.; Coalter Paxton, Wilson, N.C.; Scott Mitchell, Donalsonville, Ga., and Robert Swize, Corpus Christi, Texas.

Merchants – Raymond Faus, Plano, Texas; Bobby Walton, Memphis, Tenn.; and Joe Nicosia, William Barksdale and Jeff Johnson, all of Cordova, Tennessee.

Cottonseed – Monte Johnson, Memphis, Tenn.; Lance Barnett, Abilene, Texas; Sammy Wright, Tifton, Ga.; Austin Rose, Altus, Okla.; and Jerrod Drinnon, Lubbock, Texas.

Cooperatives – Keith Lucas, Lubbock, Texas; Hank N. Reichle, Jr., Greenwood, Miss.; Paul Bush, Glendale, Ariz.; Wayne Boseman, Garner, N.C.; and Jeff Thompson, Prattville, Alabama.

Manufacturers – Anderson Warlick and James Martin, both of Gastonia, N.C.; Mike Quinn, Sanford, N.C.; William Bowen, Inman, S.C.; and Owen Hodges, Columbus, Georgia.

NCC: Kent Fountain to Lead National Cotton Council in 2020

MEMPHIS, Tenn. – Kent Fountain, a Surrency, Ga., ginner, was elected National Cotton Council (NCC) chairman for 2020.

Named during the NCC’s 2020 annual meeting, held in New Orleans, La., on February 14-160, Fountain moves up from NCC vice chairman to succeed Mike Tate, a cotton producer from Huntsville, Alabama.

A member of the NCC’s 2001-2002 Cotton Leadership Class, Fountain served as a NCC vice president from 2016-2018 and a NCC director in 2011. He has served on numerous NCC committees and has been the chairman of its Quality Task Force since 2016. Since 2010, he has served as a director of Cotton Council International, the NCC’s export promotion arm.

A past president of the Southeastern Cotton Ginners Association and the National Cotton Ginners Association, Fountain currently serves as a director for Staplcotn and Cotton Growers Warehouse Association.

Fountain, who earned a degree in Agricultural Economics at the University of Georgia, is the president/CEO of Southeastern Gin and Peanut, Incorporated in Surrency. The recipient of numerous honors, Fountain was named Southeastern Ginner of the Year in 2001 and received the Horace Hayden National Ginner of the Year Award in 2016.

Fountain and his wife, Missi, live in Screven, Ga., and have two sons.

Ted Schneider, a Lake Providence, La., producer, was elected as NCC vice chairman.

Elected as NCC vice presidents are Jordan Lea, a Greenville, S.C., merchant, and Robin Perkins, a Sanford, N.C., textile manufacturer. Re-elected as NCC vice presidents are: Kirk Gilkey, ginner, Corcoran, Calif.; and Kevin Brinkley, marketing cooperative executive; Ron Harkey, warehouser; and Robert Lacy, Jr, cottonseed processor; all from Lubbock, Texas. Re-elected as secretary-treasurer is Barry Evans, a producer from Kress, Texas.

NCC staff officers include: Dr. Gary Adams, NCC president and chief executive officer; Harrison Ashley, vice president, Ginner Services; Craig Brown, vice president, Producer Affairs; Dr. Jody Campiche, vice president, Economics and Policy Analysis; John Gibson, vice president, Member Services; Reece Langley, vice president, Washington Operations; Dr. Bill Norman, vice president, Technical Services; and Marjory Walker, vice president, Council Operations.

COTTON COUNCIL INTERNATIONAL ELECTS 2020 OFFICERS

NEW ORLEANS, La. (February 14, 2020) – Richard L. (Ricky) Clarke, III, a merchant from Cordova, Tenn., will serve as president of Cotton Council International (CCI) for 2020. CCI is the National Cotton Council’s (NCC) export promotion arm and carries out programs in more than 50 countries globally under the COTTON USA™ trademark.

Clarke, who moves up from CCI first vice president, succeeds Hank Reichle, a cooperative official from Greenwood, Miss., who becomes CCI board chairman. Clarke, Reichle and other CCI officers were elected at CCI’s board meeting during the NCC’s 2020 Annual Meeting held February 14-16 in New Orleans, Louisiana.

