What is in this article?:
- Highest cotton prices in history followed by equally squat low-valued lint forced a frightening situation in futures market.
- 350,000 cotton acres or less in California this year brings the industry close to the minimum needed to maintain industry viability.
- Association (ACSA) members revealed that “up to 3 million bales of U.S. cotton at an estimated value as high as $1 billion is either in default or at risk. That is a staggering number.”
Looming groundwater regs
Looming on the horizon are the challenges of groundwater monitoring and extraction likely to lead to regulations and a regulatory process governing nitrogen use, adds Williams.
The recently released University of California, Davis study about groundwater contamination has raised the ire of many. However, Williams says it is flawed.
If 50 percent of the nitrogen used on crops goes into the groundwater as the study claims, Williams says that means crops are getting no benefit from nitrogen applied. That is not true, he proclaims.
The study, he adds, ignores the advancements made in nitrogen application using drip irrigation.
The marketing side of the industry has not escaped the turmoil of the past 18 months, but as WCSA president Matt Laughlin pointed out, the Western cotton industry has been spared much of the misery that descended on the rest of the U.S. industry.
Laughlin, general manager of the J.G. Boswell cotton marketing department, said a survey of American Cotton Shippers Association (ACSA) members revealed that “up to 3 million bales of U.S. cotton at an estimated value as high as $1 billion is either in default or at risk. That is a staggering number.”
Laughlin added that even though Far West merchants “haven’t been entirely immune to these problems… fortunately, such cases have been few and far between out here.”
Laughlin attributes this partly to the fact that the Far West cotton industry has long been primarily a cotton exporter with a long history of moving cotton in a streamlined warehousing and logistics system to nearby ports.
“Whatever the reason, we have not been subjected to the severity of these problems that have plagued much our industry for more than a year,” he says, “the consistently high quality cotton we produce in the Far West may have helped us avoid the level of overseas mill defaults that have hit shippers in other parts of the U.S.”
The WCSA president said the association must remain “proactive. Just as we expect our customers to perform on their contractual obligations, we have to hold ourselves and our grower-suppliers accountable, as well.” Laughlin said WCSA has hammered home “sanctity of contract” for years.
“That means we have to deliver on time what we promise to deliver,” he says. It also means to avoid business with mills on international default lists. “Once there is a contract in place, we all have responsibilities to meet; growers, ginners, shippers, warehouses and the transportation sector.”
Selling the cotton is just one step. Building relationships through the associations and marketing arms is part of the overall marketing process, said Laughlin.
The conference’s keynote represents a company that is involved in each step in the supply chain. The Esquel Group is a major importer of both Pima and Upland cotton in making more than 100 million cotton shirts annually, according to John Chen, vice chairman and CEO of Esquel, based in Hong Kong.
Esquel uses about 80,000 bales of Pima cotton and 220,000 bales of upland cotton annually.
“We want to partner with you because you are the most important Pima cotton growing region,” he says.
Esquel generated income of $1.2 billion last year and is projected to reach sales of $1.35 billion this year, according to Chen. It has been the No. 1 men’s woven shirt exporter for eight years.
These shirts are made mostly in China, which has long been an important U.S. cotton buyer to make export goods. However, China has rapidly advanced economically to become a major consumer of cotton products.
Chen acknowledges concerns about a slowdown in China’s economy that started after the 2008 Olympics. However, Chen said it lasted only two quarters. Right now, China is logging a solid 9 percent growth rate, notes Chen.
Consumer spending remains strong in China, he adds,
The Chinese economy is more stable. Chen describes it as “steady as she goes. This bodes well for our business.”