Cotton growers are riding an unbelievable hot streak. Prices are high and climbing, demand for cotton products worldwide is growing and production in the U.S. may come close to 13 million acres in 2011.
With all that good news in their pockets, North Carolina growers attending their recent annual meeting in New Bern, N.C., couldn’t help but smile at the news that the U.S. textile industry is making a slow, but sure climb out of a two-decade long doldrums that meant most of the cotton grown in the U.S. had to be sold abroad, primarily to China.
Dependence on foreign buyers isn’t going to change for U.S. cotton growers, but the successes of their domestic textile market could only be good.
Cass Morgan, executive director of the California-based U.S. Textile Industry, says the high prices cotton growers are receiving for their crop is actually good for the U.S. industry. It’s leveling the playing field and allowing some U.S. textile companies to compete with foreign countries, especially Asian countries.
Speaking at the recent annual meeting of the North Carolina Cotton Growers Association in New Bern, Morgan says for the first time in over 20 years domestic use of cotton increased in 2010. Though the increase was small, from 3.2 to 3.6 million bales, there are plenty of reasons for optimism.
Textile profits were up in 2010 by 4.2 percent — the first time in more than five years. Of the 14 top textile producers, five companies kept a stable workforce for the past three years and nine companies added employees.
In 2010, cotton yarn production was up seven percent and knit fabric production was up by five percent.
Losing the textile industry devastated rural economies in the Southeastern U.S. over the past 25 years. The news that three new cotton mills became operational last year should be good news to rural towns across the South.
Three new cotton mills opened for business in the U.S. in 2010. One in Louisiana was built and one in Texas and one in South Carolina were rebuilds of existing plants.
There is still a distinct foreign involvement in the new growth of the U.S. textile industry. The Zagis plant built in Louisiana and opened last year is owned primarily by a Mexican Company. The Santana Denim plant in Edinboro, Texas is owned by a Brazilian Company. Only the Parkdale plant in Gaffney, S.C. is primarily U.S. owned.
While the growth of U.S. cotton mills is slow, it’s not exactly small. Parkdale Mills, Inc. invested $45 million for new equipment and upgrades for the Gaffney, S.C., mill, formerly known as Wellstone Mills. The refurbished mill in Gaffney, S.C., supplied jobs for 145 textile workers who had been laid off from other closed textile plants in the area.
Johnson says, “We think the trend for increasing use of U.S. cotton by U.S. mills will continue to increase. Last year over 48,000 jobs were created by the U.S. textile industry — one of the few U.S. industries to increase its labor force during the recession.
“Asian labor costs continue to rise and our labor costs have stabilized over the past couple of years. The high cost of cotton worldwide actually helps the U.S. textile industry,” Johnson says.
The growth in U.S. textiles could produce a unique situation and one that could give the U.S. cotton industry a public relations black eye, Johnson contends. The demand for U.S. grown cotton by U.S. textile plants may exceed supply.
“That would be a real sad day, if the comeback of U.S. cotton mills is stopped because of a lack of cotton, but that could happen,” the textile leader says.
Whether the textile industry continues to grow is more dependent on politics than on cotton, he adds.
The reason for the new cotton mills and increased profitability in textiles is directly related to the 4-Cent Program, which expires in 2012. The Federal program provides tax dollars to help textile companies re-invest in equipment and become more competitive with Asian and Central and South American companies.
For spinners, papermakers and non-woven cotton product producers, the program pays 4 cents per pound for eligible cotton opened by the producer each year from 2008-2012. In year five of the program, payments by the CCC will be reduced to 3 cents per pound, if the program survives federal budget cutting.
Dollars for the program is much more than nickels and dimes. For example a 30,000-spindle spinning frame using approximately 370,000 pounds of cotton per week. At 4 cents per pound, the spinner is reimbursed $14,800 per week for four years and $11,100 per week for the fifth year, for a total reimbursement of close to $3.6 million through the end of the five-year program
All the payments from the 4 cent program are intended to support the competitiveness of domestic users of eligible baled upland cotton regardless of origin, and must be reinvested in plant and equipment.
A similar program helped the U.S. automotive industry become more competitive with foreign car makers. The Obama administration has taken steps to insure continuation of the auto program, but not the textile program.
Free trade pacts with Korea and Vietnam (second largest exporter of textile products in the world) would severely damage the comeback of the textile industry in the Southeast.
“These are not the kind of 21st century trade agreements we were promised by President Obama,” Johnson says.