“I look forward to leading CCI in its mission of making U.S. cotton ‘The Cotton The World Trusts’ for mills, manufacturers, brands, retailers and consumers worldwide,” Clarke said. “COTTON USA promotional events in 2020 will continue to educate this audience and stimulate U.S. cotton sales via networking opportunities throughout the global supply chain.”

Clarke is vice president/senior merchant for Cargill Cotton, Business Unit of Cargill, Inc. His current merchandising responsibilities include sales to several Asian markets.

Clarke, who was raised in Greenwood, Miss., graduated from Mississippi State University in 1980 and earned an MBA from Memphis State University in 1987. He started with Cargill’s Cotton Business Unit (Hohenberg Bros. Co.) in 1980 and has worked for Cargill Cotton in various merchandising capacities. Those include managing the Phoenix office, merchandising all of the major growth regions in the United States and working a stint with Cargill Cotton’s Liverpool office.

Clarke is active with the NCC and is an American Cotton Shippers Association director. He is married to Terri Clarke and has four children and two grandsons.

Other 2020 CCI officers elected include: first vice president, Ted Sheely, producer, Lemoore, Calif.; second vice president, Carlos C. Garcia, cooperative official, Lubbock, Texas; and treasurer, Steven Dyer, merchant, Cordova, Tennessee. In addition, Gary Adams, Cordova, was elected as secretary and Bruce Atherley, Washington, D.C., elected as assistant secretary.

Elected as 2020 CCI directors were: George G. LaCour, Jr., a ginner from Morganza, La.; John C. King, III, a merchant from Helena, Ark.; Neal Isbell, a producer from Muscle Shoals, Ala.; and John F. Lindamood, a producer from Tiptonville, Tennessee.

Re-elected as 2020 CCI directors were: PRODUCERS – J. Lee Cromley, Brooklet, Ga.; Richard Gaona, Roby, Texas; Craig A. Heinrich, Lubbock, Texas; Matthew R. (Matt) Hyneman, Jonesboro, Ark.; and Paul (Paco) Ollerton, Casa Grande, Ariz.; GINNERS – Curtis H. Stewart, Spade, Texas; MERCHANTS – Philip R. (Phil) Bogel, II, Dallas, Texas; Tim G. North, Dallas, Texas; Ernst D. (Ernie) Schroeder, Jr., Bakersfield, Calif.; and William Barksdale, Cordova, Tenn.; COOPERATIVES – Frederick Barrier, Greenwood, Miss.; Carlo Bocardo, Bakersfield, Calif.; Donald Robinson, Garner, N.C.; COTTONSEED – James C. Massey, Harlingen, Texas; WAREHOUSEMAN – Vance C. Shoaf, Milan, Tenn.; and MANUFACTURERS – Robin Perkins, Sanford, N.C.; and Davis Warlick, Charlotte, North Carolina.

Cotton Council International (CCI) is a non-profit trade association that promotes U.S. cotton fiber and manufactured cotton products around the globe with our COTTON USA™ Mark. Our reach extends to more than 50 countries through 20 offices around the world. With more than 60 years of experience, CCI’s mission is to make U.S. cotton the preferred fiber for mills/manufacturers, brands/retailers and consumers, commanding a value-added premium that delivers profitability across the U.S. cotton industry and drives export growth of fiber, yarn and other cotton products. For more information, visit http://www.cottonusa.org.

2020 NCC World Cotton Outlook: U.S.-China Phase 1 Implementation and Coronavirus Bring New Uncertainties

MEMPHIS, Tenn. – National Cotton Council economists point to a few key factors that will shape the U.S. cotton industry’s 2020 economic outlook.

This past year can be characterized as a year with significant uncertainty and volatility in the global economy and the world cotton market. On January 15, 2020, Trump signed the Phase 1 trade agreement with China. As part of the agreement, China has agreed to purchase an average of $40 billion in U.S. agricultural commodities, including cotton, over the next two years. However, the overall impact for cotton remains uncertain as commodity specific details have not been released.

