Each season the story of American Pima cotton is starting to sound like a broken record: one record broken after another.
And it is music to the ears of California, Arizona, New Mexico and Far West Texas producers who grow the Extra Long Staple (ELS) Pima cotton, an American-grown fiber crop that was not even a blip on the world ELS radar screen just two decades back. Today U.S. American Pima cotton is the world leader in export premium.
Since the mid-1980s American Pima production and sales have taken a meteoric rise like the launch of a Saturn rocket.
American ELS production has gone from less than 100,000 bales in 1983 to roughly 750,000 bales the last two seasons. USDA is projecting a third consecutive 700,000-bale plus crop this year. However, Supima believes the government is being too generous, and the crop will be about 25,000 bales shorter — just shy of 700,000 — due to weather and insect problems in the San Joaquin Valley.
Regardless of which figure examined, U.S. cotton growers and merchants are producing and marketing more Pima annually than anyone imagined just a few years back. And the rocket ride is not over yet.
At the Supima's 51st annual meeting recently in Coalinga, Calif., the magic number of 1 million bales of annual U.S. production and sales was mentioned as not only a conceivable, but an achievable next plateau for the Cinderella story of the American cotton industry.
SJV big benefactor
There seems to be no stopping it, and the biggest benefactor will likely be California's San Joaquin Valley, which is in the driver's seat of Pima's magical carriage, producing more than 90 percent of the U.S. Pima crop each season.
Pima has become the future SJV cotton. What is remarkable about that is that in 1987, California accounted for only 1 percent of the U.S. Pima acreage.
Pima has become such a remarkable success that the industry initiated a revision of a federally funded sale enhancement Step 2-like ELS cotton competitiveness payment program to reduce the amount of government money paid to support marketing of American ELS cotton. This comes at a time when the upland cotton industry is fighting for its economic support in Congress.
Supima chairman Jim Hansen of Corcoran, Calif., speaking at the annual meeting, detailed a breathtaking manifest of the past 12 months:
Production of 746,000 bales from the 2004/05 crop, a 72 percent increase from the previous year's crop.
Record U.S. consumption of 850,000 bales, a 15 percent increase that has virtually wiped out any carryover into this marketing year.
790,000 bales of U.S. Pima exports last season, a 25 percent increase.
One of the biggest factors propelling this rocket ride is the Supima Association's licensing program, which grants textile mills the right to use the association's highly regarded Supima label, only if the product is 100 percent Pima. Jesse Curlee, Supima president, said 80 additional licensees signed up to use the Supima label last year, bringing the total number of licensees to 300 textile mills worldwide.
Supima is a voluntary program supported by grower assessment of $3 per bale. Grower support is now about 90 percent, the highest is has ever been.
“It should be 100 percent. There is no excuse for not paying to support Supima,” said Hansen.
The big growth in the association's licensing program comes because premium high quality cotton products made with ELS cotton is one of the most rapidly growing segments of the textile industry. ELS cottons also are blended with other lesser strength upland cottons to improve overall fiber quality and strength.
Licensees have been paying $1,000 annually. Supima increased that by $5,000 this year and is encountering little resistance. And the association is setting up an auditing procedure to make sure licensees are using 100 percent American Pima.
With continuing strong demand, no carryover and a crop shorter than last year, the 2005 crop should command strong prices in the $1.20 per pound range to growers. Pima in the San Joaquin Valley will yield equal to the valley's traditional premium, Acala upland cottons with little additional growing expenses. However, it cost more to roller gin Pima, but that is not enough to deter growers from planting or expanding Pima acreage.
Curlee said the spectacular increase in American Pima demand has been bolstered by improved commercial Pima varieties with improved fiber and higher yields. “Improving farming and harvesting practices now allow American Pima to compete with hand-picked Egyptian ELS cottons,” he explained.
Curlee says it is not unrealistic to expect American Pima production to reach 1 million bales in the near future. “The capacity is certainly there in California” to achieve what once would have been considered a fairy tale number.
The 1 million bales will not be achieved this season, however, according to Marc Lewkowitz, Supima executive vice president. USDA is forecasting 725,000 bales on increased acreage of 261,000 acres this season.
However, Supima disagrees with the California yield estimate. USDA is forecasting 226,000 acres in the San Joaquin Valley with a projected yield of 1,381 pounds per acres. This is off the incredible record of 1,532 pounds produced in ideal growing conditions last season. The USDA yield estimate for this year's crop that was plagued by a poor start and insect pressure is just five pounds off the previous record set in 2002. Supima does not believe grower yields will average that much.
Lewkowitz said the California Pink Bollworm program pegs SJV acreage at 231,000 acres. However, he said Supima believes average yield will be more like 1,250 pounds.
“This would result in a production figure of about 600,000 bales in California and 675,000 total in the U.S. Either way, supplies will be tight in 2005/06,” proclaimed Lewkowitz.
India, Pakistan and China are the biggest buyers of American Pima, accounting for 50 percent of all exported U.S. crop. American Pima now accounts for 45 percent of the world's exported ELS cotton.
China is big buyer
Peru has become an integral consumer of American Pima. It imports more American Pima (50,000 bales) than it produces of its own Peruvian Pima. Turkey has doubled its consumption and Taiwan has elevated its consumption to almost 60,000 bales after a few years of declining consumption.
While Pakistan is the single largest buyer of American Pima, China has “really come alive” as an American Pima export market in the past five years. “China values the American Pima for its consistent quality, lack of contamination, and the value that the Supima brand brings,” said Lewkowitz.
China is trying to produce ELS cottons, but quality is still far inferior to American Pima and that is not expected to change.
Chinese textile mill expansion is rampant. “A number of mills (in China and South Asia) are talking in millions of spindles instead of hundreds of thousands of spindles,” said Lewkowitz.
On a recent ELS trade mission to China, merchants discovered mills using American Pima they did not know even existed.
World ELS offtake has exceeded production on an average of 700,000 bales and drawn down on stocks over the last three years has averaged over 350,000 bales, said Lewkowitz.
The Pima story became too much of a good thing last year when the industry's Step 2-like program went haywire, resulting in federal cotton competitiveness payments of up to 83 cents per pound. It was costing the federal government three times what was budgeted. This was identified as a “program weakness” that allowed high prices and high payments to influence each other with no market-like self-correcting mechanism.
The industry, through the Supima Association, negotiated a revision in the program. The result will be Step 2 like payments of likely no more than 20 cents per pound, if at all, according to Lewkowitz.