The reason, says David Camp, director of domestic sales for the Staplcotn producer cooperative in Greenwood, Miss., is an abundance of high micronaire, short staple cotton, combined with a declining domestic textile industry.
“We’ve seen a very noticeable upward trend in discounts in recent years,” says Camp, who spoke at a meeting of Delta Council’s cotton ginning and quality improvement committee in Stoneville.
The average cotton grower, he says, is producing, on average, a crop that’s discounted 100 points more per pound than it was 10 years ago. “Our best year in recent memory was 1995 which averaged base grade, and our worst year was 1991 with a 400-point average discount under base grade.
While these are quality losses realized in marketing the Staplcotn crop, Camp says they are representative of the entire Memphis/Eastern cotton market. In fact, Camp estimates quality discounts have cost Mid-South cotton growers alone more than $302 million since 1996. That total does not include what was for many, a disastrous 2001 cotton crop.
A closer look at the actual change in cotton quality parameters since 1987, and how these have affected market prices, finds that discounts for high micronaire, short staple, and low strength, have gone from $40 million to almost $60 million based on individual year averages.
Camp says he began seeing quality discounts trend skyward in about 1992. “We’ve seen first hand how fiber quality has affected cotton marketing. With the decline of the U.S. textile industry you have to find additional export markets. We are still finding a home for the cotton, but it’s not as good a home because the price point is lower.”
To make matters worse, he says, the fiber qualities being demanded by the domestic textile industry are becoming more stringent each year. “Requirements have changed, with mills tightening micronaire and staple requirements to 4.4 maximum average and an inch and a 3/32 minimum or minimum average.”
The general domestic mill contract specifies a micronaire range of 3.5 to 4.9 with an average between 4.0 and 4.4. “Higher micronaire levels make it difficult to fulfill contracts entered into at or before planting, and the Memphis/Eastern micronaire average, as a whole, is higher than the national average,” Camp says.
As fiber quality decreases, and growers produce more of this lower quality lint, the discount trend has gone up. However, Camp believes micronaire discounts will decrease somewhat in the next few years because the export market looks more at price than at quality, moderating the discounts somewhat for micronaire and staple.
Staple grades began trending down in 1995, and then dropped off “horribly” in the late 1990s, Camp says. In some of those interim years, Memphis/Eastern staple lengths have fallen off in amounts greater than the average in other regions combined.
“Short staple lengths make it very difficult to meet the averages required in mill contracts,” he says. “In the last several years staple length has turned down and discounts have turned up substantially and these cheaper prices are allowing exports to expand somewhat.”
In comparison, while strength measures have slowly been decreasing, or leveling out, since the mid-1990s, its rate of drop is not as drastic as it is for other fiber quality characteristics such as micronaire and staple.
“Strength discounts were almost nonexistent until recent years, and then everything jumped up. The one thing the export market needs is strength of fiber to run the shorter fiber and micronaire of what we would call discounted cotton,” Camp says. “Strength is extremely critical in the domestic market also because the textile machinery in the domestic market uses state-of-the-art technology, which puts higher amounts of stress on the fiber, demanding higher strength requirements.”
The good news, according to Camp, is U.S. growers will continue to find a market for their cotton fiber through exports. The bad news, though, is the export market is looking for slightly lower quality fiber it can buy at a discounted price.