Sliding lira and diplomatic row may affect US-Turkey cotton trade
Cotton trade between Turkey and the United States could be negatively affected from the steep decline in the value of the Turkish lira and the escalating tension between two countries, the Financial Times reported on Thursday.
Turkish lira has fallen 37 per cent against the dollar this year and has hit record lows in recent weeks due to the strained relations between Turkey and the United States over the long detainment of U.S. Pastor Andrew Brunson.
The United States imposed sanctions on two Turkish ministers and doubled tariffs on Turkish aluminium of steel over what it sees as the failure of the Turkish government to respect the terms of a deal for Brunson's release reached between the presidents of the two countries.
Turkey is the third-largest market for the cotton farmers of the southern United States, but the currency plunge makes imports more expensive. According to analysts, Turkish manufacturers may offset the effects of the increasing costs with exports to Europe, however, the rise in inflation decreases domestic consumption as well.
A US-based cotton broker told FT that some traders were hedging the risk of Turkish mills backing out of contracts. “We have seen guys take action in futures markets to protect against defaults,” the broker said.
The problems between two NATO allies may also result in U.S. cotton growers losing their 43 percent share in Turkish exports, as Turkish companies may start to seek supplies from other exporters, the FT noted.
“[For] the cotton we are going to import, we are choosing other countries because of political reasons,” said Besim Özek, strategic and business development director at Bossa, a denim producer based in the southern Turkish city of Adana.