Thank you, Mr. Chairman.
I am pleased to have an opportunity to update you on CCI’s COTTON USA activities.
First off, I would like to thank the National Cotton Council and its members for their support of export promotion programs during the past legislative year. That support is apparent in terms of continued strong funding for the FMD and MAP programs in spite of federal budgetary pressures. It will take our consistent efforts in the future to ensure adequate funding for these programs because the budget pressures will surely not diminish.
Ladies and gentlemen, with a record crop and struggling domestic mill demand this past year, we needed to export a record amount of cotton – and we did. As you know, exports of cotton fiber, upland plus pima, reached 14 million bales in the year that ended just a couple of weeks ago.
At the same time, U.S. cotton yarn and fabric exports continued to increase as well, keeping mill demand at home stronger than would have otherwise been the case. We need this level of exports, and more, if we are going to keep our U.S. cotton infrastructure in place and profitable.
CCI, working with U.S. textile mills and Cotton Incorporated as partners, has carried out very active programs to promote exports of U.S. cotton yarn and fabric, particularly to the CBI and Andean countries. We hope these efforts will expand even more as the industry and negotiators work out regional free trade agreements that truly benefit our manufacturers while helping hemispheric trade compete against cheap third-country imports.
Those of you who attended the CCI Board meeting this morning heard about a number of the activities that CCI, in conjunction with Cotton Incorporated, is carrying out on behalf of the group of participating U.S. mills. Activities such as seminars, trade fairs, technical support and trade teams. CCI has further upgraded its Web and database services to better feature products offered by our manufacturers to potential overseas buyers of U.S. cotton yarn and fabric.
And our efforts continue. We are not content with the status quo or with old approaches to promotion.
Yesterday I chaired the COTTON USA Export Promotion Committee meeting. Each year this committee, comprised of leading U.S. cotton exporters and mills, meets to examine likely scenarios for the next 5 to 10 years of cotton fiber and product trade and to determine future priorities for CCI’s activities overseas
During yesterday’s meeting we found out that it will be difficult for the U.S. to export the requisite 14 million bales or more of cotton fiber a year unless key markets perform according to expectations. Some of those key markets are Turkey, Indonesia, India, Pakistan, Mexico and, of course, China.
For those key markets , we have a variety of programs in place. These include technical and trade seminars, teams, summits, and ongoing contacts between buyers and sellers.
CCI’s COTTON USA trade servicing programs are familiar to most of you. Let me just highlight a couple of them today.
The flagship of these activities is the COTTON USA Sourcing Summit that CCI holds every two years in collaboration with Cotton Incorporated and the U.S. industry. These apex events gather some 400 of the world’s top mill customers and U.S. cotton exporters in one place to talk every aspect of cotton processing and trade. The summits are great places to learn latest developments in the industry, and I can tell you that they are great places to sell cotton – which is why my company strongly supports the summits and participates heavily in them.
The most recent Sourcing USA Summit was held in November of 2004 in San Diego, and the next will be held in the fall of 2006 in Scottsdale, Arizona.
A number of CCI’s activities involve full collaboration with Cotton Incorporated and its technical and marketing staff. Last year you heard about the EFS initiative in Indonesia. This year, with another special USDA Emerging Markets Program grant, Cotton Incorporated and CCI launched a two-year, $300,000 EFS recruitment effort in Turkey. Turkey is today’s second largest export market for U.S. cotton fiber, and it still has growth potential.
We feel that anything we can do to enhance use of U.S. cotton’s advantages, such as full HVI classification, EFS systems and timely/reliable trade will help U.S. market share in spinning countries.
Another area of collaboration between CCI and Cotton Incorporated is the support of the cotton schools. A couple of years ago , CCI initiated a program to sponsor students from the three U.S. cotton training schools to visit the Cotton Incorporated Research and Promotion headquarters in Cary, North Carolina as part of their curriculum.
The program has been a success. I can tell you this goes a long way in making a favorable impression on the future customers for U.S. cotton. They come away convinced that there is no other country that does as much to service its customers from field to fabric as does the U.S. industry. With today’s fierce price competition, we need to look for every other marketing advantage we can to give our cotton an edge in domestic and overseas markets.
COTTON USA Special Trade Missions from overseas play a very important role in CCI’s services to the industry. In June we had a group of Pakistani mill owners tour the U.S. cotton belt on one of these special trade missions. All the delegation members gave high praise to the program.
One of them was so enthused that he returned to his home country convinced that he would dedicate his newest spinning plant entirely to U.S. cotton. If he follows through on this pledge, this could amount to around 30,000 bales of U.S. cotton exports filling the needs of that plant alone.
In addition to the Pakistani mission, we have a Special Trade Mission from China arriving in the U.S. in September, and an Orientation Tour that will be touring the Cotton Belt in October. From an exporter perspective, each of these teams is right on target for what we need to be doing to move our crop to priority markets around the world.
Again, these are just some sample activities being carried out to promote U.S. fiber.
I would be remiss if I did not single out China.
As CCI president this year, I am putting particular priority on CCI’s activities for China. I already mentioned the China Special Trade Mission, but we have so much more to do. Everything from teaching the Chinese the basics of U.S. cotton classing, to contracts and banking. We need a greatly stepped-up effort in China from our industry, and from our export promotion organizations.
I am pleased to say that we are getting that program in place. In addition to the special trade mission, CCI is initiating a “cotton school” effort in China that is targeted at training new buyers in that country to ensure that our trade moves as smoothly as possible in a difficult environment.
