“Some of us can barely remember when we had hundreds of cotton merchants to sell to,” said David Stanford, vice president, marketing division, Plains Cotton Cooperative Association, Lubbock, Texas.
Stanford, speaking at the opening session of the 2004 Beltwide Conferences in San Antonio, said the diminishing number of cotton buyers marks one of many industry changes that pose challenges to the industry.
“Remember when the dollar was the only currency we had to be concerned about?” he asked. “And remember when the U.S. economy was measured by manufacturing strength. Can you recall paper warehouse receipts?”
He said most cotton farmers still remember seeing a boll weevil but may not for too much longer.
“These are some of the challenges and opportunities facing the U.S. Cotton industry,” Stanford said. “Everything has changed. In the decades of the ‘90s, if (farms and companies) didn’t get bigger they got lost. Now, we hardly know who our trading partners are.
“With the Internet, we can trade cotton anywhere in the world. China has an electronic marketing program and in the United States The Seam offers marketing opportunities for growers, business-to-business and international trade. That’s a giant step in cotton marketing.”
He said similar changes likely will affect the banking industry as well.
Stanford pointed to Wal-Mart as an example of how U.S. companies do business.
“Wal-Mart took advantage of change,” he said. “Last year, sales topped $244 billion. Wal-Mart is the biggest company in the world and China’s eighth largest trading partner. One-half of the U.S. population shops at Wal-Mart.”
He said the company’s growth and commitment to low prices make it an international player.
“Similarly, the business terrain for the cotton industry has changed forever,” he said. “Currently, only 35 percent of the U.S. annual cotton production will be used by a U.S. consumer. The rest goes into the global market.”
The United States will continue to produce from 16 million to 18 million bales of cotton annually, Stanford predicted. From 10 million to 13 million bales will move into the international markets.
“China will consume every third bale of cotton produced in the world in 2004,” he said, “so we must ask that they allow us entry into their domestic market. Currently, we do business under Chinese trade rules and their banking terms are also one-sided.”
This, he said, in spite of their WTO commitments. “Unfortunately, a two-way street (with trade) is unusual for the Chinese. But we need to get this right.”
Stanford said the domestic textile industry “has been bruised but is trying to help shape trade policy, especially within the Caribbean Basin, to remain competitive. “The U.S. textile industry will work through these problems but it will not look the same.”
He said the Farm Security and Rural Investment Act of 2002 provided a much needed safety net for cotton farmers. “That safety net protects farmers from the unexpected. The counter-cyclical payment, especially, was sorely needed.”
A rebound in cotton prices last fall has reduced government payments but Stanford doesn’t assume higher prices will continue.
“We’ve been through four years of low cotton prices and we have no guarantee that prices will remain strong in 2004. We hope that the farm bill will continue through its proposed six-year tenure and that the safety net will remain in place.”
Stanford said farmers in West Texas are planning to increase acreage and folks are planning for new gins. “They would not (expand) without the safety net in the farm bill. We must continue to defend the farm program and continue to respond to negative press.”
He said changes will create a different environment for the U.S. cotton industry but that opportunities exist as growers, buyers and manufacturers adjust to changing times.