Louisiana Producers Learn About China’s Need For
By Mike Danna
Like any U.S. cotton farmer, Lacour knows that China, at least for the foreseeable future, will be the No. 1 market for U.S. cotton exports. It’s a trend that’s been increasing for the last decade.
According to the USDA’s Agricultural Trade Office in Shanghai, China purchased $2 billion in U.S. cotton last year. It’s a market that’s slowly strangling the U.S. textile sector, but a lock for U.S. cotton exports and the farmers who grow the crop.
“China is where it needs to be right now in terms of U.S. cotton exports,” says Shanghai ATO Director Wayne Batwin. “Right now, with $2 billion in (U.S.) cotton purchases, China is still looking for cotton around the world, but it shows that its output is steadily increasing.”
China’s cotton products manufacturing centers are expanding at an increasing rate. It’s an indication of China’s desire to fight inflation and close the gap between imports and exports, says David Kiefner, ATO deputy director in Shanghai.
Kiefner, speaking to a group of Louisiana farmers who toured the country in January, says China’s economy is still red hot, adding the boom is expanding China’s middle class.
“They’ll need increased goods and services,” Keifner says. “The food and ag sectors of trade with China will see some direct benefits.”
Seeing China Firsthand
When Ryan Kirby, a petroleum engineer-turned-cotton-farmer from Belcher, La., landed in Beijing, he knew he had set foot in America’s second largest trading partner’s backyard. Kirby, who farms 700 acres of cotton, greeted the prospect of China’s appetite for cotton with tempered understanding.
“The fact that concerns me is that so many of our eggs are in one basket, so to speak,” Kirby says. “If they decide for some reason they can get cotton cheaper from India or other countries, where is our cotton going to go? We’re kind of at the mercy of China. We have to give them what they want.”
And what China wants is better cotton, higher quality cotton, which might not always come at a higher price.
“One of the things we’re hearing is that we have to produce the kind of cotton that they want,” Kirby continues. “The types of mills here require higher quality cotton than typically we are used to producing in the United States. So we’re having to produce higher quality cotton that may not yield quite as much.”
Tensas Parish cotton producer Ben Guthrie sympathizes with Kirby. Guthrie was also part of the LSU AgCenter’s leadership program that traveled to China.
“China buys a lot of cotton from us, and we’re dependent on them, but they are also dependent on us,” Guthrie says. “China is struggling more and more to feed its population. They’re grappling with that, so it looks like they’re content to let us supply them with the raw materials, such as cotton and soybeans, and they’ll ship it back to us in the form of the finished product.
“It’s definitely scary,” Guthrie continues. “But they’re our main customer, and we’ve got to learn how to supply them. We’ve got to learn the kinds of quality they want us to grow, and we’ve just got to adapt to that export market.”
Hasn’t Been There, But Already Done That
George Lacour wasn’t with the LSU AgCenter group in China, but that doesn’t mean he doesn’t understand the market dynamics of the country and its U.S. cotton purchases. It’s a little equation he likes to call yield-plus-quality-equals premium.
“We get paid first by yield, then we get premiums or penalty discounts second,” Lacour says. “It’s yield that keeps us in business. And we are always looking for a better variety with better fiber quality and better yield.”
Kirby said as much during his trip to China. When visiting a silk plant, he saw the need for higher quality fibers, no matter the source material, given China’s gigantic spinning mills. And cotton that grades well is where the next batch of high-end cotton products will come from.
“Some varieties grade well and others don’t,” Kirby says. “It’s that battle between grade, quality and yield. We just have to plant a variety that grades well. If we don’t, we get penalized pretty hard.”
DP 555 – The Fiber Of Choice
Both Lacour, Kirby and Guthrie agree DP 555 has been a stable staple on their respective farms. If China wants a quality cotton, for now at least, this is the variety.
“555 holds the biggest single variety share on my farm,” Lacour says. “That’s pretty much the case in Louisiana and the Mid-South.”
“Triple nickel has a pretty decent grade in variety,” says Kirby. “It might not yield as much as some other varieties, but when it comes to the bottom line, it’s going to put a dollar in my pocket. When I consider how much of my cotton ends up in China, I may be better off plant-ing a variety that grades better (rather) than one that yields better.”
Guthrie, who on his China visit saw textile mills that employed more than 1,000 workers per shift, agrees with Kirby.
“If we were growing 80 percent of our crop for the domestic market, we could grow lower quality cotton and sell it competitively,” he says. “But we grow 80 percent of our cotton for the export market, so it has to be of a much higher quality. Chinese mills are demanding a very high quality cotton, so we don’t have a lot of choice. Fortunately, seed companies know that.”
With cotton experts touting China’s ever-increasing demand for global cotton production, the die that will mold buyer and seller is ready to be cast. Whether you’ve been to China, or just read about it in the farm media, it’s a market that’s setting the pace for not only U.S. cotton exports, but for all worldwide farm commodities, regardless of where they’re grown.
“China can buy cotton from another source just as easily as it can from us,” Lacour says. “It’s been proven that the United States is now the source of last resort, now that India has increased its cotton yields. They can meet China’s (cotton) needs just as well as we can. The United States once had a fresh shot at the Chinese market. Now we may have the last shot.”
Mike Danna is Louisiana Farm Bureau’s public relations director. Contact him at email@example.com or (225) 922-6200.