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Corn+Soybean Digest

The China Syndrome

The Chinese are demanding more out of agriculture, and it's not just better rice. They want nicer shirts and trousers. They want higher-quality cotton and will likely rely more and more on U.S. producers for it.

The same goes for India, Pakistan and many other major cotton-producing countries.

Since China's call for either more or less imported cotton can instantly alter U.S. and world cotton prices, cotton economists, merchants and others agree that this “China syndrome” must be taken seriously by the entire U.S. industry.

“You have to look at China,” says Carl Anderson, Texas A&M cotton marketing specialist. “Being the world's largest producer and consumer, China carries big weight in the world cotton market. It certainly influences our exports.”

China is expected to produce 21 million bales this year. But it will consume about 27 million, according to mega-cotton-merchant Bill Dunavant at the Beltwide Cotton Conference. That's 6 million bales short. And Dunavant believes the U.S. will fill orders for 1.6 million of those, up from previous projections of 1.2 million in U.S. sales to China.

That's great news for American growers, because according to Anderson, even a 1 million-bale increase in purchases from China can increase U.S. prices by 5¢/lb.

But signs indicate that the world's most populated country no longer wants to settle for lower-grade fiber cotton. It wants longer staple and fiber length and stronger fiber for its mills. There are even reports that China intends to use more stringent quality-testing measures.

The U.S. industry is taking steps to increase quality. And growers are enjoying better prices per pound for producing higher-quality lint.

Mark Nichols is one of them, so he can't be accused of not practicing what he preaches. He not only farms, but is chairman of the Cotton Inc. agricultural research committee. As a progressive producer, he plants varieties and uses cultural practices that yield the quality of cotton that picky buyers are after.

Nichols farms in Altus, OK, with his brother-in-law, Bobby King, and nephew, Brian Nichols. They regularly plant about 2,500 acres of cotton, most of which are irrigated. “We primarily grow continuous cotton and yield 2-2¼ bales/acre and up to 3 bales/acre,” he says. “Because of the (low cash) price of cotton, we plant picker varieties that are longer in staple length. These varieties are Roundup Ready and bred to produce better quality.

“Since they are Roundup Ready, we have learned to better control our production practices with better-timed herbicide applications. There is very little foreign matter, which means a better price at the gin.”

Nichol's cotton brought about 4¢/lb above the 52¢ government loan price for 2002. Poorer-quality cotton, especially that which carries above a 5-micronaire rating, will often spell discounts below the 52¢ level. He credits efforts made by Cotton Inc. funding and other programs to generate better-quality varieties from commercial seed companies.

“Historically, American cotton has been some of the best grown in the world. We have to make sure that continues to be the case,” says Nichols, noting that the Cotton, Inc. research budget is more than $3.48 million this year, along with state-supported research of $3.1 million.

Anderson says the U.S. “got behind” in its cotton breeding programs. “Right now, there are lots of breeding programs that are struggling,” he says. “But that appears to be changing. Every year we are seeing more varieties with potential for higher quality, not just higher yields.

“FiberMax (now part of the Bayer CropScience portfolio) has been a leader in producing high-yielding, high-quality varieties. It has the rest of the (commercial seed) breeding programs refocused on higher yield and higher quality together,” says Anderson. “We have to have higher quality, with micronaire in the 4.3 range, to compete in the international market.”

Variety trials across the Cotton Belt are showing higher quality in new seed lines. Delta & Pine Land, Paymaster, Stoneville, Syngenta NK, All-Tex and other companies all have seen better results in university variety trails. Varieties available with stacked genes should be even more popular with growers this year.

Growers in Georgia are among those taking additional steps to determine which varieties work best when processed. The Georgia Cotton Commission is cooperating with the establishment of a “micro gin” at Tifton. Richey Seaton, commission executive director, says the gin will hopefully be completed in time to analyze production from variety trials as well as germplasm still under study this fall.

The commission has been working to improve quality for several years. Last year's poor Southeastern cotton production, caused primarily by summer drought and the wet fall, has growers even more anxious to find answers to quality and yield questions.

“We know the industry concerns about quality and are determined to have a micro (test) gin that operates as close to the commercial ginning process as possible,” says Seaton, noting that it's important for research-grown cotton to undergo a ginning process equal to commercial varieties at a commercial gin. “We will look at fiber quality and the consistency of varieties in the ginning process.”

Dunavant indicates that China's better technology will put pressure on other cotton-buying countries. He anticipates that over the next three years, China's cotton consumption could increase from 27 million bales to 29 million.

That can only mean the demand for higher-quality cotton will increase. And that spells profits for U.S. growers able to produce cotton with 13/16" staple length as well as high fiber strength and low micronaire.

“Don't plant any seed variety below 25 grams/tex (in strength),” warns Dunavant. Cotton that low in strength will fall below standards set by the New York Cotton Exchange.

It would produce a 10¢/lb discount at a time when growers are striving for higher quality to take on the “China syndrome.”

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