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June 2015 Cotton Leader

June 23rd, 2015

JUNE COTTON INCORPORATED BOARD MEETING RECAP

Cotton Incorporated’s Board of Directors, along with The Cotton Board’s Executive Committee, recently held their June Meeting in Dallas, Texas. They began discussions about the 2016 research and promotion budget of $76 million, a budget decreased by $4 million from 2015. Based on projected collections, even with the decreased budget, The Cotton Board will draw approximately $8 million from reserves to fund the program in 2016. The top priority in 2016 will continue to be the recovery of market share which will result in some significant 2016 budget reallocations.   Specifically, many longer-term focused research programs will be streamlined in order to increase funding for the company’s new “Favorites” advertising campaign. This campaign, which is based on considerable consumer research such as focus groups, features a stronger reminder to consumers as to why their cotton garments tend to be their favorites.  There is an additional call-to-action message to check the fiber-content label before buying. Television advertising will remain an important medium for 2016, but the new campaign was designed to also work effectively in digital media and with Cotton Incorporated’s supply chain marketing activities.  Even with a reduction in the overall 2016 budget, funds for consumer-based programs will increase.  Through this new campaign and a tighter focus on research and marketing areas that will yield the greatest returns for cotton, the cotton research and promotion program has a clear goal for the coming years – Take Back Our Market.

COTTON INCORPORATED ENTERS NEW MARKET BY PARTNERING WITH GERBER®

Cotton Incorporated is dedicated to finding and exploring new markets for cotton. They’ve recently made headway in a new market by partnering with Gerber and launching the Gerber All-in-One Reusable Cloth Diaper. The Gerber All-in-One Diaper may be the first performance product for infants because of a special cotton lining that utilizes Cotton Incorporated’s TransDRY technology, which is also found in a range of cotton athletic apparel.  The TransDRY technology works by accelerating the movement of moisture away from the skin for fast evaporation --- a high-tech advantage to keep babies dry and comfortable. When additional protection is needed, the liner has a pocket that can be stuffed with a diaper insert. As the name implies, the All-in-One Reusable Diaper can be used, laundered, dried and used again.  This can add up to substantial savings for new parents.  On average, parents can spend as much as $1,500 per child on disposable diapers (Source: The Real Diaper Association); compared to a $600 investment for cloth diaper systems such as the All-in-One.  The additional advantage is environmental since reusable diapers such as the All-in-One help reduce the amount of waste entering landfills. The Gerber All-in-One Reusable Cloth Diaper with TransDRY cotton liner is a high performance diaper that is a perfect fit for parents concerned with their baby’s comfort, the sustainability of the planet and household budget. Gerber All-in-One Reusable Cloth Diapers and Inserts are now available on Amazon.com and Target.com and soon-to-be on Walmart.com, Babiesrus.com, BuyBuyBaby.com and Burlingtoncoatfactory/babydepot.com.

THE COTTON BOARD HOSTS FIRST EVER "WOMEN IN AG" TOUR OF COTTON INCORPORATED

The Cotton Board recently hosted their first ever “Women in Ag" tour of Cotton Incorporated as part of their annual Producer Tour Program. There were 64 tour attendees representing 16 of the U.S.’s 17 cotton producing states. These attendees represented various segments of the cotton growing community, including: cotton producers, ginners, crop insurance agents, farm business managers and industry relations professionals. The group heard from key leaders at Cotton Incorporated on what is being done to increase the demand for, and profitability of, cotton. And, in addition to touring the World Headquarters of Cotton Incorporated, tour attendees heard a presentation on using social media to become an advocate for agriculture from Arizona Farm Bureau’s Director of Communications, Julie Murphree. They also heard from Plains Cotton Growers, Inc.’s Director of Communications and Public Affairs, Mary Jane Buerkle ,on  the role of Certified Producer Organizations and how they could become involved in the industry. The event ended with a tour of Syngenta’s new Advanced Crop Lab greenhouses and the group heard  a passionate presentation from a panel of women who work at Syngenta. “ Women play such a huge role in our industry and it was important for us to bring them together. We were so proud to host such a dynamic group of women on this tour, and consider the event a huge success,” said Stacey Gorman, Director of Communications for The Cotton Board. The Cotton Board is hoping to host another women’s tour in 2016. The Cotton Board’s Producer Tour Program is made possible by our committed sponsor partners: BASF, John Deere, Monsanto and Syngenta.

ECONOMIC REPORT

Benchmark prices were mostly unchanged over the past month. Prices for the July NY futures contract traded between 63 and 65 cents/lb. Values for the December contract have been marginally higher, holding to levels between 64 and 66 cents/lb. The A Index drifted generally sideways between 71 and 74 cents/lb. The CC Index was nearly unchanged in both local (near 13,300 RMB/ton) and international terms (near 98 cents/lb) over the past month. Few significant changes were made to forecasts for 2015/16 in the latest USDA report. The world production figure increased only 70,000 bales and was essentially unchanged at 111.3 million bales. The world consumption estimate increased only 30,000 bales and was essentially unchanged at 115.3 million bales. The projection for world ending stocks was lowered slightly 217,000 bales (from 106.3 million to 106.1 million).

The 2014/15 crop year can be seen as a period of transition. This transition was made evident by the decreases in prices between the planting and harvesting of last year’s crop. The easing in prices was a product of changes in the world’s supply and demand situation, with the most significant developments in terms of fundamentals stemming from reforms in Chinese policies. Since China is the world’s largest source of demand, lower Chinese imports were a significant factor contributing to the increase in stocks in many exporting countries in 2014/15. In turn, this increase in available supply was been a primary reason why prices declined.

In the upcoming 2015/16 crop year, it appears that the most important transitions relative to price direction that were made in 2014/15 will be maintained. Perhaps most important for price direction, stocks outside of China are expected to change little in the coming crop year, and are projected to decrease only 2% (from 43.4 million to 42.5 million). Trade figures are also expected to be similar those from 2014/15.  Correspondingly, it may be appropriate to think of 2015/16 as a period of consolidation, when the most important transitions relative to price direction made in 2014/15 were solidified. Considering that global stocks remain extremely high by historic standards, and assuming China will release reserves if prices move higher, this consolidation may signal the beginning of an era of consistently low prices.  Eventually, pressures resulting from lower acreage and lower production may help pull prices higher, but Chinese reserves may have to be drawn to lower levels first.

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