U.S. Delegation Looks For Better Understanding

I recently had the opportunity to lead a delegation of U.S. cotton industry leaders on a 10-day tour of China’s cotton and textile industries. This was my second opportunity to participate in such a delegation – having been a member of the first delegation in 2006. Because China is the largest buyer of U.S. cotton, these visits are an excellent opportunity to better understand their industry, some of the challenges they face and their requirements for U.S. raw cotton.

First, it is clear that China will continue to be a major importer of cotton fiber. However, it is also increasingly clear that China’s textile industry is under greater financial pressure. Higher cotton prices, coupled with rising energy costs, tighter credit conditions and a strengthening currency, are limiting growth in China’s mill use. While growth in cotton spinning may be slowing, China’s cotton production will experience little, if any, expansion going forward. Pressure to shift into food and feed crops in the eastern growing regions will lead to a greater reliance on the western province of Xinjiang for overall cotton production. While that outlook was expressed by some groups, we now hear that Xinjiang also is contemplating a shift to alternative crops. Both developments suggest that China will remain a cotton importer. Our challenge is to increase our understanding of that market in order to be their primary supplier of imported cotton.

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The increased presence of Indian cotton – even during the time since my trip in 2006 – underscores the very competitive nature of China’s import market. During a visit to a consignment warehouse, thousands of bales of Indian cotton were stacked alongside Central Asian, West African and U.S. cotton. While we continue to hear about the contamination problems with Indian cotton, it became clear that price is the primary concern. For a 3-5 cent lower price relative to U.S. growths, Indian cotton has gained market share at the expense of the United States.

Positives, Negatives

Not surprisingly, our visits with textile mills provided a chance to hear both the positives and negatives of U.S. cotton. While the mills acknowledged that U.S. cotton had the lowest contamination and generally arrived in the best condition as compared to other growths, they were quick to point out a number of concerns – ranging from consistency of cotton within a shipment, recent incidences of contamination, and short fiber content. It also became evident in our discussions that terminology and definitions generally accepted by U.S. industry members may have a different meaning to our Chinese customers.

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One of our main challenges now is education throughout the industry regarding the challenges posed by export markets, in general, and China’s market, in particular. It is incumbent upon the industry to better understand our customer and be proactive in meeting their needs and concerns. U.S. cotton does not want to be the cheapest cotton, but we do want to be the best value.

Caption (photo):

Jay Hardwick

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