Americans tell Australians to Improve Cotton or Perish

The Australian cotton industry has been put on notice - lift base grade or lose your market edge. Genevieve McAulay

Published on: Aug 20, 2004

The Australian cotton industry has been put on notice - lift base grade or lose your market edge.

Addressing delegates at the 12th Australian Cotton Conference on the Gold Coast last week two of the global cotton industry’s experts warned that Australia's position as a world leader in quality fiber was under threat.

Billy Dunavant III, president of Dunavant Inc., and Ed Jernigan, Globecot, both of Memphis, claims Brazil and USA's new Fibermax were waiting in the wings.

In particular, Dunavant says Brazil loomed as formidable competitor. He urged the Australian cotton industry to maintain their quality advantage over Brazil or face the consequences.

"The risk form Brazil is real, their quality has not quite matched the Australian style but they are working on it," he explains. "They are also consistently US 3 to 8 cents cheaper for similar styles."

In 1994 Brazilian exports were a mere 200,000 bales but Dunavant says that was predicted to reach 2 million bales this year and forecast to hit a whopping 5 million bales by 2014. He described farming today in Brazil as a business that is very focussed on both quantity and quality.

Their cost of production varies but the real advantage they have over Australian producers is no cost of water.

"The entire crop is rain harvested and the cost of land development is much cheaper," Dunavant explains. "On the downside genetically modified cotton is outlawed, but that can change and they face disadvantages with infrastructure and their transport system."

The Australian cotton industry has long held an enviable place in the global market demanding a premium due to its reputation for consistency of quality, lack of contamination and ongoing reliability.

But Dunavant told his audience Australia needs to market its cotton up and increase discounts for lower quality.

"If you don't do this my fear for you is you will lose the ability to sell forward", he says. "The progress of the Brazilian industry over the past five years has been amazing. In Australia you need to think ahead and aim to produce higher base grade cotton. It may just save your life."

Jernigan warns delegates there was an ongoing battle for the top spot and questioned if Australia could maintain its position.

He says not only was there an onslaught from Brazil but in 2003 the U.S. cotton brand Fibermax entered the race.

Fibermax is kicking goals in the Texas cotton belt with improved quality and yield. With a high proportion of Australian genetic material its biggest selling point is it is a substitute for Australian cotton but cheaper.

Jernigan says the U.S. cotton industry on the global front was expanding. "A lot has changed in the U.S. since our domestic industry collapsed," he says. "The U.S. has been forced to become a big exporter of cotton fiber."

Unfortunately due to drought Australian production has fallen from a record high of 3.5 million bales in 2000/01 to just 1.5 million bales in 2003/04.

This has left the gate open and traditional markets have been forced to try other styles.

Jernigan acknowledged that Australian cotton had its advantages with reputation of quality, shipping excellence and lower freight costs but warned this might not be enough when the industry returns to normal production.

"Do I think you should raise your base grade - Yes I do - as a matter of urgency."