The 2004 U.S. cotton crop was one of the best ever in terms of white grade and micronaire. But the average fiber length of the crop did not measure up in the eyes of many end-users.
And now there is a concern that if U.S. cotton producers keep producing low-staple cotton for the export market, their cotton will sell only when prices drop to the point where it's economical for foreign mills to use it.
This problem did not exist five years ago, noted Mike Stevens, Swiss Financial Services. “For 40 years, we supplied our domestic mills with the type of cotton that our contract called for. That time has passed. Our domestic mills are in a decline and will probably never come close to where they were five years ago. And now the cotton grown for the contract — 33 and 34 staple — is in oversupply.
At the same time, the new world market is ramping up its spinning technology and calling for a longer fiber of 35 and 36 staple. “The 33s and 34s have gone begging and found a home in the futures market that gives a premium to the middlings and strict middlings at 34 staple.”
The discrepancy between what the world wants and what U.S. growers are encouraged to grow “is really weighing on this contract.”
Doddridge, Ark., scientist, cotton producer and ginner Hal Lewis agrees that the cotton producer's primary interest in quality today is in trying to avoid one of the CCC loan schedule's many quality-related discounts. Meanwhile, the schedule's scarce number of premiums means “you sure aren't going to get any money for quality.”
Cotton producers “all speak a common language,” says Lewis. “It's called money. And if you put the money there, we'll grow it. We don't do this for fun.”
One problem is that not everybody is on the same page when it comes to rewarding quality. On April 15, spot market quotation for the south Delta was 59.90 cents for a 41-4 cotton with a staple length of 36, compared to 58.65 cents for the same cotton with a staple length of 34. The market seems much more interested in color grade, where spot prices can range as much as 10 cents from high to low.
Many in the cotton industry touted the quality of the 2003 U.S cotton crop. Not Lewis. “When I look at the data from the classing office, it says the quality isn't worth a damn.”
According to reports from the Agricultural Marketing Service, it appears that most of the 2003 crop will fall below 35 staple.
As of the end of February, average staple for the 2003 crop exceeded 35 at only three classing offices; Phoenix, Visalia and Corpus Christi. In Phoenix, 80 percent of all cotton classed was at 35 or higher; Visalia, 98.6 percent was 35 or higher; and Corpus Christi, 71.6 percent was 35 or higher.
The classing offices with the highest percentage of cotton at a staple length of 34 and below were Lubbock, at 78.5 percent; Macon, 63.9 percent; Abilene, 62.4 percent, and Birmingham, 58 percent.
Figures are not complete for the 2003 crop, but staple should be a little higher than 2002's U.S. average of 34.3. As of the end of February, staple length had increased or stayed the same as 2002 for all U.S. classing offices except Memphis, which dropped from an average of 34.5 to 34.2.
Katie Van Winkle, data analyst, fiber quality, at Cotton Incorporated, believes U.S. cotton breeders are making improvements in fiber quality, after lagging behind in the late 1990s, as new technologies were genetically engineered into existing lines.
“Micronaire has also trended upward, and we're finally getting over the hump in getting that back down. Meanwhile the strength of U.S. cotton has shown consistent improvement every year.”
But staple length, on average, has a long way to go, according to Van Winkle, who says the goal for average staple should be 36. Van Winkle also mentioned short fiber content and uniformity as two distinct measurements “that give an indication of how uniform length is and how processing will run. However, USDA does not report short fiber content on the bale.”
Van Winkle adds that low- and medium-quality cotton is still very desirable cotton under certain circumstances. “There are mills that will buy our cotton at the quality we have now, and they're happy to get it at a discount. That pool is not a huge pool. We can't grow 18 million bales of it. In general the international market prefers a longer staple, lower mike and higher strength.”
Van Winkle said that seed breeders with private companies and those with the cotton breeding program at Cotton Incorporated are fully aware of the need for higher staple. But growers must be compelled to purchase new varieties with long staple, meaning they must yield as well as or better than shorter staple varieties and/or pay off with higher quality.
Changes in the CCC loan chart to award premiums to growers for high staple are also needed. O.A. Cleveland, professor emeritus, Mississippi State University, noted, “The CCC loan schedule is telling us we need to grow discounted cotton. With two of three bales now going overseas, that's got to change. It's going to be difficult from a tradition standpoint, but that's exactly where we're headed. We've got to step out and take a leadership role and get that done.”
When asked when the cotton industry needs to raise its average staple, Van Winkle thought a moment, then said, “Yesterday. If foreign mills can't get the quality cotton they want from us, they will go somewhere else.”
Cotton producers are also aware of the increasing precariousness of the export market. “In five years, we have gone from consuming two-thirds of our cotton here and exporting one-third to consuming one-third and exporting two-thirds. We're dependent on these exports to bail us out right now,” said Marianna, Ark., cotton producer and ginner Larry McClendon.
“But within every country that we sell to, there is an inherent desire in that country to be self-sufficient in food and clothing. In the back of their minds they are saying, ‘I'm going to buy this cotton today, but in two to three years, we're not going to be doing this.’”
Senath, Mo., cotton producer Charles Parker is concerned enough about longer staple length requirements of the export market that he is planting the bulk of his 4,000 acres of cotton this year in varieties which foreign mills have identified as having desirable quality. At one gin in 2003, these varieties produced at staple length of 36.5 plus; strength, 31.7; and mike, 4.2.
“I don't want to grow the discount-type cottons,” Parker said. “I think you're better off if you have something that is more desirable. I think the whole industry sees that this is the way it's going. And to stay in business, that's what we've got to do.”