Rising cotton production in Mexico impacts US exports

April 11, 2019 - United States Of America

Recent higher cotton production in Mexico has lowered import demand and affected US exports, according to the US department of agriculture (USDA). In 2017-18 and 2018-19, Mexico’s cotton output jumped to levels not seen since the late 1970s. Cotton production is likely to remain high in 2019-20 too, forecasts the recent GAIN (FAS attaché) report from Mexico.

Due to the benefits of the NAFTA agreement, US 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 US 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 US-China trade tensions could also reduce Mexico’s export opportunities, increasing pressure to use cotton domestically. Neither of these outcomes bode well for US cotton exports to Mexico,” the Foreign Agricultural Service (FAS) of the USDA said in its ‘Cotton: World Markets and Trade’ April 2019 report. (RKS)