The relationship between Chinese textile mills and U.S. cotton producers may not be as open and honest as the relationship between U.S. textile mills and U.S. cotton producers, but China’s economic growth and love of all things Western was hard to ignore when a group from the National Cotton Council toured the country toward the end of 2006.
The tour was hosted by the China Cotton Association, which is similar in structure to the NCC. The CCA has been very active in writing some of the contract rules for trading cotton in China.
The NCC group visited production areas, gins and several bonded cotton warehouses in port cities. Inside the latter, Allen Helms, a Clarkedale, Ark., cotton producer and past chairman of the National Cotton Council, saw “a lot of cotton stored waiting for the next round of TRQs (tariff rate quotas) to open. It was mainly U.S. cotton, but a fair amount of cotton from West Africa, Zimbabwe and Uzbekistan was stored there, too. There was no way for us to come up with a specific number (of bales) and they didn’t offer one.”
While the United States does not suffer from such a lack of transparency, the fact remains that China’s appetite for U.S. cotton is ravenous. “China’s textile mills were enormous. The ones that bought U.S. cotton were very happy to have our cotton. They don’t want to pay the domestic price for cotton, which was somewhere in the neighborhood of over 70 cents a pound.”
While Chinese mills are asking for 31-3-35 type cottons, “they generally were accepting of most of our cotton,” Helms said. “When we met with some of the government agencies, one of the barriers we saw was the inspection group for imported cotton. They have a tendency to quarantine cotton for an extended period of time.”
Helms also noted that both seed cotton and baled cotton are often stored outside in dry areas of the country.
“With China’s red-hot economy, and growing affluency, they’re going to be our No. 1 factor for determining price in the long-term. We have to watch them and figure out where they’re going,” said Helms, who saw many Chinese men and women wearing designer, Western-style jeans.
There is one fly in the ointment. Chinese officials expressed concern to Helms that Vietnam and India may become the low-cost producer of textiles at some point. The latter is worth keeping an eye on because India has a potential for increased yields with its continuing adoption of Bt cotton varieties and current low-average yields.