Another bearish cotton supply and demand report is released and ongoing issues continue with Turkey – our second largest market. Cheap oil means cheaper polyester. A generation of our greatest leadership is retiring in Phil Burnett, Mark Lange, Wally Darneille and John Maguire – not to mention others. Cotton has dipped below 60 cents per pound, and the Commerce Department reports slumping retail sales. It feels like the entire world has drawn a bead on my most important commodity, and the one I cannot live without, the U.S. cotton producer. Things are tough all over. Fortunately, this is a familiar environment for us.
It is a privilege to follow Phil Burnett this month, but it is bittersweet to see him go. He touched last month in this column on something that nobody can deny. This industry’s ability to innovate is its secret to success. As president of Cotton Council International (CCI) during this last year and also president of the International Cotton Association (ICA) since October, I have seen the vital role the U.S. cotton industry plays in today’s world. My CCI Cotton Days trip to Korea, Japan, Taiwan and Thailand fully illustrated the importance of continuing to push cotton as the pure and responsible choice that it is.
The good news from the road is that U.S. cotton is still the fiber of choice. Without fail, in every market we were applauded for the quality of our cotton, the level of our bale packaging, the PBI system as well as the very consistent job that the USDA does with classing. No other country can offer the opportunities and advantages that U.S. cotton brings. There were consistent and disheartening grumbles about contamination, but I think the necessary national interest groups are addressing this issue.
U.S. Cotton is still the fiber of choice…”
During June, I was lucky enough to spend a couple of weeks in China at more CCI events as well as a National Cotton Council Leadership Exchange Program. It is hard to beat scorpions and donkey for lunch at China’s largest textile mill with the great Ronnie Lee or seeing Cannon Michael sing karaoke in some small “out of the way town” of nine million people. As a group, we saw firsthand the advantages U.S. cotton brings to the world’s largest cotton consumer.
The bad news from the road was nothing new. The world’s two largest importers of cotton are China and Bangladesh. India has now surpassed us as China’s largest supplier. Our market share in Bangladesh has slipped below 10 percent. A primary reason is our inability to land the volumes of cotton required in a prompt and timely manner. Trade rules and risk management require that buyers open a letter of credit before cotton can even be shipped. Often it is three to four months before U.S. cotton arrives. This hampers the industry’s ability to sell cotton to our most important markets as the time delays can become very costly.
I don’t know the solution to the issue of cotton flow, but I know that there is one. I also know that the future of our industry depends on it. My opinion would be that the revenue model for our warehouse industry has to tip towards paying the service provider to ship cotton as opposed to paying him to store it. I understand that it is not a simple notion. At the end of the day, we have to be able to ship cotton to our customers when they need it.
I also know that the industry requires an independently owned and operated warehouse system that is at the point of production whether it be stand-alone warehouses or gin-owned and operated facilities as it is too expensive to warehouse elsewhere. All in this industry need the opportunity to enjoy and experience prosperity. As competition for acres continues to mount, now is the time to make sure that U.S. cotton remains the most competitive cotton from every angle – whether it is quality, price, service or innovation.
– Jordan Lea, Greenville, S.C.