Pima Cotton
June 15, 2011 About 5% of all cotton produced in the United States consists of extra-long staple (ELS) pima, famous worldwide for its sheen, strength and exceptional softness. Stocks were drawn down to about 4,000 tonnes in 2010 and are expected to drop even further – all the way down to 1,000 tonnes – by the end of the 2010/11 season.
No matter how much is sent to overseas markets, the world’s spinning community just can’t get enough ELS. There have been three straight years of declining production from the world’s top three ELS producers (the United States, Egypt and China), and retail demand is increasing.
On the bright side, combined production of ELS in the United States, Egypt and China is expected to jump between 25% and 35% next year, which should bring supply and demand closer to equilibrium.
“There is always going to be demand for ELS cottons because the higher end of the market is going to want cotton textiles with the added luster, strength, softness and fine count yarns that are only possible in ELS cottons,” says Jesse Curlee, president of Supima, the nonprofit promotional organization for pima growers. “It will never be a huge market, just as the market for luxury cars and jewelry is limited. However, branding the American pima cotton creates a bigger demand for Supima cotton than for ELS cottons produced in other countries.”
The economic concept of specialization has been helping to increase output and productivity since the dawn of mankind, and it still works today for J.G. Boswell, which grows and mills cotton in California’s San Joaquin Valley. It also helps to develop a reputation for quality and consistency, according to Matt Laughlin, the company’s marketing manager.
“You develop a reputation by delivering the same consistently high-quality product year after year, and that is one of the reasons we decided nine years ago to produce only pima cotton,” he says. “By concentrating on a specific high-end cotton, everyone involved in the production and processing of pima can apply the lessons learned each season to their approach the following season. There’s something to be said for repetition.”
The Politics of Food
While neither Curlee nor Laughlin say the political and social turmoil in Egypt in previous months will have a major impact on the ELS market, there are always risks—particularly when there is such a small number of primary producers to satisfy the world’s demand.
“The global ELS market was already in overdrive because of the out-of-balance supply and demand situation, so any initial fallout from Egypt’s political and social turmoil was limited to the internal flow of cotton in the country,” Laughlin says. “I haven’t heard of any interruption of Egyptian cotton exports as a result of the recent political events. Nearly every bale of ELS cotton produced in the world in 2010 has been spoken for, and those buyers are highly motivated to secure that supply.”
Curlee agrees, but also adds a caveat to that assessment. “I am not certain that the political problems in Egypt are going to have any real affect on their ability to grow and trade LS and ELS cotton,” he says. “I have talked to my friends there and they don’t think is it going to be a problem.
“However, there could be a little more pressure to grow food crops rather than cotton. Early reports coming out of Egypt were that they would increase production 35% to 40%,” Curlee continues. “We are now hearing from the people there that it will more likely be only about a 20% increase, primarily because food crops are also offering good profit return.”
As established and desirable as it is across the globe, both Curlee and Laughlin recognize that growers have options. With
The world’s population expected to grow by tens of millions of people each year, the need to minimize water usage and the demand for food crops are also on the rise.
“It’s a challenge because all American pima cotton is grown in the West and Southwest, so the growing area is limited,” Curlee says. “Those regions of the United States will probably always have water issues and while things look good this year, we never know from year to year about water allocations for farmers. In addition, economic downturns like the one we faced a few years ago are not good for cotton overall, and are an especially big challenge for ELS cottons. Luxury goods took a big hit because expensive knits, shirts and other high-end products are things that people can find alternatives for in tough times.”
Nonetheless, Curlee maintains a positive outlook for pima’s future. “The USA pima grower has earned a reputation in the international textile world as a reliable and quality producer of ELS cotton, and this fact – plus the reputation of the Supima brand – make for a bright future. Supima’s licensing program has created demand that will only grow in the next five years, and the Chinese demand for more expensive, higher-quality goods is growing rapidly.”
Laughlin agrees, adding that “U.S. pima is the leading ELS cotton export in the world and, consequently, must remain in adequate supply. I think the U.S. pima cotton producer is up to the task, but one lesson we’ve all taken away from the past season is that growers have choices, so the demand side of the equation must hold up its end. Going forward, I remain bullish on the overall outlook for ELS cotton, and pima in particular. In the established consumer markets as well as the emerging consumer markets for higher-end apparel and textile goods, pima cotton is well positioned to capitalize on expected growth.”
One way to keep consumer awareness of pima cotton high is to partner with retailers that are eager to promote the high quality of their finished products – due in no small part to the high quality of the raw materials used to make them. Brooks Brothers, for example, has had a relationship with Supima for almost 25 years. “In recent years, the synergies between our brands intensified as Supima has become better known and more recognized among end consumers,” Curlee says.
Supima recently signed a similar deal with Bloomingdale’s and will have its own Supima Collection in 19 of the retail giant’s stores across the country. “Each store has a special section where they offer the Supima Collection. It is limited in regard to product at this time (tee shirts, hoodies, henleys), but is expected to expand to other Supima products such as polo shirts and even bottom-weight fabrics and pants. We are working very closely with Bloomingdale’s to merchandise these items through in-store promotions, special events, catalogs, sales incentives and print advertising,” Curlee says.
The Final Showdown: High Prices
Unfortunately, the list of products that are so desirable that they are unaffected by price is short, and cotton – even the beloved ELS version – isn’t on it. But the fundamentals behind cotton’s price surge can’t be denied, and they have carried pima’s price upward with them.
“I have to admit: If Upland cotton prices were at their 10-year historical levels, textile mills would not want to purchase much ELS cotton at today’s prices,” Curlee acknowledges. “The high price of all cottons, however, enables ELS cottons to rise in price also. And demand remains strong because the economics have improved slightly and because the ELS pipeline was almost empty after the economic downturn.”
Yarn prices have, to some degree, tracked the upward spiral of raw material costs, but there is a “point of diminishing returns” for textile mills, Laughlin says.
“Sustained high prices at these levels can lead to some erosion of consumption, but I think we have finally reached a semblance of stability – and that’s a good place to be as the new crop is being planted,” he says. “A relative spread between upland and pima prices held firm throughout much of the price run-up, although pima prices didn’t dip during periods of fluctuation on ICE as did upland cash prices. Global inventories for both upland and pima cotton had reached such critical low levels entering the 2010 season that both were in position to sell out, so the impact of one on the other was minimal.”
That could change if we see either a significant narrowing or widening of the price spread between the two, he warned, but for the most part they operate independently.
“We learned in 2009 that no non-essential consumer product is immune to the effects of a deep global recession, but I think we have all been pleasantly surprised by the rapid turnaround in the textile industry,” Laughlin says. “Now we have to step back and remind ourselves not to fall victim to short-memory syndrome. I think everyone in the supply chain is more keenly aware of inventory management, and perhaps even more, of the importance of the relationship between each segment in that supply chain.
“Just as the individual consumer has emerged from this recession with a new mindset about discretionary spending, all segments of our industry are certain to be more mindful of each other’s role in the process,” Laughlin concludes.
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