Paradigm Shift Changes Market For The U.S. Cotton Grower

Even during trying times and with challenges ahead, the United States cotton industry is well positioned to maintain its leadership in the global marketplace, according to incoming American Cotton Shippers Association President Adolph “Andy” Weil III. A fourth-generation cotton merchant and president of Weil Brothers Cotton, Inc., Weil learned the international cotton trade early on from his father and uncle. Weil began in the family business as a “squidge” (or apprentice) in the sample room and later moved up in the company, eventually traveling around the world to meet with clients overseas.

“As long as I can remember, I have understood that there was an international element to this business and remember that it always intrigued me,” Weil said. “I came into the family business and of course went through all of the steps of learning the trade. I began traveling and learning about things in the field, both from the grower perspective as well as the mill perspective. That was a great way of meeting people and beginning to network with people with whom we do business.”

His experiences taught him that the market is cyclical, but ups and downs can be weathered with good business planning and industry cooperation. Weil sees the need for cooperation even more in 2007 as the U.S. writes a new Farm Bill and fights WTO challenges in the future. The loss of Step 2 changed the American cotton industry and the merchandising segment in particular, with more than 80% of U.S. cotton now shipped overseas. Marketing channels for U.S. cotton are “empty” with more than half of the 2006/07 crop locked in the loan as the market has not been at levels to release this cotton. In other words, without Step 2, U.S. cotton has not been competitive, as farm subsidies provide a pricing floor that entice U.S. growers to grow for government programs rather than the market. Warehouses will feel the pressure as cotton that has waited in the loan program for overseas buyers will be coming out of the loan on top of the next crop, which could be another large one. As Congress writes the next Farm Bill, Weil believes that attention must be paid to market signals, allowing U.S. cotton to be competitive so that valuable market share is not lost.

While the U.S. cotton industry must be protected from and not dictated by WTO challenges, Weil believes the program should be more attuned to maintaining its share of world exports. Cotton is important not only from the export aspect, but also its multiplier effect on the U.S. economy, he added.

“The WTO has already fired a huge shot across the Farm Bill bow by forcing our hand and ending export subsidies and export programs as of July 31, 2006. With the loss of Step 2, we certainly have exposed weaknesses in the 2002 Farm Bill, and it has taken us out of a competitive element. It has not allowed cotton to go into marketing channels, and it’s really gotten us into the situation that we are finding ourselves in now,” Weil said. “But at the end of the day, Congress will write that Farm Bill, not the WTO, and that is something that needs to be made very, very clear. U.S. agriculture and cotton in particular certainly do not need to be sold out because of what the WTO deems. We need to write our own policy.”

Unified on All Fronts

Farm Bill legislation is not the only issue that needs a unified effort from the U.S. cotton industry, Weil said. To compete with other cotton producing countries, U.S. cotton will have to maintain and increase its quality while ensuring timely delivery. If merchants can market a quality product with on-time delivery, U.S. cotton will remain a highly valued commodity by international mills.

Andy Weil III
President, Weil Bros. Cotton, Inc.

On Sustainability:
“Sustainability is absolutely something I think U.S. farmers and farmers in developed countries have done an incredible job on through the years. We have been practicing sustainability for years by virtue that many of our farmers have been in family farms for generations. They couldn’t continue if they weren’t sustained from the very beginning – if the family growers weren’t good stewards of their land. Driven by profitability, they are going to be cost sensitive and therefore monitor what they put on their crops very closely. It costs them a great deal to apply certain chemicals to crops, and they are going to find the best way to drive down costs, and that in turn should minimize what they are putting into the environment.”

On Organics:
“One thing that comes to mind is that now we are seeing a real push for – and there is certainly growing consumer interest – more organic products, and cotton certainly is one of those products being scrutinized … Now what we are facing globally is this organic labeling of products, and the question ‘Is cotton organic?’ Well I would say cotton is one of the more organic fibers out there, and we just need to educate the consumer better on the attributes of cotton, in order to maintain and improve our share in the world markets.”

Cooperation along the production supply chain – from seed breeders, growers, ginners, warehousers and shippers – is the key to success in increasing the quality of U.S. cotton. Weil believes U.S. seed breeders have produced varieties with exceptional fiber characteristics, with the help of grower and industry input. But improvements must continue to keep up with demands from international mills.

“I think the American grower has done a phenomenal job in communicating to the seed breeders, or perhaps the industry as a whole has been communicating to seed breeders, what the market is demanding out of the fibers. And growers are much more sensitive to that,” Weil said. “The qualities have improved greatly and seed breeders have been staying on top of that and have afforded better yields for growers on top of better quality. So I think growers are doing a great job responding to what the market needs.”

