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Trade favors could hurt U.S. cotton

Cooperation with the United States in rooting terrorists out of neighboring Afghanistan could give Pakistan a bigger chunk of the U.S. textile market.

“We are concerned about trade favors (the U.S. government) might grant Pakistan,” William B. Dunavant III, told participants in a recent west Texas cotton marketing and flow meeting, sponsored by the Texas Cotton Shippers Association (TCSA) in Lubbock, Texas.

Dunavant, president of Dunavant Enterprises, Inc., in Memphis, Tenn., and first vice president of the American Cotton Shippers Association (ACSA), said Pakistan already is the number one producer of cheap textiles. Increasing the amount of textiles they can export into the country will limit how much U.S. cotton domestic mills will buy in an already shrinking market.

Dunavant said Uzbekistan, “one of the fastest growing textile markets in the world,” also may get favors for cooperation but will likely prefer military help.

Dunavant said the cotton industry faces other challenges. “We have a 9 million-bale carryover in the United States,” he said. “That's 53 percent stock-to-usage ratio, the highest since 1985. The ratio has averaged 27 percent for the past 16 years and could rise to near 60 percent by August 2002 if domestic consumption continues to fall.”

He said a meeting of 600 textile representatives in Liverpool recently “was extremely bearish,” and voiced concern about subsidies in the United States.

One of the biggest concerns among cotton shippers, he said, is default from mills.

“A drop from 60 cents a pound to 30 cents means customers are beginning to waver,” he said.

Default concerns, he said, are something “shippers let happen to themselves,” by not enforcing their own rules. “Shippers have to show unity and refuse to sell to buyers on the default list. Our worst enemy is that the default penalty has no teeth. We have no real means of punishing a shipper for selling to mills on the default list.”

Dunavant said domestic market woes continue. “Banks are now beginning to question domestic mills' receivables in regard to credibility as collateral,” he said. “Banks are nervous about the stability of the domestic textile market.”

Dunavant said a potential bright spot for U.S. cotton is the overseas market. “The USDA estimates exports at 9 million bales,” he said. “That would account for 33 percent of the world's exports; 26 percent is a traditional share. Those are lofty numbers, but we can achieve them. Cotton with quality will export,” he said.

He said India is an increasingly important customer, upping imports from 300,000 bales last year to 650,000 from the 2001 crop.

“India likes U.S. cotton,” Dunavant said. “They like the quality and the information they get from high volume instrumentation (HVI).”

He said India's crop yield and quality will be down. “They need American cotton,” he said.

e-mail: [email protected].

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