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India making big inroads into Chinese cotton market

If China imported 17 million bales of cotton in the 2005-06 marketing year, and U.S. producers supplied 9 million of those, where did the other 8 million bales come from?

It's a good bet that a fair number were grown in India, say officials with Cotton Council International, the export promotion arm of the National Cotton Council, who spoke at the NCC's Beltwide Cotton Conferences in New Orleans last month.

“With the help of Bt cotton, cotton farmers in India have doubled their yields in the last three years,” said David Burns, Cotton Council International's president. “We will have to work hard to stay competitive with them.”

Until 2004, India's cotton farmers were producing about 300 pounds of lint per acre. With the introduction of Bt cotton, India's yield average has increased from 400 to 500 and now 600 pounds of lint per acre. Total production rose from 13 million bales in 2003 to more than 19 million bales last season.

“India has the largest cotton area in the world — about 22 million acres,” said Allen Terhaar, CCI's executive director. “The problem has been that yields had stagnated around 300 pounds until they began growing Bt varieties.”

Unlike China's, India's textile mill sector has not been able to keep pace with its exploding production sector, said Burns, a cotton producer from Laurel Hill, N.C. As a result, India's exports have surged, rising from a miniscule amount in 2003-04 to an expected 4.25 million bales in the 2006-07 marketing year.

China's purchases of Indian cotton have jumped from 210,000 bales in 2004-05 to 2.25 million bales through June 20006. With those sales to China and to countries like Taiwan, Thailand and Turkey, India has become the second largest exporter of cotton behind the United States.

“Indian merchants are in China all the time, trying to sell cotton,” said Terhaar. “Until India can increase consumption by its mills, it will be strong competition for that market.”

India's exports are one of the reasons U.S. shipments have languished below last year, when the United States shipped a record 18.04 million bales of cotton to foreign markets. Much of the decline to 15.7 million bales being forecast by USDA for 2006-07 is due to a projected drop in Chinese imports.

“The primary reason for the lack of U.S. export sales to China is not due to the bumper crop China had in 2006, but rather to the bumper crop India had in 2006,” said O.A. Cleveland, professor emeritus at Mississippi State University and a columnist for the Web site.

“India has always been a sleeping giant with respect to cotton yields. No longer is it that giant sleeping. Indian textile capacity will catch up with increasing local production. In the meantime, India will be a very aggressive exporter of excellent quality cotton, and the Chinese mills will scoop up as much as they can.”

Economic conditions are improving in India, which should help increase purchases of domestic textile products.

“Five years ago, we were told, there were no shopping malls in India,” said Burns. “Today there are more than 600. So economic conditions are improving, but it is taking their textile mill sector some time to catch up.”

Cotton Council International has been working with textile mill officials in India and other Far Eastern countries to try to help increase sales of cotton-rich garments and other textile products to their consumers.

“Cotton Council International and Cotton Incorporated have shown consumers will respond to advertising,” said Burns. “What we've found is that we need to take the show on the road, so to speak, to these international markets. The hearts and minds of young consumers are where the real battle is today.”

Burns and Terhaar showed a 13-minute video outlining the strategies and tactics Cotton Council International is employing to try to win that battle. Working in partnership with Cotton Incorporated and the U.S. industry, CCI has intensified its promotion of U.S. cotton in the 50 markets where CCI now operates.

Agriculture Secretary Mike Johanns announced at the Beltwide Conferences that Cotton Council International would receive nearly $13 million of USDA's market access promotion funds to help sell more cotton abroad. The CCI allocation was the largest of the $100 million in total MAP funding for 2007.

“We believe that a rising tide raises all ships,” said Burns. “If we could help India increase its consumption by 10 million to 12 million bales and increase China's domestic consumption by a similar amount, it could really make a difference.”

Burns said India has been pumping millions of dollars into modernizing its gins and transportation infrastructure to help process and move its cotton, but very little into promotion.

“India currently is exporting about 5 million bales of cotton and importing 1 million bales because they still need high quality cotton for some uses,” he said. “It's obvious they will continue to produce more cotton; the question is whether they will use more.

“One of the problems is that farmers are so fragmented that if anyone is going to do market promotion, it almost has to be the government. The synthetic fiber industry is able to promote its products, but farmers are having difficulty with theirs.”

“For the Indians, the real problem is with fiber quality,” said Terhaar. “They are continuing to work on that and, to them, that's promotion. We need to convince them they need to do more to promote cotton consumption in their country.”

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