The current shortage of high-quality cotton in the world begs two questions: Can Mid-South cotton growers produce such quality? Can they get paid for it?
The answer is a qualified yes to both, says one expert.
According to a recent report by the International Cotton Advisory Council, the drop in Australian cotton production, a poor crop in Zimbabwe and delayed shipments from the African Franc zone has created the shortage of high-quality cotton. This situation will prevail until the new crop becomes available, says ICAC.
Foreign mills will be looking for high-quality cotton early in the harvest season and they'll be willing to pay a premium for it, roughly 4 to 7 cents. The cotton has to have a staple of 1-1/8 inch and a strength of 30 and above.
A grower can capture the premium “by identifying that cotton to the merchant,” according to O.A. Cleveland, professor emeritus, Mississippi State University. “If you are marketing this cotton by September, you will have to identify it as a high-quality cotton. You may have to go so far as to produce records as to seed purchases.”
The grower can enhance his chances if the variety is FiberMax, noted Cleveland. While endorsing a specific brand is not Cleveland's intent, the brand does appear to have established a reputation in foreign mills. In addition, certain FM varieties are early-maturing and could be harvested in time to capture the premium.
It should be noted that other Mid-South brands are starting to deliver high yield/high quality, too — D&PL's DP 555 BG/RR and Stoneville's ST 5599BR.
It's also important that quality improvements in cotton varieties are coming just as the majority of U.S. raw cotton consumption is shifting from the domestic market to the export market — in the process raising the bar on quality.
The ICAC also reported world cotton production in 2002-03 is estimated at about 19 million tons, down 2.5 million tons (12 percent) from the record reached in 2001-02. This is the smallest crop in five seasons.
ICAC says world consumption is expected to outpace production by 1.8 million tons in 2002-03, causing world ending stocks to shrink to 8.5 million tons, the lowest in eight seasons. In addition to the tighter world supply, net imports by China are soaring from 27,000 tons in 2001-02 to an estimated 300,000 tons this season, the highest since 1997-98.
As a result of this, ICAC says, the Cotlook A Index rose 10 cents (20 percent) between August 2002 and February 2003 to almost 60 cents a pound, a two-year high.
World exports are expected to decline by some 150,000 tons from a record of 6.5 million tons in 2001-02, according to the ICAC. U.S. export shipments are expected to decline slightly to 2.3 million tons in 200203, 36 percent of the world total.
The ICAC also noted that higher prices will boost world production and stifle the growth rate of world consumption next season. ICAC projects an increase in world production of 1.9 million tons, while mill use is forecast up by 300,000 tons in 2003-04.
World ending stocks are projected to decline by 250,000 tons, while net imports by China are projected to double, reaching 600,000 tons. According to ICAC, these fundamentals suggest that the Cotlook A Index will average 66 cents per pound in 2003-04.