California cotton growers and marketers are in one of the most enviable positions ever in the world cotton market.
SJV Acala and Pima cottons are in unprecedented demand worldwide due to growing consumer preference for quality cotton apparel. Although SJV cotton has long been an export product with as much as 90 percent of its production moving offshore, demand for it has never been greater.
The difference now, according to Allen Terhaar, is that huge, growing middle classes in China and India are clamoring for quality apparel and textile mills which supply it need SJV Acala and Pima cotton for quality blends.
There is plenty of Pima for the heated Extra Long Staple market, but Terhaar, executive director of Cotton Council International, said there is concern that the dwindling acreage of SJV Acala will put the finest upland cotton produced in the U.S. in short supply worldwide.
“I just returned from Asia and one of the concerns I heard repeatedly there was that mills had heard about the reduction in California cotton acreage and were concerned that they would be unable to get SJV Acala in the future. Mills say they cannot produce the type of product in demand without SJV cotton,” he told the annual California Cotton Growers Association annual meeting recently in Visalia, Calif.
“Australia is a little help in providing the (Acala) type of cotton mills want, but Australian cotton does not have the strength of SJV Acala,” said Terhaar.
The concerns are valid. SJV cotton acreage has plunged over the past decade, and Acala has taken the hardest tumble of all. This season it could take a back seat to increasing Pima acreage.
Most experts are predicting SJV cotton acreage will be about 600,000 aces this season, split 50-50 between Pima and Acala/California Upland. Last year it was 231,000 acres of long staple Pima and 436,000 short staple, mostly Acala.
However, an ideal early planting season could swing the pendulum to the Pima side to the tune of 350,000 acres, leaving only about 250,000 acres of Acala. There have been as many as 1.6 million acres of cotton produced in the San Joaquin and when it reached that level, it was all Acala.
It is not low demand in the world market for Acala that is driving down Acala acreage. It is competition for land between cotton and higher value crops like almonds and pistachios, said Terhaar.
“California is well situated in the world market. The growing middle class in China and India puts California on the frontier because the mills see their future in higher end products,” said Terhaar. “You are situated closest to those markets and ideally situated for shipping the type of (high quality) cotton to the fastest growing economies in the world.”
The middle classes economies in those two nations are climbing quickly to a combined 800 million people.
While speaking to the cotton growers, Terhaar read a market report from Globecot citing strong demand for Pima cotton from Eastern Chinese textile mills, even though spot prices are approaching $1.30 per pound ahead of what most are predicting will be a big increase in SJV Pima acreage this season.
One reason Pima is taking away Acala acreage is price. Even with a hefty SJV basis, Acala is bringing only about half of the current Pima price. Yields for both cottons are basically equal.
There is a lot of low-priced, low quality cotton on the world market and that is keeping the price of Acala down because it is priced off those uplands. The premium may be good, but the starting point is so low the basis is not enough to entice growers away from ELS Pima.
Part of that low-priced, low quality is U.S. cotton from regions outside of California and Arizona. A record 16.8 million bales of U.S. cotton is expected to be exported this season.
Demand is there for that much cotton, regardless of its quality, said Terhaar. “It is not a matter of selling it. It is a matter of moving it,” he said, citing problems in Texas particularly where shippers are having difficulty getting the cotton bales to port in a timely manner.
CCI is the overseas market promotion arm for U.S. cotton and business could not be more promising, said Terhaar.
However, it is just as challenging. He says cotton in the overseas textile market is where it was in the U.S. during the 1960s and 1970s, losing market share to manmade fibers. Cotton Incorporated turned that around, and CCI is trying to do the same thing outside the U.S.
Polyester is cheaper, more durable and fashionable, but more uncomfortable than cotton to wear, said Terhaar.
“Cotton is not the cheapest fiber in the world, but what we want to do is position cotton as the preferred product,” said Terhaar.
And they have been successful. Cotton recently picked up 3 percent more of textile market in India.
To show how important it is for consumers to switch to cotton, a 1 percent shift from consumption of manmade fibers to cotton represents an additional 650,000 bales of cotton use in the Chinese market.
CCI is betting on an increase in per capita consumption of cotton in China where there are now 1.35 billion people soon to be 1.4 billion. Per capita annual consumption on apparel is rising sharply, said Terhaar, and CCI is trying to get new consumer-oriented Chinese to select cotton over polyester.
According to some experts, Chinese cotton consumer demand is increasing so rapidly “it will swamp China's internal demand to produce apparel” and China will look to places like Vietnam, Pakistan and India to fill that void.
“We want to swamp that market with cotton,” said Terhaar.
U.S. cotton is obviously doing something right in the world market, but Terhaar said cotton is missing the boat in other areas and it could hurt world sales if not addressed.
Environmental stewardship and agricultural sustainability are becoming major issues for consumers, textile mills and retailers in this country as well as overseas.
Terhaar said U.S. cotton is being hammered in the world as not environmentally friendly along with the issue over federal cotton support and world trade.
The current round of World Trade Organization is dealing with the trade issues, but he said cotton needs to gets its message out that cotton is environmentally conscious and sustainable.
Cotton has a great land use story to tell. “In 1926 the U.S. was producing 17.9 million bales of cotton from 45 million acres. Today we are producing 23 million bales of cotton on 13.7 million acres. That essentially says cotton has saved 30 million acres of land for environmental benefits and other needs. That is a story cotton needs to get out,” he said. Cotton Incorporated recently produced a brochure extolling sustainability in U.S. cotton production.
Cotton also needs to address the issues of pesticide use, and no one can better defend itself as sustainable as California.
“California with all its regulations and rules” to protect the environment and the public, “has the best environmental and sustainable story to tell in the country.
”The U.S. can compete with other country in the world with our regulations to protect the environment,” he said. However, “we have been missing the message” by not telling it to customers of U.S. cotton.
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