I am pleased to have an opportunity to update you on some of my thoughts on CCI?s COTTON USA activities. We have been very active these past months.
In this morning?s CCI Board meeting I reported on our COTTON USA Executive Delegation visits to Bangladesh, Indonesia and Hong Kong and some of the issues that team dealt with.
This afternoon I would like to make a few comments about the Cotton Day celebrations in Asia and some other aspects of CCI?s programs.
For some time now we have been talking about how to generate underlying consumer demand momentum for cotton products. I think CCI and Cotton Incorporated have developed a solid concept in the "Cotton Day" events that they started in East Asia and are looking to expand to other areas of the world.
Cotton Day is a simple concept. It means picking a day when the U.S. cotton industry ? along with the local industry, press and consumers ? can all focus on the importance of cotton in their lives. Cotton Day began in Japan seven years ago as a trade event, and has now been developed into a much bigger concept.
I can tell you that the amount of PR, interviews and press articles spun off from these events in Korea, Taiwan and Japan was fantastic ? particularly in Taiwan.
I know CCI staff will probably talk to you more about where CCI plans to take this concept from here on, but I must tell you that I was very impressed. It may be something that we look at having more of our trade involved in events in the future in order to maximize the opportunity for U.S. cotton.
However, the primary target audience that we really need to focus on is that end consumer for finished cotton products such as apparel and home furnishings. We need to constantly find vehicles to highlight our product against the very tough competition coming from man-made fibers.
Let me switch gears for a few minutes to give you some of my thoughts on where things are headed internationally, and what is on the minds of the overseas press. These topics are top of mind because it seemed like we did a hundred press interviews during our Cotton Day tour, and the reporters? questions focused on a few common themes. Here are some of them:
Farm Bill ? what about this program to support American producers? Why is that in your interest, and why is it in our interest?
- Will provide assurances of stable supply
- Will not stimulate more acreage
- Benefits to overseas and domestic mills based on competitive pricing
What about surplus production and stocks?
- Only have surplus production if there is too little consumption
- We know we can produce cotton and cotton products, we now need to enhance our promotion of those goods to the consumer
- We know we are in a war with man-made fibers for markets ? we need to develop tactics to win that war
Isn?t the U.S. Farm Bill driving prices down and other producers out of business?
- There are very few countries that do not vigorously support their agriculture one way or another, and the United States is doing just that
- Cotton production in the U.S. under this Farm Bill is likely to stabilize, but not likely to expand
- The U.S. industry, through its self-help measures such as the CCI and Cotton Incorporated programs, has built an additional 10 million bales of cotton of annual product demand in the U.S. as compared with where it would be if we had not vigorously promoted our product since the 1970?s
- The U.S. is the biggest importer of finished cotton products in the world
- Where would prices and surplus stocks be if the U.S. had not built that demand and had an open market for products????
Isn?t cotton just cotton? Why should the mill or the consumer care where the cotton comes from in their purchase decisions?
- Cotton is not just cotton ? it comes in all sizes and shapes
- We offer every quality and characteristic the customer might want in the cottons grown across the U.S.
- We offer 100 percent HVI-classed cotton
- We offer service and promotion through CCI and Cotton Incorporated
- We offer financing
- We offer some of the most contamination-free cotton in the world
- And, through our co-op and merchant exporters, we offer reliability unequaled by any other country
These were just a few of the many questions we faced, some of which were quite probing ? including the inevitable question of where prices are going. You can imagine how I responded to that one!
I would be remiss, however, if I led you to believe that everything is just fine out there on the export market.
Yes, we are exporting a record level of cotton ? 11 million bales. However, in talking with mills in the countries I visited for CCI these past few months, there are some persistent issues. Some of those issues, such as contract sanctity, need to be addressed by the exporting community ? and as President of the American Cotton Shippers, I can tell you that we are working on them.
Some of the problems, such as neps and high micronaire need to be addressed in the seed, producer and ginning sectors.
As a member of this industry, however, there is one current problem that is causing considerable damage to our reputation as a preferred supplier this year. That problem is sticky cotton. This topic came up very strongly in each of the 6 countries I visited for CCI in the past 4 months.
I do not wish to go into detail here regarding this issue. However, as some states found out several years ago, getting a reputation for sticky cotton is one of the things that can cut into prices and basis faster than almost anything else.
It is important that the NCC and we, as an industry, address this head on and provide the reassurances necessary to our customers overseas and in the U.S. that we are taking all appropriate measures against the causes of sticky cotton.
CCI?s theme for the past few years has been "Demand, Demand, Demand!"
I don?t think anyone here needs to be reminded of just how important the demand side of the equation is to our productivity and our profitability.
While we can certainly point to the strong dollar, to a slowdown in the U.S. economy and to inefficiencies in trade with countries like China, the main problem causing low prices is too little global demand for the available supply.
In his report to the American Cotton Shippers Convention last week, Dr. Terry Townsend reported that production this year exceeded demand by 5.9 million bales. Next year that should change, with demand exceeding production by 5.6 million.
Why the change? If it happens, it will be because of a drop in production ? not because of a significant increase in consumption.
Ladies and Gentlemen, it is our great challenge to ensure that final consumer demand for cotton is rising strongly in the world. An individual business might do well for awhile in a declining industry, but it will not do well for the long run.
Lack of final demand in the developing world is a major part of the problem. According to the ICAC, developing countries account for 76 percent of world cotton mill use, but only 43 percent of end-use consumption. In contrast, industrialized countries account for only 20 percent of mill use, but 50 percent of final cotton consumption.
This need to reverse a trend toward man-made fibers is behind CCI and Cotton Incorporated teaming up to start what they have called the "Cotton Gold Alliance." Allen Terhaar and Dean Turner told us more about their plans in this morning?s CCI Board meeting.
All I want to tell you is that I believe very strongly that this is the right direction for our cotton demand enhancement effort, particularly in developing countries. I urge each of you to track this initiative closely, and get involved as the opportunity arises.
In the meantime I thank you, Mr. Chairman and members of the NCC Board, for providing me the opportunity to talk to you briefly about the COTTON USA programs. By focusing on demand enhancement, we are hopeful that we can provide the overall environment for profitability for all segments of our great industry.
CCI and its programs play a key role in that demand enhancement, and I thank all of you for your continued strong support.
