At a time of “changing dynamics,” cotton ginners and growers gathered within a stone's throw of where the first commercial cotton in the United States was grown for the annual meetings of the Southern-Southeastern recently in Savannah, Ga.
Just up the Savannah River, Eli Whitney invented the cotton gin at Mulberry Grove Plantation. Down the river, the talk was about how things have changed in the past several years.
Speakers ranging from two U.S. representatives from Georgia, a trade expert, a mill CEO, Cotton Incorporated's president and CEO, and representatives of the National Cotton Council addressed the hot topic of “changing dynamics.”
The term “changing dynamics” refers to the new era U.S. cotton growers find themselves in. Namely, growing for the export market under pressures to open the farm bill and expand trade agreements.
U.S. Rep. Jack Kingston, R-Ga., referred to the plight of the U.S. textile industry, as well as the farm bill.
He said “everybody wants to reopen the farm bill.” He and U.S. Rep. Max Burns, R-Ga., said they were fighting against the move to reopen the farm bill. Kingston labeled the next farm bill as the “most important that we've ever had.”
He said in 2004 it will be very difficult getting anything passed in Congress because of the election year.
Despite naysayers, the 2002 farm bill is doing its job. “Folks have a misconception about what the word ‘big’ means” as it applies to the farm. “Back when my grandfather bought 80 acres, that was big. Now you can't survive on 800 acres. We have to continue to fight payment limitations.”
He and other legislators are spending more time on trade issues. “We seem to be giving away the farm, our jobs and our future,” Burns says.
Burns referred to China as the “800-pound gorilla that affects you on the farm every day.”
An increase in cotton purchases in China and a decrease in ending global stocks are driving the price of cotton, says Gary Adams, vice president of the National Cotton Council. One out of every 3 bales of cotton will be consumed in China this year. “They have drawn down stocks, but now are looking to buy more cotton from other countries.”
“The fundamentals are still there to support good prices,” Adams says. Futures' markets have rallied to around 70 cents per pound. Those prices are 12 cents to 15 cents above where they were this time last year.
In 2004, the real question is, “How much will China rebuild stocks?” China has similar declines in ending stocks for corn, wheat and rice — “really tight supplies across the board.”
While the U.S. remains the largest retail market for cotton, roughly 19 million bales of finished products were imported last year. China represents more than 2 million bales of imports.
On the bright side, U.S. cotton growers had record average yields of 725 pounds per acre in 2003, producing 18.2 million bales. The Southeast as a whole saw a 25 percent to 45 percent increase in yield, while South Carolina saw a 150 percent jump. Under the new farm bill, cotton planting has increased to 3.6 million acres from 2.4 million acres under the previous farm bill.
Adams sees many factors affecting prices in 2004. “It could go up, down or sideways,” he says, tongue-in-cheek. Looking at the prices over the last 20 years, the years 1984, and 1995-1998 stand out for their string of highs when the market began the year on a high note. In some years, however, prices that started out high dropped by the end of the year. In 1994 and 1995, prices moved higher from their start earlier in the year, Adams says.
With tight supply and demand, the odds are high that prices will continue.
“China continues to be the wild card,” Adams says.
J. Berrye Worsham, president and CEO of Cotton Incorporated, says the company has had to change to adjust to the dynamic of more cotton going overseas. Cotton Incorporated and Cotton Council International are working to build demand in foreign countries where demand has been stagnate. China has gone from consuming 18.4 million bales of cotton in 1998 to 30.4 million bales today.
According to James D. Grueff, assistant deputy administrator of the Foreign Agricultural Service, International Trade Division, the United States produced 42 percent more cotton than it used. Cotton accounts for about 5 percent of the value of U.S. exports, or $3 billion.
In trade negotiations, cotton has become a “key issue” because of the attention given by the media this year to African nations who say U.S. cotton subsidies hurt them.
Exports are essential to the prosperity of the U.S. cotton sector. “Trade agreements will likely be important in determining the future of the U.S. cotton industry,” Grueff says.