Cotton selling at $1.50 to $2 a pound may have rung a bell for sellers of cotton. But it also lowered the boom on demand. Cotton’s share of the textile market place has dropped from about 60 percent to 52 percent over the last year or more, thanks in large part to substitution of man-made fibers by fear-stricken end users.
The game-changing events began in 2010-11, noted Berrye Worsham, president and chief executive officer of Cotton Incorporated, during a recent cotton producer tour of the organization’s Cary, N.C. research facility. “The United States had basically sold out of the crop, India had suspended exports, demand was very strong, China was buying aggressively, hedge funds were moving into commodities, and we saw an unprecedented rise in volatility in the cotton market.”
Unfortunately, the fear of future cotton shortages – along with high cotton prices – sent traditional raw cotton users running toward higher blends of polyester, which at the time was in plentiful supply and about half the price of cotton. Unfortunately, they haven’t come back. A lot of damage was done to cotton demand. Getting it back won’t happen overnight.
Worsham noted that each percentage point of market share lost represents about 300,000 bales of cotton just in the U.S. consumer market, meaning the loss of demand is equivalent to about 2.4 million bales of cotton. That’s about the size of the entire Mid-South cotton crop grown in 2009. The losses are much more significant in the world view.
Cotton Incorporated has faced this situation before. Back in the 1970s, cotton’s share of the market place had dropped to 35 percent to 40 percent before the organization’s “push-pull” strategy began to pay off. The objective was to “push” cotton textile innovations into the market through product and process development, while building consumer demand, or a “pull-through” advertising and promotion campaign.
Worsham says Cotton Incorporated is focusing on four major initiatives for 2012-13, and even bumped its budget by $3 million to address them – cost of cotton production, sustainability, innovative product development and remaking the case for cotton to brands, retailers and consumers.
Cotton is not a perfect product. It has short fibers, polyester does not. Polyester spins well, something you can’t always say for cotton. But as long as consumers prefer to wear cotton, mills will continue to spin and manufacture it.
Worsham doesn’t want us to get too comfortable with that thought however. “If we are not diligent to make sure that we can compete, we can get knocked off.”
Indeed, cotton’s biggest competitive challenges aren’t necessarily China, Brazil or India. It’s the inclination to substitute something else for it, whether it’s $16 soybeans or man-made fiber.
Cotton’s competitiveness is unique in the commodity world, demanding a comprehensive understanding and creative research, promotional and marketing activities. As usual, Cotton Incorporated is making the right moves.