U.S. Pima and world Extra Long Staple (ELS) cotton supplies are expected to inflate quicker than a balloon attached to a fire hose over the next three seasons.
However, California and the other Pima producers in Arizona, New Mexico and West Texas are well positioned to do battle as one of the Big 4 world ELS suppliers.
“If we collectively have the stomach to duke it out with the other three world Pima producers over the next three or four years, U.S. Pima has the potential to really command a world marketplace” that will absorb large U.S. crops, Rodger Glaspey told the fifth annual Pima Production Summit recently in Visalia, Calif.
Glaspey, president of Dunavant of California in Fresno, Calif., said U.S. carryover would be 350,000 bales on Aug. 1. With the potential of a good 2002 crop certainly likely, carryovers could reach the 500,000- to 600,000-bale levels over the next few seasons.
“Obviously we are entering a new arena,” said Glaspey.
That is the bad news. The good news is that the U.S. has the tools to compete in an oversupplied world market for the next six seasons. These are a locked in federal ELS loan rate of 79.77 for the life of the new farm bill and a guaranteed Step 2 ELS competitiveness program that could add more than four cents to the bargaining power in the world marketplace.
U.S. highest priced
American Pima is the highest priced ELS in the world right now, averaging 10 to 20 cents per pound more than similar ELS cottons from the other three major world suppliers, Egypt, China and the CIS.
However, Pima's uniform high quality and a U.S. reputation as a reliable supplier will put U.S. Pima in a good position in an oversupplied world market.
Glaspey cautioned “growers will have to continue to make grade 2s if they want to take secure a share of the world marketplace. If you want to take over Egyptian long staple sales, you need to make 48s rather than 44s. It goes without question you have to avoid stickiness and contamination.”
Past May Pima production summits have always been the first solid industry projection for Pima acreage in California. But with ideal planting conditions there was little uncertainty about crop acreage. Others issues, like emerging stickiness problems and a world marketing outlook with almost certain burgeoning world stocks, took center stage.
Glaspey did give his California acreage projection: 250,000 acres. That is almost identical to earlier USDA projections and Supima Association estimates. However, others have said it may be more than that. Acreage in the others three Pima states will add about 30,000 to California's total making the U.S. crop about 275,000 acres, roughly 5 percent more than last season.
82-cent loan rate
The crop is off to an excellent start, and Glaspey said growers could expect average to above average yields.
If California producers continue to plant Pima at the current rates, there will likely be loan rate of 82 cents per pound (when premiums are added to the frozen loan rate).
The other big three ELS producers also see a brighter future for ELS than upland. China has an aggressive plan to dramatically increase its production to levels now produced in Egypt by 2004.
However, ELS cotton does not have the homeland support in China like upland. Chinese mills do not use ELS and that could alter those Chinese ELS plans if prices plummet or production is damaged. Glaspey reported sand storms and heavy rains have hit this year's Chinese ELS crop.
Egypt continues to be America Pima's primary competitor, but Step 2 funding makes the U.S. a formidable Egyptian foe.
“Only 60 percent of the Egyptian cotton that has been sold this year has actually been shipped. A lot of buyers may not be there and if we can get closer to Egyptian prices (with Step 2 support), there may actually be room to take away Egyptian sales. I am encouraged about that,” said Glaspey.
With the growing supplies, Glaspey said there would be a two-tiered marketing system for Pima in the future. Increasingly more cotton will go into the loan at 82 cents where it will be defaulted and then offered to the world market. New crop will then go head to head with that defaulted cotton, he said.
“But, we have the tools (frozen loan and assured Step 2 funding) now to be competitive in price, no matter where the world price levels go,” said Glaspey.
Complimenting that is a marketing and licensing program from the Supima Association, which has recently initiated an aggressive consumer advertising campaign to enhance its licensed products program.
Matt Laughlin, association executive vice president, said there are now 75 international and 20 domestic textile mills licensed to use the Supima name.
“If they use the Supima label, it has to be 100 percent American Pima cotton. We think the program is working and growing.”
“I well never tell a grower how to grow Pima, but I will say quality is what is getting the job done. You maintain and built markets with quality,” he added.