Beltwide '06: The Implications Of An Export Market

In less than a decade, U.S. cotton producers have watched their customer base dramatically shift from mainly one dominated by domestic mills to a market dominated by export sales.

In 1997, the U.S. textile industry consumed 11.3 million bales, or 60% of the cotton crop, while exports in that same year stood at 7.5 million bales. In just 9 years, exports have jumped to 16 million bales or about 70% of the crop, while U.S. mill use has dropped to 6 million bales.

Increased dependence on exports has a number of implications, noted Gary Adams, the National Cotton Council’s vice president for economics and policy analysis.

As Adams pointed out during the Beltwide’s opening session, increased exports have:

• Put a strain on the industry’s shipping and storage infrastructure. “Instead of the majority of the crop moving to textile mills in the southeast in a somewhat orderly manner throughout the marketing year, we now have most of the cotton going to ports such as Long Beach, Savannah, or Galveston. And as we’ve seen, those shipments can come in bunches.”

• Heightened price volatility. “The balance between exportable supplies and import demand will be key to movements in market prices. As overall demand for US production relies more heavily on exports, we can be in a situation of increased volatility. Year-to-year volatility will depend on weather and a number of external factors around the world.”

• Put more importance on factors out of the control of U.S. producers. Success will hinge increasingly on “external factors” like exchange rates, economic growth overseas and weather problems in competing countries, he said.

For the current marketing year, China is still on pace to be the largest consumer of U.S. cotton, said Adams.

Manmade fibers remain a challenge, he added.

“It is likely that the U.S. will sell China 7 to 8 million bales of this year’s crop,” he estimated. “Globally, manmade fiber use totals 180 million bales, compared to 115 million bales of cotton. As we look at challenges facing the global cotton market, the ability to increase demand and regain market share relative to manmade fibers is paramount.”

The domestic textile industry has withered as imported goods increased. Over the last 10 years, imports of cotton textiles – mostly from Asia – have “roughly tripled,” Adams said. In 1995, imports of cotton textiles stood at the equivalent of 8.4 million bales. The estimated import level for 2005 will be about 22 million bales, he said.

A significant portion of the remaining textile industry output – the equivalent of about 5 million bales – goes into the export market in the form of yarn, tread and fabric. Much of that is shipped to countries in this hemisphere where it’s manufactured into finished goods for sale here in the U.S.

“That leaves only a small amount that is completely manufactured into a finished consumer product within the United States,” Adams said. “Adding up fiber exports and textile exports suggests that 90%-plus of the U.S. cotton crop enters export channels,” either as raw fiber, thread, yard or fabric.

So, like it or not, the economic health of the U.S. cotton and textile industry is directly linked to developments in other cotton-producing and consuming countries.
“In short, we are competing in a global market, and we are directly impacted by what happens in that market,” Adams noted.