November 11, 2019
Trade War’s Forgotten Farmers Get Crushed in U.S. Cotton Country
“American cotton farmers are having such a difficult year that even a potential trade deal between the U.S. and China is likely to offer them little comfort. That would have been unthinkable just a few months ago for Jeremy Brown, a fourth-generation cotton grower in Texas who began the year full of optimism. While a spring deluge was disrupting planting of other crops such as corn and soybean, it brought welcome moisture to typically dry soil in the Lone Star state. Prices were also rallying after a smaller crop the previous season. Then the weather turned, with scorching heat damaging crops. The persistent trade war between Washington and Beijing choked U.S. exports to China, the world’s top cotton buyer. Global output boomed with help from Brazil, which is eating into American market share. Now, even though the farmers are included in a multi-billion dollar aid package to mitigate the impact of tariffs, the outlook for demand and the harvest is bleak. “It’s just horrible,” 39-year-old Brown said from Lubbock, Texas, the heart of U.S. cotton. While soybeans have become a poster child of the trade war, with everyone from U.S. President Donald Trump to Treasury Secretary Steven Mnuchin opining over the oilseed, cotton is one of the unsung victims of the tit-for-tat tariff battle. Only about 14 million acres of the fiber were planted across states including Texas, Georgia and Mississippi in the current season, compared with 76.5 million for soybeans and almost 90 million for corn. The U.S. is the world’s top shipper of the fiber and more than three-quarters of the domestic crop goes into exports, which are heavily dependent on Chinese purchases. Even if Beijing and Washington strike a deal, the outlook for global demand is shaky and the harvest isn’t looking encouraging. The favorable rain early in the season gave growers the confidence to sow a crop that’s forecast to be 13% larger than the previous year. But while the area planted was larger, the amount farmers will get from each acre — the yield — is being hurt by the summer’s heat.
U.K. Avoids Recession But Remains Hobbled Ahead of Election
“Britain dodged a recession ahead of the now-postponed Oct. 31 Brexit deadline, but the figures underscored the economic challenge facing whoever wins next month’s election. The latest GDP figures give parties across the political spectrum something to latch on to in the campaign for next month’s election. Consumer spending was strong, and the economy recorded 0.3% quarterly growth, but that was below expectations, and year-on-year figures were the weakest in almost a decade. Prime Minister Boris Johnson’s Conservatives are trying to focus the campaign on the economy, something that polls show voters regard as its strong suit. This weekend, the Tories upped their attacks on that topic, invoking Labour’s fiscal program before the financial crisis a decade ago and claiming its latest policies would further undermine growth. After a decade of austerity, both Johnson and Labour leader Jeremy Corbyn have unveiled massive spending plans in a bid to woo voters. For Johnson, the goal is a Conservative majority in the Dec. 12 vote to allow him to push his Brexit deal through Parliament. A breakdown of the latest data revealed a familiar pattern, with solid consumer and government spending offsetting weak business investment. Services and construction expanded, while manufacturing flat-lined, with only a rebound in car production preventing the sector from declining. Exports jumped in the quarter, leading to a sharp narrowing of the trade deficit. Net trade added 1.2 points to growth. However, the data have been volatile recently because of effect of stockpiling and flows of non-monetary gold. There was little evidence of Brexit hoarding, with inventories actually falling, in contrast to the huge surge ahead of the initial March 29 deadline to leave the EU. The quarterly GDP increase was due entirely to a strong July, with output falling 0.2% in August and 0.1% in September. Overall GDP rose just 1% in the third quarter from a year earlier, the least since 2010.”
China’s Consumer Inflation Could Hit 5% in January, Analysts Say
“China’s consumer inflation will continue rising and could peak at around 5% or even 6% in January before gradually falling back, according to economists. The consumer price index rose to a 7-year high of 3.8% in October due to soaring pork prices, and the demand from the Spring Festival in late January will push it higher to at least 5%, according to economists from Barclays Plc, Citigroup Inc., and Bank of China International Ltd. Huachuang Securities Co. said the headline number could even hit 6%. Inflation will then likely slow down from that January peak, according to China Merchants Securities Co. While non-pork price rises remain benign for now, the brokerage house warned that the cost of eggs, seafood and cooking oil are most likely to rise, based on previous periods of pork price inflation. The rising prices will complicate monetary policy, with markets closely watching how the People’s Bank of China balances the competing demands from rising consumer prices and falling producer prices over the rest of the year. The demand-supply imbalance of pork will “likely become acuter” and push pork inflation to a near-term high around Chinese New Year, Yu Xiangrong, an economist at Citigroup in Hong Kong wrote in a note. “The window for further policy easing will open wider,” when consumer inflation starts to decline after the new year.”
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