Fibermax Cotton Continues to be Successful in World Markets

Sunday, December 13, 2009

There’s been a lot of hand wringing over the sad state of affairs in exports of U.S. cotton. Exports in 2008 really sagged and in 2009 exports have struggled. Of course, such declines are a direct result of the global recession as textile mills have slashed consumption of cotton and other fibers resulting from weak sales of yarns, fabrics and made-up apparel products.

But something else has happened in the market that has gone largely unreported in the trade media: While overall exports of U.S. cotton are down sharply, exports of Fibermax-type cotton (that is, cotton with a staple length greater than 1-1/8” that’s not Pima) has taken over as a driving force behind U.S. exports.

I say “Fibermax-type” cotton because Fibermax varieties now directly compete with SJV varieties in terms of price and quality and U.S. government export statistics lump Fibermax varieties in with SJV for statistical purposes. But with acres of SJV now making up just a small percentage of the U.S. crop, Fibermax has grown to be the dominant variety of quality upland cotton in the U.S.

It’s not surprising, then, to see a shift away from traditional upland cotton in favor of quality upland varieties like Fibermax. Mills demand the quality in order to provide better products at a good price for their customers. In turn, retailers are looking for better ways of delivering consumers with better apparel for a better price in order to maintain sales during the economic recession.

Not only the largest producer of the textiles in the world, China is a major consumer of Fibermax–type cotton. In fact, in 2009 U.S. exports of these varieties have increased at a time when the upper and lower portions of the market (Pima and traditional upland) saw stiff declines.

It is also important to note that the Fibermax-type cotton sells at a premium price to traditional upland cotton.

I have some comments concerning the most recent U.S. export results (as compiled by the Census Bureau) for October 2009. These are:

1. Overall exports to the world are down nearly 13% for YTD October 2009 compared to the same period of 2008, but exports Fibermax-type cotton are up by more than 17%. Although aggregate cotton exports continue to fall it appears that the rate of growth in Fibermax-type cotton appears to be slowing slightly (for the first half of 2009 Fibermax-type cotton exports were up by more than 40%). Much of the slowdown in the rate of growth is the result of a sharp decline in imports by China (-16%), the largest market for Fibermax-type cotton, however much of this decline has been offset by increases recorded in Turkey, Pakistan, Bangladesh, Vietnam and Taiwan.

2. So far in 2009, traditional upland cotton's share of US exports is down to 57%, which compares to nearly 64% for the same period in 2008; for Fibermax-type cotton, its share of the export market is up nearly 34% from just 25% a year-ago.

3. For YTD October 2009, exports to China were 1,013,000 bales, down 16.1% from comparable 2008 levels. With this decline, China’s share of the Fibermax-type cotton export market has fallen to just over 29%, down from almost 41% during the same period in 2008.

4. The average price for Fibermax-type cotton according the Census Bureau is 60 cents/pound for YTD October 2009, which compares to 54 cents/pound charged for traditional upland. However, the price for Fibermax-type cotton is down from comparable year-ago levels by 17 cents/pound. The price for traditional upland was also down by 17 cents/pound.

5. Other highlights: YTD October 2009 exports to Bangladesh have soared by nearly 260%. Exports of Fibermax-type cotton to Pakistan were up by nearly 253% for YTD October 2009, while exports to Hong Kong were up by more than 370% and exports to Vietnam were up by nearly 80% and exports to Turkey were up by 138%. Interestingly, exports to Morocco are up by more than 2,081% (we recently discovered that much of this is being consumed by Fruit of the Loom's mills in Morocco), while exports to Indonesia are up by 1.5% and exports to Taiwan were up by 180%. Exports to Mexico continue to fall, down by 28%.

Despite the apparent slowdown in imports by China, 2009 will mark the second consecutive year where China has consumed more than 1 million bales of Fibermax-type cotton. It is interesting to note that despite very poor business conditions in Indonesia and Thailand, exports of Fibermax-type cotton continue to rise. Turkey has grown be the second largest market for Fibermax-type cotton exports this year at a volume nearly equal to 50% of China’s imports.

The attached spreadsheet tells the story: download XLS file

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