By  on June 12, 2007

GREENVILLE, S.C. — The future of the U.S. cotton industry hinges on its ability to present itself as the world's quality commodity player.

Even as global demand for cotton keeps rising, the U.S. industry faces mounting challenges ranging from increased global competition to farmers abandoning cotton for more profitable crops.

More than 150 farmers, ginners, researchers and scientists gathered here last week for Cotton Incorporated's 20th annual EFS System Conference to discuss the state of the cotton market and how to ensure the future viability of the domestic industry. EFS, which stands for Engineered Fiber Selection, is a software package introduced in 1982 that allows qualities of a cotton bale to be quickly analyzed and evaluated, allowing for the production of a more uniform product.

S. Louie Perry Jr., chairman of Cotton Inc., opened the two-day conference by stressing the need to quickly adapt to the quickening pace of globalization. To accomplish this, he said farmers and ginners must look beyond their traditional roles and develop a comprehensive understanding of all aspects of the supply chain.

"We were minding our own business without any real understanding of how one link of the supply chain affects the other," Perry said of the cotton industry 20 years ago. "Today, we can't just mind our own business without minding the business of the whole industry."

Perry addressed external issues that pose a threat to the industry.

"We also have a host of new and exotic fibers that are capturing the attention of manufacturers and consumers alike," he said. "We have waged a good battle over the last year in dispelling myths about the negative environmental impact of conventionally grown cotton and we intend to support that initiative."

The 2006-2007 crop year has been a tough one for cotton on several fronts, said Mark Messura, executive vice president of global product supply chain at Cotton Inc. The booming interest in alternative fuels, particularly ethanol, has seen farmers plant corn rather than cotton. As a result, cotton plantings are expected to decline 20 percent and production to fall 13 percent, he said.

More troubling is a dip in cotton exports to China. The U.S. has been China's primary cotton supplier over the last 10 years, typically supplying 50 percent of that nation's imported cotton, he said. That's changed this year."This year has been a very off year for exports to China," Messura said. "China is importing about 13.5 million bales of cotton this crop year, the U.S. getting only about 3.6 million [bales] out of that total import opportunity."

However, Messura believes there is cause for optimism next year. China is expected to import 23 million bales of cotton in the 2007-2008 crop year and the U.S. is projected to supply about 10.3 million bales of that.

"We believe the opportunity for China to produce enough cotton to satisfy its mill demand is limited," Messura said.

In addition, global demand for cotton continues to rise. Next year, mills are expected to consume more cotton than is grown during the crop year, the third consecutive year in which consumption would outpace production.

Years of declining apparel prices, brought about by the plethora of low-cost sourcing options in Asia, may also be coming to an end, Messura said.

"That's something that is the result of brands, retailers and other sourcing companies looking for the low-cost suppliers," he said of the falling price line of imported goods. "I think they have found them and are taking advantage of them. The question now becomes how much lower can they go."

The answer, Messura believes, is not much lower.

The conventional cotton industry also has made progress in defending its environmental record during the past year, Messura said. Cotton Inc. has aggressively engaged the apparel industry in discussions about the difference between a sustainable business and one that is strictly environmentally friendly. Cotton Inc. has argued that allegations regarding the industry's use of pesticides and other chemicals have been greatly exaggerated and that the supply of organic cotton can't come close to meeting the needs of the apparel industry.

"The physical volume of organic cotton simply does not exist to allow anyone to have mass volumes of these products," Messura said.

Vendors and retailers are more aware of the limited supply and added cost inherent in organic cotton. Consumers also don't realize significant benefits in the look or feel of a garment based on the type of cotton used, making it all the more difficult to pass on a 50 to 100 percent cost increase.Cotton Inc.'s research indicates that consumers are overwhelmed with labels describing garment performance and that consumer interest in environmentally friendly products is cresting, Messura said. Brands and retailers are still rushing to offer customers an array of environmentally friendly products, but over the next year he expects those retailers who jumped on the trend to slowly back out of it.

"The number of organic products continues to move higher, but consumer interest has turned the corner," Messura said.

Yehia El Mogahzy, professor of textile engineering at Auburn University, said the industry's future should focus on establishing "a unique identity for U.S. cotton to make it clearly distinguishable from all other cotton varieties and provide evidence of competitive advantages in the end product."

However, even if the U.S. cotton industry improves quality through technology and science, there aren't ways to ensure that others don't simply make the same claims in an effort to sell their own cotton supplies.

There are no tests that would certify cotton as U.S. cotton. El Mogahzy pointed out that last year the amount of pima cotton that brands and retailers claimed to be using was more than the available supply. Ultimately, El Mogahzy said, the strength of the U.S. cotton market will increasingly rely on the amount of information it can provide about its cotton rather than the cotton itself.

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