GREENVILLE, S.C. — The demand for cotton has grown dramatically over the last several years, but concern over whether the U.S. economy can sustain momentum is mounting.
Speakers at Cotton Incorporated’s 19th annual EFS System Conference here last week questioned whether high levels of consumer spending on apparel could be maintained in the face of continually rising energy prices.
“There’s been more demand for cotton in the past three years than in the previous 17, I believe,” said J. Berrye Worsham, president and chief executive officer of Cotton Inc., during his keynote address to a crowd of more than 175 attendees on June 5.
While there is ample opportunity to expand the use of cotton in developing countries such as Russia, China and India, Worsham noted that in the U.S. it is taking significantly more economic growth to generate modest increases of apparel sales.
Women’s apparel in particular is showing early signs of a potential slowdown. Mark Messura, executive vice president of global product supply chain for Cotton Inc., cited data from NPD Fashionworld’s AccuPanel for the first quarter of 2006 indicating that sales of women’s apparel by units had increased 8.6 percent and had grown 6.4 percent on a dollar basis.
“What doesn’t look so good is the direction in price, particularly in the women’s market,” said Messura, pointing out that despite the growth the average price for women’s apparel has fallen 2 percent.
Messura also noted the NPD data indicated that women’s apparel sales were being generated by the poles of the demographic spectrum; the 18-and-under demographic and those over the age of 55 account for the majority of growth. The result, said Messura, is a “missing middle” in the women’s market and signs of a slowdown in what should be its sweet spot.
“This is the heart of the women’s market and it’s not performing well,” said Messura of the 19- to 54-year-old age bracket.
The average price paid for women’s clothing declines as women get older. Similar trends were seen, to a lesser extent, in the men’s apparel market.
The difficulties in expanding the domestic market for cotton use stem from the fact that it is already the fiber of choice among a large segment of the population. NPD Fashionworld’s AccuPanel found that 56.3 percent of apparel purchases were 100 percent cotton garments, while 78.9 percent of apparel purchases contained some cotton.
Corporate America continues to embrace business-casual attire, which creates continued opportunity for domestic expansion in cotton, according to Kathryn Novakovic, director of product trend analysis at Cotton Inc. Novakovic said chatter about companies returning to formal business attire had remained just that, and with jeans cleaned up and given a more tailored look, consumer attitudes are changing about where it is appropriate to wear denim.
“According to a recent study, 55 percent of all respondents felt it was appropriate to wear denim in the workplace,” said Novakovic.
The cotton industry is putting much of its faith in denim. Domestically, the greatest opportunity lies in the premium segments, which Cotton Inc. defines as jeans that cost more than $60. But premium categories represent the smallest segment of the denim market. The biggest opportunity, therefore, rests in getting the consumers of developing countries hooked on denim.
“We know that the U.S. is known to be denim lovers, so we have to consider where there are potential opportunities,” said Novakovic. “The U.S. consumer has nearly nine pairs of jeans. In China, this [figure] is much less, at around four.”
The cotton industry is also facing challenges over the environmental impact of its agricultural practices. Roy Cantrell, vice president of agricultural research at Cotton Inc., dispelled the idea that cotton required excessive amounts of water to grow, saying cotton has been bred to be a drought-resistant plant.
Edward Barnes, associate director of agricultural research at Cotton Inc., presented the results of studies that showed cotton growing did not require excessive amounts of water.
“Grass uses more water than cotton in Mississippi and just about anywhere else,” said Barnes. “This idea that cotton is some kind of water hog is just an invention.”
It’s also in the interest of cotton growers to reduce the amount of water necessary. Barnes said the industry’s latest efforts are centered on developing site-specific watering techniques, mapping cotton fields to show areas of sandy soil, where more water may be necessary, and low-lying areas that require less water. The goal is to eliminate the traditional method of watering an entire field at the same rate.
Technology will play a crucial role in site-specific watering. In a recent project, Cotton Inc. used radio frequency identification sensors in the soil to control water flow. The RFID units monitor soil moisture, sending a signal to an orbital sprinkler that tells it to turn specific sprinkler heads on or off as it approaches.
Site-specific strategies are also being employed for pesticides, with promising results, and growers are using natural predators to counter pests like aphids.
According to Patricia O’Leary, senior director of agricultural research at Cotton Inc., farmers must decide to use pesticides when they find 50 percent of their crop is infested with aphids. However, a study found that if ladybugs, a natural predator of aphids, will have the same impact as a pesticide. The potential savings to farmers over a season can amount to millions of dollars, according to recent studies.
The good news for cotton is that global consumption is on the rise. According to a U.S. Department of Agriculture report released last month, global cotton use is expected to reach 122 million 480-pound bales for the 2006-2007 marketing year, representing a 12 percent increase from the 108.9 million bales used globally in 2004-2005. Not surprisingly, China is responsible for most of the growth.
While cotton use is up, production looks to be falling short. Current forecasts put global cotton production at 115 million bales this year, or 7 million bales shy of expected consumption.
EFS, which stands for Engineered Fiber Selection, is a software package introduced in 1982 that allows various qualities of a cotton bale to be quickly analyzed and evaluated, allowing for the production of a more uniform product.
The system has become a key element to expanding the use of U.S.-grown cotton. Foreign mills are being encouraged to use the software, and must agree to use U.S. cotton in their production. EFS is used by more than 90 percent of the mills in the U.S., and 29 mills in Europe, Canada, Mexico and Asia.
Global outreach is adding diversity to the mix at the Cotton Inc. conference, although most visitors still are Southern cotton growers and mill owners. Last year, contingent of cotton growers from west Africa attended the conference, and this year there were visitors from Thailand, South Korea, China and Latin America.