While U.S. varieties meet international mill standards, Weil says U.S. cotton could be improved with fewer neps and less contamination. Harvesting and ginning technologies need to address these issues in the future, so that quality is maintained down the pipeline. “We probably need to be more sensitive to things that might detract from the quality such as neps and short fiber content that we often hear about on the merchant level when we deal with our customers in foreign markets. These textile mills invest a tremendous amount of money in spinning and weaving equipment, and the modern technology involved in those pieces of machinery demands a lot from the fiber to perform at peak efficiencies,” Weil said. “If we can’t provide that, either because of the ginning, the way it’s packaged or because of the foreign material in the fiber, the mills will complain very heavily. It can blow up a mill and hurt their efficiency.”

Mills not only need cleaner, contamination-free cotton, but they also need on-time delivery. In the past, U.S. cotton has been a reliable commodity in a marketplace where other suppliers didn’t have the infrastructure or ability to deliver shipments as timely. But the market has shifted. China leads the world in production, and India’s yields have reached record levels as its growers take advantage of technologies.

With these countries in close proximity to Asian mill markets, U.S. logistics must find less expensive, more efficient delivery channels to compete with overseas markets. One way to achieve this, Weil believes, is to move more cotton to the country’s ports, staging it for export shipments.

“The best way we can deal with congestion in the interior is to go ahead and just continually move it and stage it in ports around the country. I think we are fortunate to have as many ports as we do, so that it does spread the opportunity to ship cotton effectively. We have great facilities on the East and West coasts, as well as in the Gulf of Mexico, to facilitate timely shipments for exports,” Weil said. “I think the capacity is there to move the cotton, as fast as we can get ships and containers available to load the cotton. But I think the real sticking point is in the interior. Warehouses are rewarded when cotton is kept in the loan. But we need to be sure it can be moved in a timely and reliable manner. We all need to cooperate, or we need to force the issue.”

Two Sides to Every Coin

China and India may be the largest competitors of U.S. cotton, but there is another element to the supply-demand equation. The combined population of the two countries is more than 2 billion, or one-third of the total world population. As growing economies and a rising middle-class begin to expand the purchasing power of India and China, those countries will demand more textiles. Weil believes this demand could be very helpful to U.S. cotton, but we have to be in position to take advantage of it.

“We are seeing the two largest countries in terms of population increasing with growing middle classes, and they are realizing more disposable income, and they are becoming more discerning in what they are buying with their disposable incomes. Their budgets can afford more, and they want to get the best for it, and I think cotton is well positioned to take advantage of that,” Weil said. “So that is a great promise. With a global population that is growing very rapidly, we are now over 6 billion people, and the demand for cotton is going to continue to grow.”

The Challenge Ahead

If international demand will be the savior of U.S. cotton, it also is the market’s greatest hurdle – greater than writing a new Farm Bill, greater than growing a quality crop and greater than delivering bales on-time in a global market – to the U.S. and international cotton community. Supply can match demand in two ways: by increasing yields or increasing acreage. Technologies will continue to optimize yield, but probably not with the continued explosive degree of success as in the last 10 years. The only other solution is an increase in acreage; but with a burgeoning bio-fuels industry and growing global population, land – especially land for cotton – has become a dwindling commodity.

“You can shift land around, but there is so much more demand on that land. Grain for alternative fuels. Grain to provide feed for livestock to provide protein for the food chain. So there is going to be a real juggling of how we use land, and also more land is going to be expended for people to live as populations increase. You can build up, but you can only build up so far,” Weil said. “So there is quite a challenge out there. Will there be a demand for cotton in the future? Yes. Cotton is going to be relied on greatly as a fiber to clothe, and I think it is going to be promising on prices in the long run.”

Leave a Reply

Market Analysis Stories
Market Analysis

Shurley on Cotton: Where Does This Wild Season Go From Here?

August 27, 2015

Cotton’s wild ride continues, thanks to a constant barrage of economic and policy forces.

Market Analysis

Cleveland: “Pickable” Bolls Unlikely from Late Texas Blooms

August 31, 2015

The time has passed to expect any of today’s blooms to make a “pickable” boll on the High Plains. While I hope every single one of them will be picked, do not expect many to make it to the basket.

Market Analysis

Cleveland: Amid Turmoil, Quality Still Drives the Market

August 24, 2015

Cotton had a remarkably positive week, considering its gains in the wake of a global meltdown of commodities and equities.

Market Analysis

Shurley on Cotton: On the Ropes, But Trying to Hold On

August 12, 2015

The past few weeks have not been kind to cotton. But new USDA crop reports may act like the referee stepping in to stop the damage just in time.

Market Analysis

Cleveland: Prices Seek New Floor Ahead of USDA Reports

August 10, 2015

We had long held that the 62 to 63 cent support would hold, but the market corrected us once again.

OA Cleveland
Market Analysis

Dog Days of August Keep Market on a Lazy Pace

July 31, 2015

In the absence of a weather event in the near turn, the dog days of August will keep this low volatility market backing and filling at a very slow pace.

Market Analysis

Cleveland: Market Movement Still Stuck in the Mud

July 24, 2015

It looks as if the cotton market is frozen in time, and some teeth may have to be pulled in order to get the market moving again.

