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- SPECIAL REPORT -

Understanding China

U.S. Industry Group Believes Trip Accomplished Goals
  

By Tommy Horton
Editor


In June, a National Cotton Council leadership team visited China to learn more about that country’s cotton industry development, as well as continue building a relationship with U.S. cotton’s No. 1 customer. U.S. cotton leaders previously visited China in 2006 and 2007. Producers on the tour believe the experience will continue to enhance this important industry relationship.


How important is China to the U.S. cotton industry? Better yet, how important is U.S. cotton to China? Those questions could be the lead-in to a doctoral dissertation, or maybe a best-selling novel. Suffice it to say that one fact remains quite clear in discussing these questions.

Both countries need each other for obvious economic reasons. The United States is doing everything it can to enhance the relationship with its biggest cotton customer. Conversely, the Chinese are looking for a reliable supply of high quality cotton to supplement what it already produces.

When all is said and done, that is the bottom-line analysis.

For that reason, U.S. industry leaders are justifiably enthusiastic after a National Cotton Council leadership team visited China in June. The trip continued the momentum achieved in previous U.S. delegations’ visits in 2006 and 2007.

In 2006, U.S. cotton leaders were on a fact-finding trip to learn more about their biggest raw cotton customer. In 2007, cotton leaders joined USDA officials in updating Chinese cotton industry officials and mill buyers on U.S. cotton quality.

Hardwick Leads Delegation

This summer’s industry delegation was led by NCC vice chairman Jay Hardwick, producer from Newellton, La. Other members of the group included: producers John Lindamood, Tiptonville, Tenn.; Chuck Coley of Vienna, Ga.; and Eddie Smith of Floydada, Texas.; along with warehousemen Trent Felton, Marianna, Ark., and Dean Church of Lubbock, Texas; ginner Sid Brough of Edroy, Texas; merchant Cameron Austin of Dallas, Texas; and cooperative official Jarral Neeper of Calcot, Ltd., in Bakersfield, Calif.

Gary Adams, NCC vice president of economics and policy analysis, also accompanied the group.

“I think it was a successful trip,” says Hardwick. “It continues to allow us to have contact with the Chinese. That is something we need toremind ourselves in the context of doing business.

“In the western world, we want to conduct business, make a decision and move on. The Chinese want to have a basis for involvement. They want to have a level of confidence in the relationship.”

If early reviews are accurate, Hardwick and the rest of the delegation made significant progress in these aforementioned areas. He says there was a noticeable “comfort zone” in communicating with Chinese leaders at all levels – whether sitting in a conference room at the China Cotton Association in Beijing, visiting a port facility at Shanghai, touring textile mills or conferring with researchers.

Both sides were able to converse easily on issues of mutual concern, such as fiber quality, timely shipments and contract compliance, to name a few.

Bright Future Ahead?

Another fact also became clear after the tour was completed. Because China is contemplating the idea of moving some of its cotton acreage into grain production, there are “demand opportunities” for U.S. cotton in the future.

“I don’t think we should look at China as a competitor or antagonist,” says Hardwick. “There are some exciting things out there in the future for this relationship. We can bring real value to this country with our raw commodity. We just need to keep building on this relationship.”

Hardwick has visited China numerous times, beginning in the 1970s before he became actively involved in the cotton industry. He continues to be amazed at how far the country has progressed economically.

“The Chinese face some big hurdles as they try to become a global leader in the 21st century,” he adds.

“The infrastructure is being built, but you still have 800 to 900 million people who still live on the farm in the countryside. The government simply can’t displace those people as it considers mechanizing its agriculture.”

Although the United States exports between 5 and 8 million bales into China each year, this Asian country is projected to import 13.7 million bales in 2008 and 16.7 million bales in 2009.

Competition From India

Georgia producer Chuck Coley says it’s obvious that China likes U.S. cotton and probably prefers it. India, however, usually sells its cotton at a price that is 3 to 5 cents lower.

“That’s how India is gaining some market share in China,” says Coley. “The Chinese mills are feeling an economic pinch, and they’re willing to buy Indian cotton if it can help improve their bottom line.”

Coley had other impressions of China as he reviewed the 10-day trip that occurred in June.

He was particularly impressed at how modern Beijing appears as it prepares for the Olympics. And he thought the textile mills were as advanced as any he had seen in the United States.

“I was also intrigued by the number of crops and smaller plots that you’d see in the middle of a big field,” Coley says. “I had heard about this, but it was very interesting to see this kind of crop management.”

Addressing All Questions

Texas producer Eddie Smith echoes Coley’s statements about the rapid modernization of China’s textile mills. But he was downright shocked when he walked into one of them and saw how technologically advanced it was.

“I’ve been in a lot of mills, so I thought I was prepared for what I might see,” he says. “But it was a shock to see how advanced they were. They’re what I would call ‘lights-out’ mills. You could turn out the lights, and the mill would keep running by itself. That was impressive.”

Smith says it’s clear that the Chinese appreciate all of the technical expertise they are receiving from the NCC, Cotton Incorporated and USDA – including HVI classing and EFS systems.

The Texas producer says it was also obvious that the Chinese are concerned about other issues besides fiber quality. Several questions were asked about the decrease in U.S. cotton acreage brought on by skyrocketing corn, soybean and wheat prices.

“We heard those questions all the time,” says Smith. “We tried to reassure them that we still have the acreage to be a reliable supplier.”

Learning More About China

All parties, including NCC economist Adams, believe that both sides are now more comfortable with each other since the initial exchange visit in the fall of 2006.

Instead of a quiet atmosphere in a conference room with little reaction from the Chinese, Adams and other U.S. representatives noticed smiles, facial expressions, nodding heads and even applause.

“That was a sign that we’ve come a long way in our understanding of each other,” says Adams. “In the old days, that would’ve never happened.”

Contact Tommy Horton at (901) 767-4020 or thorton@onegrower.com.


China Cotton Facts:

• 35.5 million bale crop in ‘08.
• 54 million bales consumed in ‘08.
• World’s largest textile exporter.
• Will import 13.5 million bales in 08.
• Most important U.S. export market.
• Will import 5 to 8 million bales from United States in ‘08.

 


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