Townsend Says The Cotton Industry Needs A Reality Check
August 22, 2013 After spending so many years as one of the most recognizable leaders in the cotton industry, it’s obvious that International Cotton Advisory Committee (ICAC) Executive Director Terry Townsend is a huge advocate for the natural fiber and wants to see the industry succeed long into the future. And he knows you can’t make problems go away by simply pretending they aren’t there.
It’s clear that Townsend himself doesn’t intend to ignore the challenge. The Keynote Presentation he delivered at the 2013 Cotton International Global Summit could only be described as a reality check for the entire industry. His presentation and insights certainly made an impact on the attendees, who bombarded Townsend with questions and comments throughout the question and answer period.
While Townsend highlighted multiple issues that he finds troubling and/or disappointing, the thing that bothers him the most is the fact that some of the most important and influential figures in cotton have adopted “a parochial view” of the industry and don’t seem particularly interested in collaborating with leaders from other sectors of the supply chain to improve the outlook.
We Will Sink or Swim Together
Cotton’s ship is taking on water but people don’t seem willing to grab the buckets and work together to bail it out. When leaders don’t rally the troops and unite their efforts toward a common good, the entire cotton value chain is weakened.
Meanwhile, polyester and other synthetic fibers – not to mention food crops like corn and soybeans – continue to nibble away at cotton’s acreage. And the amount of land they gain gets bigger every time cotton’s stakeholders insist on bickering among themselves, or remaining apathetic to the challenges their business partners face. There’s no doubt that a divided cotton industry is a weakened cotton industry.
“Competitiveness can be affected by industry behavior,” Townsend said. “It isn’t something that just happens, like the weather. The future of cotton will be determined by the decisions we make as an industry.
“There are intervention strategies we can implement: increased investments in research, demands for infrastructure development, industry training to improve workforce productivity, and cooperative purchasing of inputs and marketing, for example. The most dangerous thing we can do is take a fatalistic attitude and simply accept cotton’s decreasing competitiveness.”
To be sure, cotton faces no small amount of obstacles and challenges. Some of them, such as the prices of competing crops, are simply beyond anyone’s control. But others that might appear to be beyond the industry’s ability to influence – such as droughts, floods and other weather-related events – can be countered, at least to some degree.
Researchers are working feverishly on strains of cotton that require less water and can flourish in colder temperatures.
But perhaps the biggest threat to cotton’s continued health and vitality is 100% man-made – and it’s not a fiber. It’s the lack of contract sanctity, and it’s crippling. At one point during the peak of the crisis, experts estimated that cotton worth more than $1 billion was either in default or at risk of default.
There is nothing inevitable about defaults. Sometimes the circumstances that result in contract defaults are unavoidable, such as the flooding in Thailand that put many mills underwater – literally – for several months. But there are still two human parties involved in every contract, and they should strive to work together to resolve their issues. It speaks volumes that business parties refer to each other as “counterparties,” because the more confrontational the relationship between the sectors becomes, the weaker the entire chain gets.
Among the other sobering points Townsend made during his keynote presentation in Singapore were:
• In recent years, all of the growth in cotton production comes from higher yields, not increased plantings.
• Although yields aren’t rising, the cost of inputs is.
• Cotton’s share of the global fiber market has fallen from 50% a few decades ago to about 31% today, and ICAC predicts that number will continue to shrink, dropping to about 27% by 2025.
• Cotton prices are in decline, relative to competing crops.
• Spun yarns of all kinds – both cotton and synthetic – are losing share to filament yarns.
When faced with various challenges in years past, much of the cotton industry’s leadership came from the United States, especially through the demand creation efforts of organizations such as Cotton Incorporated and the National Cotton Council. But in coming years, Townsend believes new leaders must step up – especially among growers and cotton professionals in developing markets such as India, Pakistan, Brazil and Australia.
The industry seems to be in agreement. On April 3, Cotton International ran a poll question on www.cotton247.com asking whether the industry’s future leaders will come from those markets, and two-thirds of respondents said they would.
Regardless of nationality, Townsend says, the people most responsible for leading cotton’s resurgence are going to be growers. “Merchants, logistics companies, textile manufacturers and other parties certainly do have a vested interest in cotton’s success, but for the most part, they can find something else to do for a living,” Townsend said. “But farmers who live in arid and semi-arid regions – including Texas, central Asia and central India – are the ones who have the most at stake, and they need to be the ones who are taking leadership positions.”
The Spinning Industry Is at Risk, Too
Some people assume that spinners would largely be unaffected if cotton’s decline continues, and the natural fiber eventually becomes a luxury/specialty product, such as wool or silk. After all, if cotton is no longer available (or falls out of favor among textile and apparel consumers), mills will just spin more polyester fiber instead.
But those people need to look more closely, Townsend says, because spinning mills are at risk, too.
First of all, those forward-thinking mill owners who invested money in both human capital as well as equipment to ensure they can spin cotton efficiently have a vested interest in maintaining or increasing consumer demand in cotton products.
Cotton has been losing market share to polyester steadily since the 1960s … but polyester staple has been losing market share to polyester filament during that time, too.
“One thing that jumps out to me when I look at the statistics is that polyester filament is growing, but polyester staple isn’t,” Townsend says. “An ever-increasing amount of the products that end consumers buy are made from filaments – or might even be a non-woven product.
“These products bypass yarn production completely, so spinners aren’t only competing against spinners anymore; they’re also competing against manufacturers of filament-based and non-woven products. The end result is downward pressure on yarn prices, regardless of whether they’re made from cotton or polyester,” he said.
Man-made materials – whether they be polyester, rayon or nylon – all start out as filaments that are then chopped into staple so they can be blended with cotton.
“To put it simply: If there is no need for cotton, then there will be no need for staple made from any material, whether it be natural or synthetic … and thus, there will be no need for spinners at all,” Townsend concludes.
Given that degree of codependence, cotton professionals aren’t the only ones who need a reality check. Spinners need to open their eyes, too, because if cotton’s fortunes continue to slide downhill, the spinning industry will be going along for the ride.
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