If the U.S. commodity market is a roller coaster ride at the fair, then keeping U.S. cotton competitive is a walk through the midway. There’s usually somebody looking to steal your shirt.
In a way, the latter is what happened to the U.S. domestic textile industry over the last decade. “There have been massive changes in the U.S. textile industry over the past few years” said Michael Watson, vice president, fiber competition, Cotton Incorporated, during a producer tour of Cotton Incorporated’s world headquarters in Cary, N.C. The tour included producers from California and Texas.
“At one time, our domestic industry was our best customer and bought most of our U.S. cotton. But we have seen the U.S. textile industry essentially move offshore, reducing U.S. cotton consumption from about 11.5 million bales of cotton to 3.6 million bales. The product is still out there on the store shelves. But it’s being manufactured in China, Indonesia and Thailand.”
Today, Watson noted, China alone consumes more raw U.S. cotton, 4 million bales, than the entire U.S. textile industry. “U.S. cotton producers are dependent upon a global supply chain. But that’s a nice way of saying that we are at the mercy of a global supply chain. We are not in control of all the things that influence our ability to be profitable in business. That’s why we’re constantly having to change what we do.”
Watson says changes are occurring in the textile manufacturing industry as well. “Today, production development ideas (like the green movement) tend to start in the retail area and work their way down. They dictate to manufacturers what they want them to make.”
Watson noted that the lack of contamination in U.S. raw cotton is a positive for U.S. cotton competitiveness. Machine-picked cotton is traditionally less contaminated than hand-picked cotton. “That doesn’t always make sense, but it is (true). Chinese cotton usually outshines U.S. cotton on length uniformity index.”
But contaminants still make their way into the processing stream, and are often not discovered until after a garment is manufactured. “They can make a real mess.”
The one cotton characteristic that cotton’s customers want above all others is low price, noted Watson, which means they’re not real happy with current market values.
“Depending on the type of yarn being manufactured, the price of raw cotton can represent up to 80 percent of the cost of the yarn. The price of the raw product and its effective utilization is critically important to our customers. So it needs to be important to us too, because without them, we would have no one to sell to.”
Watson noted that high cotton prices “give our competition a foot in the door,” not only from foreign producers potentially planting more cotton, but also from man-made fiber. “When cotton prices rise above the mid-80-cent level, polyester becomes more attractive to textile manufacturers. They can do some subtle things to cut their costs. For example, they’re allowed a 3 percent tolerance on the labeled blending percentage. So last week’s 60 percent cotton/40 percent polyester product becomes a 57.1 percent cotton product, and they don’t have to change the label. But it affects the amount of cotton we can sell.”
Watson noted that polyester manufacturing plants can produce a near perfect fiber for spinning and “can locate their factories right next to the mills.” To stay competitive, “We have to avoid contamination, minimize short fibers, avoid neps and move cotton through the supply chain.”
Watson said changes where cotton is produced within the United States have the potential to add to uncertainty about the U.S. crop. Mid-South and Southeast cotton acreage has declined, “and west Texas cotton has emerged. But it has the most highly variable weather and growing seasons of any place we produce cotton in the United States.
“There is no longer such a thing as business as usual within the fiber market, or the textile markets as a whole,” Watson said. “These are areas that have changed rapidly during the last 10 years, and the pace of change continues to accelerate.”