Volatile cotton demand and declining profits for all segments point to the industry's continuing need for market-building, says J. Berrye Worsham, president and chief executive officer of Cotton Incorporated.
U.S. demand, at 36 pounds per capita, remains good. The rest of the world, however, fell from 7.2 pounds per capita to 5.8 in recent years.
“That drop is the equivalent of 10 million to 15 million bales of cotton. Cotton is strong in the United States, but unfortunately, not outside the United States. The United States is the only market in the world with a coordinated research and development and marketing effort for cotton,” Worsham says.
But even in the United States, profitability is elusive for nearly every part of the cotton industry, he told growers attending a recent tour of Cotton Incorporated's new world headquarters in Cary, N.C.
“The problem is not a question of consumer demand but of profitability, for growers, mills, and at the retail level. Our mission at Cotton Incorporated is to try to improve demand for and profitability of all cotton-marketing activities. We're going to continue to try to make at least the U.S. market less sensitive to synthetic fiber demand,” he says.
Much of Cotton Incorporated's research focuses on improving efficiency, along with markets. “Growers are trying to grow more efficiently, to increase the value of the seed. Textile mills continue to push for faster and faster processing speed. How do they produce fabrics and yarns and meet the demands of the market and have to do it on these new spinning frames?” he says.
Through the 1960s, a time when fiber demands increased rapidly, Worsham says, the cotton industry lost about half its market share. In 1970, Cotton Incorporated was created as a marketing and research arm of the industry. In the years since then, cotton steadily recouped its losses until it now has more than 60 percent of the U.S. fiber market.
“A greater feat will be maintaining that share,” Worsham says. “We need higher yields for our farmers and better fiber quality for our mills.”
He says Cotton Incorporated will be sponsoring seminars and workshops for farmers to introduce new computer programs to help them make management decisions.
While Cotton Incorporated continues international marketing efforts, it is closing its Basel, Switzerland, office due to dwindling mill capacity in Europe. The focus will be on more-promising markets in Mexico and Asia.
In an ever-more-competitive world, quality can be your only calling card, another speaker said.
“Market perceptions of quality influence how buyers select among competing suppliers. You are competing against your neighbors, other regions of the country, against Uzbekistan and Australia, and against Dupont and Wellman and the folks in the synthetic fiber industry,” says Mike Watson, Cotton Incorporated's senior director of fiber quality research.
At the farm level, poor quality often equals discounts. “We don't often get a chance to talk about premiums, but all too often we do get a chance to talk discounts. After yield, fiber quality has the most impact on your income of anything I can think of,” Watson says.
That's why Watson's Cary, N.C.-based textile services laboratory, touted as the world's best, focuses on quality issues.
“We're working on ways to find contaminants. We're doing trash and dirt analysis. In a business where there's a 1- to 2-percent margin, the amount of waste can be the difference between making money and losing it,” he says.
Watson notes that many farmers do a good job of producing quality cotton. “The long-term trend on neps is down, so overall that's moving in the right direction. The micronaire trend had been going up, overall. West Texas has the broadest distribution of micronaire,” he says.
Acreage trends could contribute to quality problems, however, he says. Cotton acreage has been dropping in California while Texas made erratic gains and North Carolina went up dramatically.
“Is that part of the quality thing we've been hearing about? Could be,” Watson says.
Another issue of concern: staple length. “It's been down over the past three years. The Southeast and Mid-South have been hammered on it. Texas is holding its own but over the last four years dropped off,” he says.
Fiber strength is a different matter, though. “Strength is genetically determined and the trend on it has been relatively flat over the last ten years,” Watson says.