Despite a projected 30 percent to 35 percent increase in San Joaquin Valley Pima acreage this season, 2004-05 Pima prices should be within the range of $1 to $1.20 per pound for growers, according to Jeff Elder, vice president, cotton marketing for the J.G. Boswell Co.
That was a surprising forecast to at least some textile mill executives attending the 5th U.S. Pima Industry Seminar recently in San Diego, Calif. They thought the price forecast was a bit high with the big increase in acreage at hand, but Elder did not back down from his estimate when challenged.
Elder justified his forecast by noting the carryover is the lowest it has been since America became a major world exporter of Pima about 15 years ago. The sharp 2004 acreage increase will only provide enough cotton for a “full year's supply” to meet growing Pima demand worldwide.
He expects the market to be “pretty competitive” for the 2004-05 crop because “we are a long way from an ample supply of ELS cotton.”
Mills are now paying $1.30 per pound for ELS cotton to cover their nearby needs.
Elder said a price of $1.20 or less does not impact demand, but when it exceed that mills become reluctant to buy and seek alternatives.
Elder's comments carry a lot of weight in the relatively small Pima/ELS market because Boswell is the largest Pima grower in the U.S., growing reportedly 75,000 to 80,000 acres each season.
Elder was part of a Pima marketing panel that included Hans Kretschmer, executive vice president of SWIG Cotton, El Paso, Texas; John Burch, vice president, sales, Calcot, Bakersfield, Calif.; Rodger Glaspey, president, Dunavant of California, Fresno, Calif.; and Dan Sullivan, vice president, marketing, Queensland Cotton, Fresno. These five market 90 percent or more of the U.S.-grown Pima.
Pima has been a volatile crop since it was introduced into the San Joaquin Valley a little more than a decade ago. California now produces 85 percent of U.S. Pima cotton. Before that, Arizona, New Mexico and Far West Texas were the only Pima producing areas. Those areas continue to grow Pima.
Although it makes up 25 percent of the San Joaquin Valley's cotton acreage, it is still very small part of U.S. and world cotton. It represents only about 3 percent of world cotton production.
As a small crop, it is subject to wild market swings and therefore equally gyrating acreage swings. Elder said that will not likely change.
Elder predicted SJV Pima acreage will swing from 190,000 to 290,000 yearly over the next five to 10 years. Sullivan's range was 175,000 to 225,000. This year acreage should be 225,000 acres in the valley, according to Burch.
Boswell is 100 percent Pima and has been for two years. Elder said that Boswell's acreage will not change much year to year, but other SJV producers likely will.
SJV Acala acreage can be expected to make 10 to 20 percent yearly swings. Elder said Pima can swings 30 to 40 percent either way and unless demand increases, that likely will not change.
Pima takes two weeks longer to produce than Acala and poor spring weather can force growers to switch from Pima to Acala.
“Pima growers wait right up until February — or later to make an acreage decision,” said Glaspey. “They literally have two bags of seed waiting” — one Pima and one Acala — waiting to see what the weather will do and what the Pima price is at planting.
Egypt and China are the biggest competitors for ELS business in export with the U.S. Other world Pima producers are Israel, CIS, Brazil and Australia.
China is an ELS newcomer, producing 80,000 tons of long staple cotton last season. Elder said it had hoped to produce 100,000 tons. China's fiber quality is not equal to the U.S. and Egypt, but China has as enormous potential to increase ELS production.
China has also emerged as a major buyer of U.S. Pima, buying 60,000 bales yearly the past two seasons, according to Glaspey. China is currently second only to Pakistan as an export market for U.S. Pima, up from fifth place only a year ago.
China's entry into the ELS market will have the same impact as the most populace nation in the world has on upland cotton — price discovery — most likely to lower prices,” said Glaspey.
China now consumes and produces 25 percent to 30 percent of the world's cotton production and has an enormous impact on world market.
Demand is growing for ELS cottons worldwide, faster than upland. The Supima Association has had an aggressive, successful market promotion program for several years.
Glaspey said SJV cotton producers are “desperately” looking for an alternative to differentiate SJV cotton from the rest of the world and increasing Pima demand could provide that difference with expanded SJV acreage.
SJV Acala cotton has a worldwide reputation for quality that commands a premium. However, the quality gap between Acala and other uplands is closing with cottons from Australia, CIS, Brazil, South Africa, and even in the U.S., said Glaspey.
California cotton costs more to produce than anywhere else in the world because of the high price for irrigation water and state regulations. And, Glaspey said producers are concerned that federal market support for uplands may be reduced. There is no direct payment for Pima. However, there is a federal loan program and a market enhancement Step 2 program.
Pima ‘fit the bill’
Expanded SJV Pima production, said Glaspey, could “fit the bill” in differentiating the valley from other parts of the world and increase farmer income to cover added costs. SJV producers are “very willing trading partners” who respond quickly to demand and price.
Until recently, California Pima acreage had been dominated by Arizona-developed varieties. Elder said that is changing with California-bred varieties. This he said is narrowing the yield gap between lower-yielding Pima and higher yielding Acala. In some areas Pima now outyields Acala.
Along with improved agronomics, these new varieties have longer, strong, more uniform and “less neppy” fibers, according to Elder. The last improvement is opening up SJV Pima to the 100-count yarn fine shirting market.
Although there is more world competition in the ELS market, Sullivan said the San Joaquin Valley will always hold a “strategic advantage” because its environment is ideal for producing high yielding, consistent, high-quality Pima.
“U.S. Pima is a premium quality fiber that almost sells itself,” said Burch. “It's fun to sell it is so good.”
Burch is “very upbeat” about Pima this year.
“It was a short crop this year and demand has outstripped supply. The price is up dramatically,” he said.
Burch will be a member of a Supima Association trade delegation to China, Japan and Korea this month to promote U.S. Pima. It is the first trade delegation of the U.S. Pima industry every to visit China.