And, I can tell you that it is a difficult environment. I have made countless trips to China over the years and have had some difficult negotiations with Chinese counterparts. However, none was more difficult than arriving in China with Allen Terhaar and Jeff Coey in mid-May this year, barely 24 hours after the U.S. announced its safeguard actions against Chinese textile products.
CCI had pre-arranged press interviews and Chinese trade organization meetings with the idea that spring would be good timing to get across the positive message of cotton and COTTON USA to the press and consumers in China.
Instead, we faced one press interview after another that asked us to explain how the U.S. could impose safeguards on its best export customer for U.S. cotton. Was this not a "trade", they asked?
Finally, in a moment of frustration, I responded with “this is not a war, it’s a marriage!”
Well, you can imagine that this is the line that led the news that evening.
In retrospect, I stand by that line.
It is a marriage. It is for the long term, it will have its difficult moments, but we are better off working it out rather than going our separate ways. Both countries will benefit from this marriage over the years. We have to! It is just too important for U.S. cotton and for Chinese textiles not to have it work out.
In order to intensify our contacts in China, CCI and Cotton Incorporated are both expanding their staffing in that country, and the two organizations are working out details for office co-location in Shanghai. This will be very positive for the coordination and joint effectiveness of their programs.
CCI and Cotton Incorporated are also collaborating on consumer research and strategic thinking to determine how best to work with China on promoting cotton products at retail. With its rapidly growing economy and expanding middle class, China represents perhaps the largest opportunity in the world for added cotton consumption at retail. However, this will not happen on its own. It will only happen through some form of effective consumer promotion – and our two organizations are the most experienced in the world when it comes to cotton consumer promotion at retail.
So, stay tuned for this one. It could be big.
Of course, CCI is not neglecting consumer promotion elsewhere in the world.
The COTTON USA consumer promotion program remains at the core of CCI’s export promotion strategy. With very limited budgets against the challenge of promotion, CCI has to constantly innovate and leverage to make sure we have impact at the consumer level.
That includes closely tying CCI’s expenditures on consumer and point-of-sale promotions to our mill, brand and retailer partner spends in target markets. CCI does this through its extensive COTTON USA licensing program, and through its Supply Chain Marketing initiative.
I will not go into detail on those programs, but suffice it to say that CCI has a well-defined set of procedures and incentives to tie the mill customer for U.S. cotton or U.S. cotton yarn and fabric all the way through to the downstream retail customer and end consumer.
I saw part of this process myself when I visited the Texworld and Premier Vision trade fairs in Paris this spring. These are huge events, and CCI and Cotton Incorporated collaborate to give U.S. cotton a presence at these fairs and others in order to ensure that cotton is on the sourcing companies’ minds, but also to connect the dots from mills using U.S. cotton and cotton products through to their end customers.
One exciting development that fits with the Supply Chain Marketing effort is the possibility that the COTTON USA trademark will be registered for use here in the USA. Currently CCI is awaiting an opinion from the Federal Trade Commission and from U.S. Customs regarding its operating policies on licensing and labeling. If those opinions are favorable, as expected, U.S. retailers will have the opportunity to license and use the COTTON USA Mark on qualified product here in U.S. stores.
Remember, to carry the COTTON USA trademark requires that product be 100 percent cotton with at least 50 percent of that cotton coming from the U.S.
We believe that U.S. consumer s will be quite interested in product labeled with the COTTON USA Mark, and that the opportunity to label their products as COTTON USA will mean that we can draw even more of your cotton through the supply chain into the biggest market of all for cotton products at retail – the good old US of A! As with so many other efforts, CCI is working collaboratively with Cotton Incorporated on this initiative as well.
So, get ready - your next CCI president may ask you to always look for the COTTON USA label in your store on your quality cotton apparel and home furnishings purchases!
Finally, I want to mention Cotton Days in Japan, Korea and Taiwan. I traveled to each of those countries in May for a marathon Cotton Day tour. I must admit that I am a bit of a skeptic when it comes to such promotions – but I came away a believer.
It is hard to imagine how an industry like ours can focus the energies of the cotton textile manufacturers, retailers, fashion designers and the press in a foreign country around the topic that is central to our business – cotton. But, CCI and Cotton Incorporated continue pull it off - year in and year out.
Gathering everyone from supermodels in slinky cotton outfits, to babies in designer cotton diapers, CCI and Cotton Incorporated make a splash for cotton in the local and national newspapers and television each year. Such events help to keep cotton apparel and home furnishing on the minds of the consumer in these countries for Cotton Day -- and hopefully every other day as well.
We have not forgotten other cotton products. CCI continues its efforts to promote cottonseed meal in livestock operations in Mexico. CCI also managed another U.S. cotton linters trade team to China in July of this year. The trade team came back with a very positive report on the prospects for further linters exports to China, with the biggest constraint likely to be our ability to supply sufficient volume.
I hope what I have presented to you today gives you a feel for the very active and diversified program that CCI carries out around the globe in conjunction with its U.S. industry partners, and Cotton Incorporated and USDA. As I said, this is just a sampling of the activities.
I will end my remarks where I started them – with the message that your support is fundamental to the COTTON USA export market development program, and exports of cotton fiber and value-added cotton products are increasingly vital to the survival and profitability of our industry.
Ladies and gentlemen, there is no getting around it. This industry is “export dependent”, and we need export programs we can depend on.
CCI’s COTTON USA program is such a program.
I again thank the National Cotton Council and its membership for all their financial and policy support to keep CCI and the COTTON USA program thriving.
Thank you!
