Trade officials from China will sign nine U.S. cotton contracts worth $500 million in a Los Angeles ceremony Friday, but the big deal was announced in Memphis this morning.
The Chinese delegation met this morning with leading Memphis cotton traders and shippers at The Peabody to share ideas on a cotton trade that has averaged $1.6 billion each year for the United States over the last eight years, according to trade officials.
Among merchants that are signing deals with Chinese mill owners for 220,000 tons of cotton are Allenberg Cotton and Cargill Cotton, both of Memphis, and Staplcotn of Greenwood, Miss., said Jiang Hui, vice chairman of the China Chamber of Commerce for Import & Export of Textiles.
“Memphis is famous for its agriculture and history (in cotton),” Jiang said. “We are used to purchasing cotton from Tennessee and so our delegation will come to Memphis every time.”
Richard Clarke, a Cargill representative and American Cotton Shippers Association board member, called China “our most important customer” in his welcome address to the delegation this morning, and said 2012 is going to be a “great year.”
“This year the (U.S. Department of Agriculture) is forecasting total cotton imports by China to be the second-largest ever at approximately 17 million bales,” Clarke said.
Economists at the Memphis-based National Cotton Council, however, cautioned that China’s appetite for U.S. cotton may only provide short-term support here as its government implements a policy to build the country’s cotton reserves.
This policy is the “single largest wildcard in the cotton market,” said Gary Adams, the NCC’s vice president of president economics and policy analysis.
The delegation in Memphis today is one of six Chinese trade groups that fanned out across the country to gin up business in the U.S.
The trade visit is being led by Xi Jinping, China’s vice president and, likely, the country’s next president.
Xi was in Iowa Wednesday where trade representatives signed contracts for grain and soybeans similar to the cotton contracts announced in Memphis.
The Memphis cotton trade’s ties to China stretch back 40 years.
William “Billy” J. Dunavant Jr., chairman of former Memphis cotton giant Dunavant Enterprises, was the first to sell U.S. cotton to China in 1972 and helped create a worldwide market for the domestic fiber.
That first sale came on the heels of President Nixon’s historic visit to China in 1972.
In 1990, Dunavant brokered the largest individual sale in history at the time with China and the largest sale for any company.