The Captains of Cotton

Demand Remains Key to Cotton's Success Globally

Michael M. Adams, President, Cotton Council International

As a unified U.S. cotton industry, we want to positively influence our future and our profitability by stimulating retail consumer demand for cotton. Cotton Council International (CCI) and Cotton Incorporated's successful demand-building activities in Asia, Europe, Latin America and the United States give us confidence that the consumer can be influenced. In fact, global demand for cotton has shot up by more than 25 million bales (28 percent) since 2000, and export demand for U.S. cotton fiber responded by rising to a record 18.5 million bales in the 2005/06 marketing year - the fifth consecutive record year.

The growing consumer interest in "sustainability" is a key issue that we can capitalize on to continue building demand for cotton. The accepted international definition of sustainable development is: "development which meets the needs of the present without compromising the ability of future generations to meet their own needs." In the realm of sustainability, cotton and other natural fibers have clear advantages over synthetic chemical fibers. Cotton is a renewable, biodegradable and sustainable fiber - and the U.S. is a sustainable producer. In contrast, the major synthetic chemical fibers use petroleum as a base, which is non-renewable and, therefore, not sustainable.

Last December the United Nations declared 2009 the "International Year of Natural Fibers." We applaud that effort and the emphasis this declaration and its related promotions will give to the importance of natural fibers in the global economy. Cotton is the largest natural fiber in the global fiber, textile and apparel economy, now representing roughly 37% of all natural fibers consumed. In the United States alone it is estimated that cotton generates in excess of $100 billion in economic activity as it moves from production at the farm level through processing and retail. Cotton globally represents hundreds of billions of additional dollars of economic activity and employs hundreds of millions of people from field to fabric, and even more if you were to count retail and manufacture of inputs, cotton products, by products, etc.

CCI and the U.S. cotton industry have done more than any other player in bringing attention to the importance of cotton in the global economy. Events such as the 2006 Sourcing USA Summit promoted U.S. cotton's quality, reliability and service, but also recognized sustainability and the importance of cotton at retail globally. Other initiatives, such as CCI and Cotton Incorporated's generic promotions in China and CCI's generic cotton promotions in India, as well as CCI and CI leadership in the International Forum for Cotton Promotion (IFCP), are indicative of U.S. industry leadership in promoting cotton and natural fibers to the benefit of all players. Of course, CCI's mandate is to promote our U.S. industry, and this is evidenced through its many activities to promote U.S.-made cotton textiles, COTTON USA licensing and advertising, Supply Chain Marketing (SCM) and numerous other initiatives that bring recognition and business to our industry.

The future success of these demand-building activities depends upon continued funding from both the public and private sectors. An impact study, commissioned by the Foreign Agricultural Service of USDA, clearly shows that USDA's Market Development Program funding - of which CCI is one of the largest recipients - positively affects U.S. agricultural exports, the farm economy and the larger U.S. macro economy. In fact, the study finds that, for every added dollar spent on market development, $25 in additional demand results within three to seven years.

By any measure, this is a solid return on investment. Moving forward, we must work together to ensure that the U.S. Congress continues to fund these programs in the new Farm Bill. New investments in demand-building programs are needed if we are to expand recent increases in global cotton consumption and fight the increased use of synthetic chemical fibers. Consumer demand will make the difference as to whether cotton is profitable.

The Cotton Provisions of the 2002 Farm Bill Are Not Broken

Chip Morgan, Delta Council, Executive Vice President

In the mid 1980s, the cotton industry was faced with huge carryover stocks, prices of the unsold old crop were depressed by the anticipation of another crop being planted while cotton sat in storage houses all over the Cotton Belt, and Congress was drafting the 1985 Farm Bill.

That was the year that U.S. Senators Thad Cochran (R-MS) and David Pryor (D-AR) introduced the marketing loan, a mechanism for bringing world-price competitiveness to U.S. cotton amidst a highly-subsidized global marketplace. Almost without pause, the marketing loan went to work and began moving U.S. stocks of cotton.

It worked until the late 1980s, when a resourceful cotton expert with USDA, Charlie Cunningham, realized that the calculation for the U.S. Adjusted World Price would need refinements, lest we be faced with another scenario whereby cotton stocks would be backing up in warehouses from California to North Carolina. It was around 1988 when Cunningham advanced his idea for improving the function of the marketing loan, behind the strong support of the National Cotton Council, making U.S. cotton even more competitive by allowing for the CCC to forgive some of the carrying charges for cotton storage, while in the CCC loan.

The refinement worked and cotton stocks once again were drawn down to a manageable level. Prices rebounded to a level which allowed farmers to secure operating profits from the marketplace, rather than relying upon the safety net features of the Farm Bill. Numerous other refinements have been made to the competitiveness provisions of farm laws behind the efforts of USDA and the National Cotton Council, working jointly - always with the objective of moving cotton to the marketplace for a price to the farmer that would sustain income stability.

This 2002 Farm Bill, and the cotton provisions of this Farm Bill, are not broken. But since passage, we have lost more than four million bales of consumption of U.S. cotton by the U.S. textile industry. Due to advances in technology, largely, we are producing four million bales more than we did upon passage of the 2002 Bill. We have conceded almost three-cents-per-pound in world-price competitiveness during the same period, as a result of eliminating provisions in the 3-Step competitiveness provisions. And most of all, domestic policies of the Chinese government to attain self-sufficiency in cotton production, and to strive for fewer imports of cotton, have caused the world cotton market to remain sluggish. In fact, with the exception of U.S. cotton exports to China, USDA reports confirm that all of our major export markets remain comparable to last year's cotton purchases.

The success of the U.S. cotton industry has been built upon 1) a National Cotton Council that sends a clear and united signal to all branches of government, 2) a USDA and a U.S. trade policy which shares similar signals to world competition that we are not trading our local economy for their local economy, and 3) Congressional leaders that fully realize the value of a U.S. farm policy that treats production agriculture like the industrial employer which it is; no longer barefoot, but the foundation of wage earnings outside urban, financial centers in all 50 states.