Thursday, August 27, 2015

Downturn in Chinese economy causing concern for U.S. agricultural industry

The U.S. agricultural industry is anxiously waiting to see how a downturn in the Chinese economy affects business, Josie Musico reports for the Lubbock Avalanche-Journal. "Because China purchases so many imported agricultural goods when its economy is healthy, a not-so-healthy Chinese economy is bad news for the global market," said Texas Tech University agricultural economist Darren Hudson. (Musico photo)

People shouldn't panic yet, Hudson said, because "much about the future of China’s economy remains in speculation," Musico writes. Hudson told Musico, "The market adjustment that is occurring is doing that as a result of the uncertainty that exists around Chinese economic growth and related things like exchange rates and energy (costs).”

When it comes to cotton, the global industry "has already been worried the past few years by China’s stockpiling policy," Musico writes. "While millions of cotton bales are stored in Chinese warehouses, growers and industry representatives nervously wonder how their eventual release will hinder the global export market. Supply and demand principles suggest that surplus could cause prices to plummet."

Other concerns are grain crops and the fluctuating demand for sorghum in China, Musico writes. Hudson said "the Chinese anticipate a record domestic harvest of corn, a crop with many of the same uses as sorghum. The country uses imported sorghum mainly to produce alcoholic beverages, pork and duck. All three of those goods are somewhat elastic, meaning they are purchased less frequently during economic hard times." (Read more)

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