Seshadri Ramkumar, Professor, Texas Tech University, USA
Textiles sector needs demand uptick and more cargo traffic. A record attendance of 255 people representing all segments of cotton flow met today (September 20) at the West Texas Flow Marketing Meeting in Lubbock to discuss the state of the industry, issues at hand such as supply chain, transportation, and warehousing.
It is clear that the U.S. crop this year will be less–thanks to the dry and prolonged hot summer in the High Plains of Texas. The crop situation and China occupied the center stage of discussions in Lubbock.
China’s economic situation is a problem, with a growth rate than 5 percent. The economic situation is not being helped by the housing crisis and the high unemployment rate in China. We are used to witnessing double-digit growth in China during the pre-pandemic era predominantly due to its manufacturing capacity, which is not the scenario now.
“As China’s economy suffers, it affects the regional economy as well,” stated Daniel Lee, Export Sales Manager at HMM American Shipping Agency, Inc. Foreign investors are not investing in China resulting in job losses and hence affecting the middle-class population, added Daniel Lee.
Increases in labor costs, forced labor issues and geopolitical tensions between China and some nations are forcing foreign investments to other countries such as Indonesia, Vietnam, Cambodia, in Southeast Asia. China is looking for domestic investments and domestic market growth to grow its economy opined Daniel Lee.
There are opportunities for India to boost its manufacturing sector. India should focus on value-added products and enhance its product basket to be a viable alternative to China. The government of India and the Indian textile industry are aware of this necessity and efforts are underway to enhance its textile sector by focusing on post spinning sector.
Increase in imports of textile goods into developed economies such as United States, United Kingdom and Canada is an indicator of demand boost in cotton. A quick survey of the attendees at today’s meeting today indicated that imports into the U.S. will pick up during the Q2 of 2024 indicating a slow demand for textiles in the next few months.
“United States’ cotton industry is competing against countries like Brazil, which sells cotton at 3-4 cents less and we have to be competitive,” stated Beau Stephenson, President of Texas Cotton Association. There was sentiment among the participants in today’s meeting that for the 2023-24 cotton marketing season, United States will export less than 11 million bales (480 lbs. each) of cotton.
“In this current situation effective communication with our partners is needed to plan for the season ahead,” stated Kandice Poteet, Executive Vice President of Texas Cotton Association. A representative of cotton truckers attending the meeting agreed that partnerships and constant communication with stakeholders are important to move cotton forward.
Given the lack of robust demand for textiles due to inflation in the cost of daily essential groceries, higher fuel prices and mortgage rates, effective engagement among different segments in cotton flow, brands and retailers will be critical.