Around The Gin
Product News

Falcon Adds Two New Automated Precision Soil Samplers

August 28, 2015

Falcon Soil Technology has added two new automated soil sampling systems to its product lineup.

Product News

HUMA GRO Adds New Boron Liquid Nutrient Formulation for Crops

August 28, 2015

BORO-MAX, a new boron 10 percent liquid nutrient formulation, is now available from HUMA GRO.

Product News

On-Farm Research Helps Ease Grower Questions About Enlist System

July 31, 2015

Southern cotton and soybean growers who have worked with the Enlist Weed Control System in on-farm research plots are now sharing their experiences.

Product News

Nufarm Introduces Panther SC Herbicide

July 24, 2015

Nufarm is introducing Panther SC herbicide, a new broad-spectrum herbicide for use in cotton and other Southern row crops.

Product News

USDA Deregulates Dow AgroSciences’ Enlist Cotton Trait

July 23, 2015

The USDA has deregulated Dow AgroSciences’ Enlist cotton trait in the United States.

Product News

Ratting Out Copper Theft

June 10, 2015

A simple alarm technology is helping to stop copper thieves who target irrigation systems.

Product News

EPA Approves New Premix for 2016 for Cotton, Soybean Weed Control

May 29, 2015

Cotton and soybean growers will have a new weed control option in 2016 with Warrant Ultra Herbicide, a premix of acetochlor and fomesafen.

Product News

Deltapine NPE Program Begins Eighth Year of On-Farm Variety Evaluation

April 28, 2015

Nearly 200 farmers will be part of the Deltapine New Product Evaluator program this year to help evaluate cotton variety candidates for the Deltapine Class of 16.

Latest News
Market Analysis

Cleveland: “Pickable” Bolls Unlikely from Late Texas Blooms

August 31, 2015

The time has passed to expect any of today’s blooms to make a “pickable” boll on the High Plains. While I hope every single one of them will be picked, do not expect many to make it to the basket.

Market Analysis

Shurley on Cotton: Where Does This Wild Season Go From Here?

August 27, 2015

Cotton’s wild ride continues, thanks to a constant barrage of economic and policy forces.

Market Analysis

Cleveland: Amid Turmoil, Quality Still Drives the Market

August 24, 2015

Cotton had a remarkably positive week, considering its gains in the wake of a global meltdown of commodities and equities.

Market Analysis

Plexus: Market Still Promising, But Keep an Eye on Global Financial Issues

August 21, 2015

Since August 12, the market has gained nearly 600 points, which is impressive considering what is going on in other commodities. But financial problems in key emerging markets could dampen demand – and prices.

Market Analysis

Cleveland: Bullish USDA Report Paints Brighter Price Outlook

August 17, 2015

Market gains of the past week announce another charge at 70 cents, leaving behind a life-of-contract low in December and painting a rosier price outlook for the out months.

Market Analysis

Shurley on Cotton: On the Ropes, But Trying to Hold On

August 12, 2015

The past few weeks have not been kind to cotton. But new USDA crop reports may act like the referee stepping in to stop the damage just in time.

Market Analysis

Cleveland: Prices Seek New Floor Ahead of USDA Reports

August 10, 2015

We had long held that the 62 to 63 cent support would hold, but the market corrected us once again.

Market Analysis

Dog Days of August Keep Market on a Lazy Pace

July 31, 2015

In the absence of a weather event in the near turn, the dog days of August will keep this low volatility market backing and filling at a very slow pace.

Market Analysis

Cleveland: Market Movement Still Stuck in the Mud

July 24, 2015

It looks as if the cotton market is frozen in time, and some teeth may have to be pulled in order to get the market moving again.

Market Analysis

Shurley on Cotton: The Path to 70 Cents Is Still Negotiable, but Rocky

July 24, 2015

The goal of 70 cents is still possible, but each passing day likely lowers the odds that we can get there. We just need to make sure we know what our alternatives are and act accordingly.

Market Analysis

Shurley on Cotton: Prices Tracking Back Down the Same Row

July 13, 2015

If cotton prices were a piece of heavy farm machinery, the market would have a serious compaction problem, tracking over the same ground time after time after time.

Market Analysis

July Supply Demand Report Proves to Be a Bear in Bull’s Clothing

July 13, 2015

The release of USDA’s July supply demand report quickly turned a big bull report day into a date with the big bear.

Market Analysis

Shurley On Cotton: A New Floor for Planted Acres

July 2, 2015

  By Dr. Don Shurley The long-awaited and much anticipated first estimates of actual crop acres planted for 2015 are

Market Analysis

Will Spring Rains Offer Price Relief in 2015?

July 2, 2015

Will this year’s decline in planted acres offer some price release sometime soon? That’s the question waiting for an answer.

Market Analysis

Late Week Fireworks Could Signal Something Bullish for Cotton

June 29, 2015

Round and round and round she goes… Where she stop no one knows. The circus crier could have found employment