The latest government projections for 2005-06 U.S. cotton exports even has the government gasping at its own latest estimate, calling it a “remarkable” 16.2 million bales in the latest USDA-ERS report.
If achieved it would be a record and many believe it is a very big “if.” However, Memphis, Tenn., cotton merchant Gary Taylor, the newly elected president of Cotton Council International, believes it can be achieved.
The only impediment is getting it processed out of the government loan and getting it on ships bound for textile mills worldwide.
Taylor acknowledged at a CCI breakfast meeting at the Beltwide Cotton Conference in San Antonio it would be “difficult” to break the U.S. cotton export mark, but the demand for cotton worldwide makes him more optimistic than many that 16.2 million bales of this year's 23.2-million-bale crop would be shipped overseas. If achieved, 2005/06 exports would be 1.8 million above 2004/05.
“I think we have a pretty good shot at it because there are a large number of export certificates that expire July 31. I think a tremendous amount of cotton will be evacuated in the last 90 days of the marketing year,” Taylor said.
CCI, formed to promote U.S. cotton abroad, is celebrating its 50th anniversary this year and its role has never been more critical for U.S. cotton producers. Seventy percent of the U.S. crop is now exported, and CCI has a presence in 50 world cotton markets spanning four continents to service those who buy U.S. cotton and market textiles from it. CCI's programs involve around fiber servicing, consumer advertising, retail promotion, U.S. textile export promotions and cottonseed meal projects working in conjunction with the National Cotton Council, Cotton Incorporated and Supima.
“Very few us in the business of growing and selling cotton have an appreciation has what CCI does,” said Taylor, who has been involved in trade shows and other market promotions in conjunction with his CCI leadership role. It is vital to the continued viability of U.S. cotton exports, he emphasized.
World cotton demand has been on a sharp upward curve in recent years, and Taylor admits he has been among those who have not been convinced this trend is sustainable.
However, he admits that he is “about ready to throw in the towel” and admit the trend is real, largely because of the rapidly expanding middle classes in China, India and Pakistan.
He believes this growing demand will result in the U.S. — supplier now of 40 percent of the world cotton trade — needing to produce 24 to 25 million bales of cotton annually to meet world demand in a growing world cotton consumption market.
China is the 800-pound gorilla in the global cotton market as the world's largest producer and consumer of cotton, and it is a difficult gorilla to tame with constant conflicts over quality issues, growing access to U.S. markets and other issues.
Two classing systems
China has two classing systems; one for imported cotton and another for its domestically produced cotton. Not surprising, China uses the two-classing system to protect its own cotton producers. Taylor said U.S. merchants figure U.S. cotton moving through the Chinese import cotton classing system will loose a point to half point off the contract price. “China is just trying to protect its product. They are no different than we are,” he said.
Access to the U.S. market is a constant source of conflict with China, although access agreements have been made in world trade negotiations.
“We have a saying in our business that when you sign a contract with China, that is when negotiations start. In China, it is ‘Yeah, we have a deal, but let's look at it again.’
“China needs this (U.S.) market,” Taylor said, indicating the most populous nation in the world will never let up on trying to gain full access to it.
India with its rapidly growing middle class has been a growing blip on the U.S. cotton export radar screen, but Taylor, president and chief executive office of Cargill Cotton in Memphis, said he expect India to become more reliant on internal supplies in the future and less of a customer for U.S. cotton.
In three to five years, Taylor expects India to become the world's largest cotton producer.
India currently plants about 9 million hectares annually and production has been increasing. In 1995 Indian produced 13.2 million bales from approximately the same acreage that produced a record 24.3 million bales during 2004-05. This is due largely to improved cotton varieties, particularly the introduction of Bt cottons to ward off bollworms.
By comparison, China produces about 24.5 million bales from 5.1 million hectares.
India's growers have been getting planting seed “out of the back of the gin and getting horrendous seed quality” for years, but now are accessing improved seed and Bt technology, and yields are going up.
Taylor expects India to become a “huge exporter of cotton” in the near future. India will continue to import ELS cotton, but its demand for short staple cotton in the world market will decline.
Taylor also expects India and Pakistan to be a larger exporter of yarn. “Pakistan can produce textiles cheaper than China,” he added.
It is an ever-changing world market with changing fashion trends. The U.S. is well equipped to meet the demands of the world market through CCI, he said.