William B. Dunavant, chief executive officer of Dunavant Enterprises Inc., Memphis, Tenn., said in his annual market outlook address at the Beltwide Cotton Conferences in Atlanta that the theme of farm legislation being debated in the Senate and passed by the House "is one of big payments – which I’m not opposed to, if they’re administered correctly."
But he said he is "concerned" that the National Cotton Council "is supporting a program and concept that encourages overproduction," and "it would seem to me that the payments should be dedicated to conservation, so as to balance supply. The world cotton-producing countries are not getting a clear signal from the U.S. concerning production."
While acknowledging that his company "profits from overproduction in the U.S. and the world," Dunavant said too much production "has led to very low prices, and that will continue until there is a major production crisis" in the U.S. or other major cotton-growing countries.
"Even a robust world textile economy won’t solve the problem (of price) if the world continues to overproduce. The way to higher prices is simply to reduce world carryover, with less world production."
Although a new farm bill is "the No. 1 agenda item today," Dunavant said, "I’m glad it didn’t pass the Senate last year so we’ll have time to address what the U.S. cotton industry truly needs for the future." And, he said, "Even though I’m not on the same page with the National Cotton Council’s support of the bills before Congress, I applaud them for stepping forward in creating what they feel is necessary for the future of the U.S. cotton industry. All seven segments of the industry are not always in agreement, but the council’s history has been one of doing the right thing at the right time – even though we may not all agree.
"I hope we will address the new farm bill carefully as deliberations start up again later this month."
Dunavant said "all of us have lost sight of the fundamental scenario of supply and demand." The original theme of the FAIR Act, dubbed "Freedom to Farm," was to give flexibility to producers to plant whatever they wanted, he noted. "But it also was supposed to phase out government payments, which has never happened; in fact, payments have grown, not diminished, over the period of the legislation."
Over the past few years, Dunavant said, "I’ve recognized how much the American cotton producer needs additional support. I’ve seen many efficient farmers go out of business because, even with this program, they couldn’t make it financially.
"But, we should not go through the next 10 years with farming being classified as an entitlement program."
Describing American cotton producers and their traditional best customer, the textile industry as being "at the crossroads," Dunavant said "You’d think these very low prices would discourage production in the world, but I don’t think it will be reduced enough to encourage prices back to the 70-cent level."
The U.S. textile industry beset by conditions "I’ve not seen in my lifetime," he noted, with some 74 textile mills and plants closing over the past two and a half years, "and their current difficulty is going to affect all of us, in every industry segment, in the future. The world textile business is better than the U.S. textile business – but it’s not any home run either."