• back
  • 5.2.2-MARKET SEGMENTS-ELS COTTON EXPORTS

  •  
  • ELS cotton exports

    Chapter 5 - Market segments - Extra long staple cotton 

     
     
    As production increases, the consumption of ELS cotton becomes ever more important. Globally, consumption of ELS and LS cottons has grown, and annual ending stocks have shrunk from about 1,800,000 bales in the 1993/94 crop year to 945,000 bales in the 2006/07 crop year. However, the consumption of ELS and LS cottons is not simply tied to the consumption of this cotton by spinning mills. As noted previously, the consumption of the cotton is innately tied to the selection of this specialty fibre by brands and retailers for use in better quality cotton products. This reinforces the importance of maintaining a clear name and image for these unique fibres as a special product that produces premier quality products.

    Most of the ELS and LS producing nations are also the main consumers of ELS and LS cottons. The only real exception to this is the United States. The United States is the largest exporter of ELS cottons and, according to ICAC data, accounts for about 45% of the total ELS and LS exports on an annual basis. American Pima exports account for approximately 90% of annual production. This has arisen because of the shrinking domestic textile industry in the United States. By comparison, many of the other ELS and LS producing nations have larger and more robust domestic textile industries to use the fibre domestically. Exports of American Pima cotton also benefit from its high quality and consistency and recognition of its low levels of contamination, along with the benefits associated with the third-party classing of every bale grown in the United States by the USDA.

    ELS cotton consumption

    The largest consumer of ELS cottons is China, closely followed by India. These two nations account for approximately 85% of the world’s ELS consumption. The remaining consumption is distributed around the rest of the world.

    American ELS Competitiveness Payment Program

    The American Extra Long Staple (ELS) cotton programme includes a competitiveness provision designed to ensure that American Pima cotton can be readily marketed in both the domestic and international markets. The programme operates when American Pima prices are above world prices for a certain period and provides a payment to eligible domestic users and exporters of American ELS cotton in the amount of the difference between the United States and world prices.

    Since 5 August 2005, the ELS payment rate is determined by the difference between the CNF Far East American Pima quotation and the lowest foreign ELS quotation adjusted for quality, as reported by Cotton Outlook. Payments continue as long as the weekly average for the lowest adjusted foreign growth quote (LFQ) remains below the weekly average quotation for American Pima, and the LFQ is less than 134% of the American Pima base grade loan value (currently 82.25 cents per pound).

    The ELS Competitiveness Payment Program is similar to the Step 2 of the 3-step competitiveness programme for American Upland cotton. Following the dispute brought by the Government of Brazil against American Upland cotton subsidies in 2003, the World Trade Organization (WTO) ruled in 2005 that the Step 2 payments to exporters of cotton were prohibited export subsidies, and Step 2 payments to domestic users were prohibited import substitution subsidies because they were only made for American cotton. Competitiveness payments for Pima cotton continue despite the elimination of Step 2 payments for American Upland cotton on 1 August 2006.