While the Phase 1 trade agreement provided some cautious optimism for an improvement in the cotton economic situation, the China coronavirus outbreak in the early weeks of 2020 could delay China’s ability to increase purchases in the near-term. As a result, the potential impacts of the coronavirus represent a significant wildcard in the outlook for the world cotton market in the 2020 crop year.

In her analysis of the NCC Annual Planting Intentions survey results, Campiche said the NCC projects 2020 U.S. cotton acreage to be 13.0 million acres, 5.5 percent less than 2019. The expected drop in acreage is the result of slightly weaker cotton prices relative to corn and soybeans. With abandonment assumed at 13.8 percent for the United States, Cotton Belt harvested area totals 11.2 million acres. Using an average 2020 U.S. yield per harvested acre of 848 pounds generates a cotton crop of 19.8 million bales, with 19.1 million upland bales and 675,000 extra-long staple bales. U.S. cottonseed production is projected to decrease to 6.1 million tons in 2020.

Regarding domestic mill cotton use, the NCC is projecting a slight decline in U.S. mill use to 2.85 million bales in the 2020 crop year. As one of largest markets for U.S. cotton, U.S. mills continue to be critically important to the health of the cotton industry. In the face of rising textile imports from Asian suppliers, the U.S. textile industry has focused on new investment and technology adoption in order to remain competitive. The recently passed U.S.-Mexico-Canada Agreement (USMCA) includes some important provisions that should help boost the U.S. textile industry.

Campiche noted that export markets continue to be U.S. raw fiber’s primary outlet. World trade is estimated to be higher in the 2019 marketing year, but the retaliatory tariffs and increased competition from other major exporting countries has led to a sharp decline in the U.S. trade share in China. Despite the continued U.S.-China trade disruptions, U.S. export sales to other markets have been very strong for the current crop year.

Sales reached the highest level in the marketing year during the week ending on February 6. While export competition from Brazil remains strong, the U.S. has had increased opportunities for export sales to other markets in the 2019 crop year. Lower production in Australia, Pakistan, and Turkey has led to higher U.S. export sales. As a result, the United States will remain the largest exporter of cotton in 2019 with 16.5 million bales.

Prior to the implementation of tariffs, the United States was in a prime position to capitalize on the increase in Chinese cotton imports. With the imposition of the 25.0 percent tariff, China has turned to other suppliers during the 2018 and 2019 marketing years, allowing Brazil, Australia, and other countries to gain market share. Vietnam is currently the top export market for U.S. cotton in the 2019 crop year, followed by China and Pakistan.

U.S. exports are projected to drop slightly to 16.4 million bales in the 2020 marketing year. For this outlook, the U.S. is assumed to export 2.5 million bales to China in the 2020 crop year as compared to an estimated 2.0 million bales in the 2019 crop year. However, with record stocks outside of China, increased production in Brazil, and a partial recovery in Australia’s production, the U.S. will continue to face strong export competition in 2020. When combined with U.S. mill use, total offtake falls short of expected production, and ending stocks are projected at 5.9 million bales.

Campiche said world production is estimated to decline by 2.4 million bales in 2020 to 118.9 million as a result of lower cotton acreage. World mill use is projected to increase to 121.7 million bales in 2020. Ending stocks are projected to decline by 2.0 million bales in the 2020 marketing year to 80.1 million bales, resulting in a stocks-to-use ratio of 66.4 percent. Stocks outside of China are projected to increase to a record level in 2020.

Based on the underlying assumptions and resulting cotton balance sheet, stable stocks outside of China, increased export competition from Brazil, recovery in Australia’s production, and low manmade fiber prices will have a bearish influence on cotton prices. A quick containment of the coronavirus and a successful implementation of the Phase 1 trade agreement would provide support to prices.

As with any projections, there are uncertainties and unknowns that can change the outcome.

Additional details of the 2020 Cotton Economic Outlook are on the NCC’s website at http://www.cotton.org/econ/reports/annual-outlook.cfm.