Both domestic and export shipments of American ELS are expected in 2002/03 to reverse their downward trend from the past three years, but the projected total offtake of almost 600,000 bales won’t be enough to significantly unburden the U.S. supply of 700,000 bales from this year’s crop and ending stocks of about 350,000 bales.
The result for American producers and merchants will be 12 to 18 months of burdensome supplies and prices that will earn the U.S. government the title as the biggest owner of U.S. Pima cotton, according to Matt Laughlin, executive vice president of the Supima Association.
Even though Pima producers in California, Arizona, New Mexico and Texas do not have the extensive federal farm program as with upland cotton and other commodities, Laughlin told producers and marketers at the association’s annual meeting they do have a loan program that should keep producers in the Pima business and a permanently funded Step 2 that should keep American ELS cotton moving into the world market, even though it is now priced 10 to 20 cents a pound over world prices.
Egypt, America’s biggest competition, is unloading its burdensome stocks at bargain basement prices, but Pima is still selling, largely due to the extensive licensing program that the Supima Association has been promoting for several years. There are now 24 domestic and 82 international licensees in 15 countries that may use the Supima label on products made with 100 percent American Pima cotton.
Supima launched a major home fashion advertising campaign last spring that will continue this spring. According to association president Jesse Curlee, it has been well received.
‘Born and bred’
That was bolstered with a post Sept. 11 patriotic ad campaign featuring "born and bred" American Pima cotton that also won favor with not only consumers, but Supima’s textile, apparel and home furnishing customers.
"Supima has become the most talked about fiber in the textile industry today," said Curlee. It has garnered strong marketing support from such high-end apparel and home furnishing manufacturers as Ralph Lauren, Land’s End, Brooks Brothers, May Co. and Dillards.
Until now Supima has not moved into the mass-merchandising world of the Wal-Marts and Targets because it has been positioned as a high end product. However, Curlee said that would soon change with the development of a red, white and blue label similar to the post Sept. 11 patriotic one for 100 percent Pima or American ELS and upland blends in mass merchandising stores.
"We do not want to use the Supima label in the mass merchandising arena," said Curlee, The new logo is significantly different that the Supima brand logo, and will open up new markets for branded American Pima.
"There is no question branding has helped American Pima," said Laughlin, who is leaving the association after 14 years to join America’s largest Pima producer, the J.G. Boswell Co. in its marketing division.
"Even with the higher prices we are seeing today for American Pima, we can increase market share thanks to the Supima brand," said Laughlin. "We are laying the foundation for the future."
It will also be reliability and quality that also sells American Pima. Almost 100 percent of the last three U.S. Pima crops have graded Grade 3 or better. Ninety-one percent of last year’s crop graded Grade 2, which not only moves cotton, but also guarantees a higher loan rate.
"Nothing is better than quality," Laughlin said, praising producers by saying "you have raised the bar very, very high. This will keep customers." However, he added that the advantage would disappear if the stigma of sticky cotton is not contained and sticky cotton eliminated.
The base loan rate for Pima on the 2002 crop is 79.77 cents per pound, which is the fixed rate for five-year life of the new farm law. However, the Grade 2-46 loan rate for this season is 81.25 cents per pound.
California now produces 80 percent of the U.S. Pima cotton with yields equaling 94 percent of Acala yields ion the San Joaquin Valley. With the loan rate and yields like that, Pima should remain profitable for producers.
A second consecutive record-setting average yield (1,254 pounds) is projected for the U.S. Pima Belt this season, propelled largely by California’s projected average of 1,300 pound per acre, another record if realized. Arizona and New Mexico Pima yields for this season are estimated to equal the good 2001 outputs. Texas’ 2002 average yield is expected to be down about 75 pounds.
"Yield wise, we are in very good shape across the (Pima) belt," said Laughlin.
Ready to pay
"Merchants say there is one tough year ahead" selling American ELS against Egypt, China and other countries. "However, most manufacturers want American Pima cotton and they are willing to pay a premium for it. We tested that last year and they will pay," he said.
"Step 2 will allow us the bridge the gap (between American Pima and competitor prices) and make sales," said Laughlin, adding, "there are brighter days ahead as we liquidate cotton over the next few years," he added.
Overall world ELS consumption is growing. It went up 8 percent in 2001/02 to reach the second highest total in eight years. However, this is not nearly enough to offset a 32 percent increase in supplies. This will send stocks from 1.21 million bales to 2.11 million bales at the close of this season and one reason the nationalized cotton industries in Egypt and China are lowering prices almost weekly.
"There is a lot of competition out there and it is being greatly discounted from what you produce. However, the U.S. is still expected to export almost 500,000 bales this season. The Supima brand is driving a lot of that," Laughlin concluded.
Taking some of the burden off supplies could be a drop in U.S. Pima acreage next season with the improved economic outlook for U.S. upland.
Final acreage this season for California should be about 215,000 acres, according to Steve Carnes, Supima’s director of field services. This is down from the 240,000 last season. USDA estimates Arizona acreage at 7,400; Texas 20,000, and New Mexico, 7,000 acres.