Let's make the short leap to New Year's Day 2005: While you're dining on blackeyed peas for luck and overdosing on football games, the cotton world will be changing about you.

Why?

“The barbarians will be at the gates,” Mike Watson, vice president of fiber quality research for Cotton Incorporated, told members of the Southern Cotton Ginners Association at their summer conference at Lafayette, La.

“On that day, the quota walls will come tumbling down and your world is going to be different. It's an extremely important date for the U.S. cotton industry.”

Whenever U.S. cotton sales representatives call on foreign customers, he says, “Almost inevitably the conversation turns to ‘What can you do for me about quota?’ They tend to look at the United States as a big wall of quota that blocks their ability to put cotton and other textile products into this country. At the same time, U.S. mills see the quota wall as Swiss cheese, full of holes, with many ways for foreigners to circumvent quotas through transshipments, illegal shipments, etc.”

The main customer for U.S. cotton is now a foreign customer, Watson notes.

“They're the 800-pound gorilla in the world cotton market. Trade issues are changing the cotton customer, and the customer you sell to today is very different from the one you've been accustomed to.”

In 1997, he points out, the U.S. textile industry utilized over 11 million bales of American cotton and shipped 7.5 million overseas.

“Just a few years later, we're now selling only 6.3 million bales to U.S. textile mills — if we're lucky — and this year we'll sell nearly 14 million bales in the international market, with China the most important customer, followed by Mexico, Turkey, India, and Pakistan.”

The decline in U.S. mill purchases isn't because Americans don't prefer cotton, he says. “Per capita consumption is up and more cotton is being sold at retail in this country than ever before. But since 1998, North Carolina, our most important textile state, has lost fully half its textile manufacturing jobs. This reflects very closely your sales of cotton. Mills that remain are utilizing cotton, they're buying cotton, but there are only half as many to sell to.”

And that has had an impact on cotton price. “When production is about the same, domestic consumption continues downward, and foreign demand is not as great, it increases supply worldwide, and that affects price.”

Current projections are for less than 6 million bales of domestic consumption, Watson says, and international sales of a bit over 11 million. “It would be very hard to see more than 6 million bales of domestic consumption. The capacity is no longer there; it has been moved out of the country, and the people who had textile jobs are now working at Wal-Mart, if they're lucky.”

A constant in the highly competitive fiber world, he says, is man-made fibers.

“We should never, ever forget that this is our biggest competition. They don't have a crop season, they don't worry about weather, they can change their product at will. When you're the leader, as cotton is; when you've got a 60 percent share of the retail apparel market, you're the one they're coming after.”

And says Watson, they continue to try and position their products as more like cotton.

“You can go in a store and touch some of the polyester products and, until you look at the label, you'd think it's cotton. We have labeling laws in the United States, but many, many countries don't, and if the polyester folks can make the consumer think it's cotton, they may make a sale.

“The nylon people are after us, as well. A recent advertisement for Supplex says it's ‘the high-tech nylon that breathes and feels like cotton.’”

So, how does U.S. cotton compete in the face of such wide-ranging competition?

“The obvious way,” Watson says, “is good yield and productivity: better-yielding varieties, better methods of production, more efficiency at the gin. All of those count big. But yield and productivity aren't the answer if you're producing the wrong product.”

The U.S. cotton industry is no longer targeting one customer, he says. “They're all different, with different needs. And more and more, they're saying they want quality cotton.”

Quality, Watson says, “is what the customer says it is. It's not how much effort you've put into it, it's not how hard it is to grow or how carefully it's run through the gin — it's what the customer wants. The customer pays only for what is of use to them and gives them value.”

In the international market, he says, “the absolute minimum” is 35 staple, 28 grams per tex, 3.8 to 4.6 micronaire, and 8.2 length uniformity index. “As they move more to high-speed equipment, this is the minimum and is going to emerge as the benchmark.

“Color grade is more important in foreign markets than it traditionally has been domestically. They want 31 color and they complain if it's trashier than 3.0 leaf content.”


e-mail: hbrandon@primediabusiness.com