Is the U.S. cotton production sector destined to shrink by a fifth between now and 2010 or can the industry find its footing and respond to the challenges of an increasingly crowded world market?

Bill Dunavant III predicted in a speech to the American Cotton Producers Jan. 30 that U.S. cotton production could decrease 10 percent to 20 percent to 15 million to 17 million bales by 2010 because of changes in the U.S. cotton program.

Although Dunavant works for the world's largest cotton merchandising firm, he was speaking in his role as the chairman of Cotton Council International. The producers' session helped kick off the National Cotton Council's annual meeting in New Orleans.

And while his speech included a number of thought-provoking comments about world cotton production and consumption, this column will focus on those for the U.S. cotton industry.

Maintaining the U.S. cotton production sector, given the constant criticism of the U.S. cotton program, will be a challenge.

“I read with great concern the comments on restarting the Cancun round by our U.S. Trade Representative Robert Zoellick, which specifically mention cotton,” Dunavant said. “His rhetoric is a forewarning of problems for the future of world and American agricultural subsidies.”

Every cotton-producing country except Australia subsidizes its cotton industry, says Dunavant. (And some would say Australia's water reservoirs are a subsidy.) But, in contrast to other producers, American and European farmers live in glass houses.

“The entire world can clearly see how our programs are administered and function, and, unfortunately today, this is being used against you,” said Dunavant. “There is no way to see agricultural subsidies in opaque societies such as China, the CIS and to a certain extent Africa.

“This is why free and fair trade is not attainable and Ambassador Zoellick had better start understanding which economy is the largest in the world and use it for all the leverage that it deserves.”

With domestic textile use potentially declining to 5 million bales by 2010, U.S. cotton producers will have to focus on exports. Unfortunately, farmers in Brazil and West Africa are eyeing the same goal.

Dunavant believes the United States will lose 10 percent of its market share by 2010 due to production losses from reduced government subsidies. By then, Brazil could be producing 9.5 million bales vs. its current 5 million bales and exporting 5.7 million to 6 million vs. 1.4 million today.

Meeting such competition will require changes not only in economics but in the industry's infrastructure, according to Dunavant. “If we cannot compete because of inconsistent quality or warehouse delays, truck or equipment shortages, your customers have options of buying other foreign growths. This is not domestic business anymore.

“You must look at the complete picture of cotton-farming, ginning, warehousing, logistics and merchandising because the business has changed due to your export competitors. We can and will compete, but it will require an American producer-driven effort to encourage all segments to stay competitive.”

e-mail: flaws@primediabusiness.com