It’s time we acknowledge a couple of realities in the U.S. cotton industry. Structural conditions will never return to “the good old days,” and U.S. farmers must look to the market for the returns on their substantial investments of time and capital.
For many of us who have spent our lives working in the domestic cotton economy, that’s a difficult set of realities to accept.
Until recently, cotton farmers across the United States have been able to evaluate the investments in land, equipment and infrastructure required for cotton production as a multi-year commitment with a reasonable expectation of economic gain. Today’s farmer now compares cotton to a variety of competitive crops, depending on his viable choices.
The fact is that the competition for acres is intense. While prices have strengthened recently, cotton has taken some bruises the last couple of years. Nobody knows that better than the symbiotic businesses that have scaled to process the volume of cotton grown through the first seven years of this decade.
Most of us are busy figuring out how to move forward under these conditions. Although adjustments may be painful for a time, we can also rest in the knowledge that markets always prevail in the end. But American farmers are now doing what they always do when challenged. They innovate. Farmers are looking at commodity markets, costs of production, yields and returns more diligently than ever. To borrow a concept from the manufacturing sector, “continuous improvement” will be the key to survival.
As a lifelong participant and observer of the cotton industry, I am convinced that cotton will continue to be a viable, competitive choice for farmers in the United States. It is unquestionably one of the most durable crops a farmer can plant. It will perform under conditions that wilt and destroy other crops.
I also believe that cotton infrastructure in the United States will continue to become more efficient. The capacity to gin, warehouse and ship the U.S. crop will scale itself to process the annual output at the least possible per-unit costs.
Most importantly, the world needs U.S. cotton. It’s the most dependable supplier for the vast global textile business that will benefit from a budding global recovery that we all want and need. As world population progresses toward an estimated nine billion people over the next 40 years, opportunities will abound for those who prepare for the growth with innovation and determination.
Africa and Latin America will become increasingly important markets as they grow to 20 percent and 10 percent of the world’s overall population levels, respectively.
Although Asian populations will plateau, their ability to consume will no doubt increase significantly. China is still primarily a business-to-business (B2B) economy. It has 34 companies in the Fortune Global 500 list that are all B2B by nature. But as individualism steadily gains in the country, China’s appetite for consumer goods will surely follow. Support by industry analysts for this assumption has been increasing. My conclusion is that it will not be “if” the Chinese consumer will make a significant impact on demand, but “when.”
Any discussion of economic activity in Asia must also include India, which continues to solidify its position as one of the world’s growing economic powers. Its economy is now ranked fourth by purchasing parity and annual GDP growth.
I’m closing my thoughts with a word about technology. Next to our land, it is our most valuable asset. Make sure you’re using it to your advantage. We believe strongly that it is the key to lowering costs and generating leverage in any market.
– Phil Burnett, Memphis, Tenn.
President/CEO of The Seam