July 18, 2002

4 Min Read

“The U.S. textile industry has always been a steady customer for U.S. cotton. A decline in the textile industry means that steady customer is gone, and now the U.S. cotton grower is more exposed to the vagaries of the world market,” says Darren Hudson, agricultural economist at Mississippi State University in Starkville, Miss.

While it is not absolutely essential that the U.S. textile industry be viable for the U.S. cotton grower to remain in business, he says, it is certainly more favorable to have that steady customer than to rely solely on the world market.

Mark Lange, vice president of policy analysis and program coordinator for the National Cotton Council in Memphis agrees, saying: “There is a much greater degree of uncertainty in the marketplace without a strong domestic textile industry.

“From the standpoint of price discovery on the New York Cotton Exchange, a cotton market with exports of 11 million bales and mill use at 7.5 million bales is an entirely different market than one with mills using 11 million bales and exports using 7.5 million bales,” he says.

“I’m not sure whether it equates to a difference of a nickel or a dime per pound of cotton, but I think it means a significant improvement in price if you were simply able to flip those numbers.”

The reason, he says, is there is a much greater confidence on the part of all participants in the market when you can realistically expect a certain volume level. “When mills are using 11 million bales of cotton, you have confidence that next year you’ll be able to do that again. The ability of the United States to export 11 million bales of cotton year in and year out doesn’t produce the same confidence level in the market.”

Can cotton exports be maintained at current levels? The answer, Lange says, is a definite maybe. “We probably can continue to push 11 million bales of cotton into the export market, but at what price? It is worth something very significant to have a strong textile industry to underline price support. The U.S. market fundamentally trades at a lower value when the predominant portion of your product is going to the export market. It’s just a far more uncertain world out there.”

Annualized consumption in the U.S. mill industry dropped in December 2001 to 7 million bales. It has since risen slightly, with annualized domestic mill use currently running somewhere around 7.8 or 7.9 million bales.

Lange says the consensus in the industry is that domestic mill use will hover somewhere between about 7.7 million bales and 8.1 million bales in the next year or so

According to a report by Mississippi State University economists Darren Hudson and Stan Spurlock, titled “Impacts of a declining textile and apparel industry in Mississippi and the United States,” exports of textiles have increased since 1988. However, imports of finished textile products have far outpaced exports.

“The textile industry has undergone tremendous adjustment in recent years. Once a vehicle for development, the textile industry has witnessed a rapid relative decline,” Hudson and Spurlock say. “The growth in textile exports has been focused in the areas of semi-processed yarns and fabrics, while apparel cutting, sewing, and finishing have been in decline. By contrast, import growth has been in finished goods.”

“In 1999, the apparel sector had an industry output of $1.4 billion and employed 14,240 people in Mississippi alone. Across the United States, the textile business had an industry output of $53.2 billion and employed 510,523 people,” the Mississippi economists report.

A complete departure of the U.S. textile industry, Hudson and Spurlock say, would result in a $81.4 billion dollar loss in total output to the United States and the loss of about 2.8 million jobs. In addition, this change would result in a decrease of about $25 billion in federal tax revenue, and about $12 billion in state and local tax revenue.

“Trade agreements such as NAFTA and the phase-out of the Multi-Fiber Arrangements in the World Trade Organization have led to the labor intensive portions of the apparel production system gravitating to countries with relatively abundant labor supplies, such as Mexico and Honduras,” Hudson says.

“Although these adjustments are arguably inevitable in the current economic environment, gauging the economic impacts of departure of these industries on individual states and the nation are important for policy-makers and businesses.”

e-mail: [email protected]

Subscribe to receive top agriculture news
Be informed daily with these free e-newsletters

You May Also Like