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Cotton industry leaders still bullish on prices

Cotton industry leaders still bullish on prices
The average high price predicted by leaders of the Southeast cotton industry, based on mid-April conditions is $1.85 per pound. Perhaps more optimistic for growers, the average low prices, according to the group, will be 85 cents per pound.

Cotton buyers, shippers and warehouse managers attending the recent 88th annual meeting of the Atlantic Cotton Association were asked to estimate the high and low price of cotton over the 2011-2012 cotton production/marketing season.

Estimates were texted to Association President Robert Buckles during the meeting and generated a lively interaction. The end result should be good news for Southeastern cotton growers.

The average high price predicted by leaders of the Southeast cotton industry, based on mid-April conditions is $1.85 per pound. Perhaps more optimistic for growers, the average low prices, according to the group, will be 85 cents per pound. Privately, several voting members noted their price estimates were probably too conservative — on the low side.

Several speakers at the meeting shared optimism up and down the cotton industry.

Mike Hubbard, vice-president of the National Council of Textile Organizations reported to the group that the U.S. textile industry is alive and once again growing. Three new cotton mills began operation in 2010 and several others are in the planning stages, he says.

“Parkdale Mills hosted a group of Georgia cotton farmers recently at their newly refurbished mill in South Carolina. Waiting to go inside, some of the growers commented on how cotton mills hadn’t changed much over the years. When they got inside it was a whole different story. These new mills are high tech and ultra modern,” Hubbard says.

China gets most of the headlines for textile production, but there is real growth in the industry in Central America and 70-80 percent of the clothes made there are made from U.S.-grown cotton, he adds.

“When you look on the label and it says, ‘Made in Honduras’, that’s not a bad thing,” Hubbard contends. It’s made in America — central America and it’s a good bet it’s made from high quality North America cotton,” Hubbard says.

U.S. textile industry making gains

The U.S. textile industry made some significant gains in 2010. New production generated new domestic demand for cotton. U.S. textile plants reversed a long ongoing trend of domestic use, kicking up cotton use by over 300,000 bales in 2010.

“A driving question we frequently get asked is “Can we meet the demand for uniforms for U.S. armed forces with U.S. grown, U.S. spun cotton. The answer is always yes, but last year we were much more confident with our ‘yes’, Hubbard adds.

Cotton warehouses need to work together to continue to give U.S. grown cotton an edge over foreign competitors, says Coalter Paxton, president of the Cotton Warehouse Association of America (CWAA).

Cotton warehouse operations have had to be extremely flexible over the past few years, going from historic low supplies in 2009 to a 50 percent increase in production last year. It is a testament to warehouse owners and managers that they maintained the infrastructure to handle 12 million acres of cotton production last year, Paxton stresses.

CWAA is a national trade association representing a diverse, but unified, group of cotton warehouse operators from the Carolinas to California. Membership includes independent, gin, merchant, and transit warehouses.

The upcoming farm bill will be critical to all factions of the cotton industry, Paxton says. “It is important that we work hard to work together,” he adds.

The cotton industry is coming off a year in which commodity prices were high, much like back in 1996. At that time, the Republican-elected Congress was seeking big budget cuts, much like the Democrats are seeking today. The big difference, Paxton stresses is that our government’s fiscal house is in much bigger disarray going into the 2012 farm bill year than it was back in 1996.

Industry is predicting more than 13 million acres of cotton will be planted in 2011. With a good production year, that much cotton will stress the entire cotton system from the time farmers put seed in the ground until the finished product reaches the textile mill, he adds.

Paxton says key issues for the cotton industry will include:

• Timeliness of pickup of cotton from warehouses

• Quality and quantity of shipping options;

• Structure of warehouse charges and tariffs;

• Expanded contract delivery points;

• The way bales are blocked and ordered out;

• The transparency of basis charges.

“In the past 12 months we’ve shipped more cotton than anyone thought possible. Some issues related to timely pickup and delivery were paramount. Before that growers were pushed to deliver on contracts and expanding delivery points for growers were made clear,” Paxton says.

Infrastructure is strong

He contends the infrastructure of cotton in the U.S. is strong and is confident the business end of cotton will get the job done for what is expected to be one of the biggest crops in recent years.

Jordan Lee, president of the American Cotton Shippers Association told the group that customer satisfaction, regardless of the price of cotton, is critical to longevity of the U.S. cotton industry.

“We had a meeting at the Beltwide Cotton Conference back in January with a group of cotton producers and tried to educate them to the importance of warehouse performance and producer performance related to the risk cotton buyers and shippers are taking. We’ve never had this kind of volatility in the market, and most growers have never had to think much about it,” Lee says.

“I was very impressed by their reaction to what could happen if we can’t deliver on a contract. We are the intermediary between growers and the end users in China and other major textile producers in the world.

“Our four million bale domestic market can’t come close to using the cotton we produce and China, India, and other cotton producing countries around the world would love to take our place,” Lee adds.

Bringing cotton growers together with buyers, with textile industry leaders and even retail buyers is important, the cotton industry leader says. ‘The more we all know about how the entire industry works, the better we can be in working on the same page,” he adds.

“For example, all these parts of the industry can work together and it can all be undone by something as simple as a truck driver making his own schedule.

“We saw this several times last year. A load of cotton was due at the port in Charleston on a Friday and due to be picked up on Tuesday. The driver decides he can pick the load up on Thursday and still get to the port by Friday morning, that pushes the warehouse schedule back two days and affects how they receive cotton during that time period,” Lee explains.

“Keeping customers happy with high quality cotton delivered when the mill wants it is critical to us keeping our export business healthy,” he says.

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