Cotton Outlook - ICA TRADE EVENT Liverpool 2019
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Cotton Outlook
Special Feature
October 2019
ICA TRADE EVENT
Liverpool 2019
SO M E T I M E S LEAVIN G TH E LAND BE TTE R TH AN W H E N YOU
FO U N D IT STARTS WI TH LE AVI NG I T ALTOGE TH E R .
James is a 4th-generation cotton farmer whose family has always been passionate about farming sustainably. Today, he
uses unmanned aerial vehicle (UAV) technology to examine his fields so he can apply water only where it’s needed.
Look closer at the people of COTTON USA. You’ll see eco-friendly technology that’s truly innovative.
W W W. C OT TO N U S A . O R G
Liverpool 2019
Cotton’s coming home
Antonia Prescott
Deputy Editor
Cotton Outlook
In 2019, the International Cotton Association’s ICA can play at this critical moment for the cotton
annual Trade Event returns to Liverpool for the industry.
first time in three years. It must be acknowledged
We are obliged too to our other eminent
that the meeting comes at a difficult time for the
contributors, who present a variety of perspectives
cotton industry. There is anxiety in many quarters
on the sector. Joe Nicosia considers the insulating
and about many issues – the trade policies of the
effect that fluctuating international currencies
superpowers, profit margins and the execution of
have had on cotton prices in some markets. Marco
contracts, a global oversupply of cotton stocks and
Mtunga looks at the next challenges in achieving
a fall in demand, climate change and the worldwide
sustainable cotton production in Africa. Rhea
economic outlook. In such unsettling times, it is
Wakefield introduces a new initiative from the ICA
all the more important for industry participants to
aimed at enhancing the profile of women in the
gather together, and I humbly suggest that Liverpool
sector. Atul Ganatra discusses the Minimum Support
offers the perfect venue for such an event at such
Price offered to farmers by the Indian government,
a moment. This proud, historic city has seen an
an example of the effect that domestic policy in one
extraordinary renaissance in recent years, emerging
country can have on the global supply and demand
from difficult times refreshed and vibrant with talent
dynamic. ANEA president Henrique Snitcovski
and new ideas, ready to tackle the challenges that
considers the recent extraordinary developments of
arise constantly in a rapidly changing world. The
the cotton industry in Brazil. Our contributors from
recent fortunes of Liverpool Football Club (pace any
China, Zhao Jing of the China Cotton Association
Evertonians in our midst) offer a similarly inspiring
and Yang Baofu from the China National Cotton
story. A truly international collaboration (by a squad
Exchange, offer their perspectives on the reform
that includes representatives of cotton nations
of the industry, including the establishment of an
great and small!) produced an extraordinary suite
International Trading Centre in Qingdao. Lastly,
of results in the final stages of this year’s UEFA
Cotton Outlook presents an overview of the
Champions League, delighting their fans across the
tumultuous twelve months just gone and considers
world and rewarding them at long last for their
the outlook for global production and consumption
fortitude and loyalty, sorely tested at times but
in the coming season.
which remain as strong as ever.
So, welcome back to Liverpool! Let us do as four
Cotton Outlook is pleased once again to partner
of the city’s most celebrated sons (not forgetting
with the ICA in producing this Special Feature.
that Paul McCartney’s father was a Liverpool cotton
We are as grateful as ever to the Secretariat,
man…) exhorted us in the opening track of Abbey
including Managing Director Bill Kingdon and the
Road, the final Beatles album which was released
principal officers of the ICA, for their support in
fifty years ago almost to the day on which the
the preparation of the publication, and we offer
gala dinner is held: Come Together, to converse,
our most sincere thanks to the incoming president,
collaborate, share ideas, resolve conflicts, confront
Azeez Abdul Syed, who gives his view on the role the
the challenges of today and prepare for the future.
The photograph on the front cover of this publication shows the Willis organ and a portion of the Minton tiled floor in the Great Hall
of St George’s Hall. The Minton floor is composed of over 30,000 hand-crafted tiles and features the coat of arms for the city of Liverpool
and other decorative elements such as sea nymphs, tritons, and dolphins, reflecting the city’s maritime heritage. For a short period of time
each summer, the protective cover is removed and the floor is displayed to visitors; unfortunately, diners at the gala dinner in October will
just have to imagine the extraordinary work of art that lies beneath their feet!
Page design and layout by Pam Jones, Cotton Outlook.
Published by : Cotlook Limited, Outlook House, 458 New Chester Road, Rock Ferry, Birkenhead, Merseyside, CH42 2AE, U.K.
Tel : 44 (151) 644 6400 Fax : 44 (151) 644 8550 E-Mail : editor@cotlook.co m World Wide Web : www.cotlook.com
The publisher accepts no responsibility for views expressed by contributors. No article may be reproduced without the prior permission
of the Editor.
3
Liverpool 2019
Interview with
Azeez Syed,
incoming ICA president
Cotton Outlook: Congratulations on your by being a part of the ICA community; I have made
(imminent) accession to the post of ICA president. some wonderful friends and built some privileged
From a personal and professional perspective, can relationships. I consider my service as a member
you sum up what this means to you? of the ICA board over the last six years, and now as
president for the next year, to be a very small way of
Azeez Syed: My initial engagement with the ICA
giving something back to the ICA members and the
was way back in the spring of 2000 when I travelled
industry as a whole.
to Liverpool for the first time to participate as a
delegate in an earlier version of the Complete Cotton CO: You assume the role following a period of
course. I still vividly remember my first visit to the considerable instability in the international cotton
office of the Liverpool Cotton Association, as it was market. World prices have fallen by some twenty
then. As I stood there in the boardroom, soaking in percent since the last president took office, and
the association’s history, heritage and legacy and it is no secret that challenging trading conditions
looking at the boards displaying the names of all the have become a serious preoccupation over the past
past presidents, I never even remotely imagined that few months. In that context, what are the major
one day I would be presented with the opportunity challenges that the ICA is likely to face during your
to be the president of this great association. I term of office?
am deeply humbled to be entrusted with this
AS: Global growth prospects have significantly
responsibility and I consider it an honour and a
softened over the past several months –
privilege. My journey in the cotton industry began
consequently, business sentiment has remained
a little over 21 years ago when I joined Olam and
weak. The escalating US/China trade dispute,
it has been an extremely enriching one ever since.
Brexit dynamics, a considerable slowdown in
Over this period a lot has changed in our industry;
manufacturing, trade and investment, and fresh
however, one aspect that has remained constant is
fears of recession across many parts of the world
the pivotal role that the ICA plays in maintaining a
have pushed the markets into a protracted state of
sense of order in the world of cotton trading. We
uncertainty that has affected sentiment and business
perhaps don’t need to look beyond a few other
decisions. Quite inevitably, our industry has been
segments of the textile value chain to understand
severely impacted as well. While the weak economic
how chaotic our industry could be without the ICA.
outlook appears to be slowing down global cotton
To continue that sense of order into the future,
consumption, the US/China trade conflict has caused
I think it is very important for all stakeholders in
havoc in our supply chains and global cotton trade-
our industry to become members of the ICA and
flows. At the same time, we appear to be producing
promote its values of equitable trading and contract
record crops almost everywhere. All of this has led
sanctity – that, at least, has been my own motivation
to considerable market volatility, causing significant
for my active engagement with ICA during the last
distress to both buyers and sellers. The ugly face
decade or so. Over the years, I have benefited a lot
4
Liverpool 2019
of rampant contract defaults seems to be surfacing buyer / seller’s exposure, not just with you
once again. The principle of contract sanctity, which but also to the rest of the market. Diversify
forms the core of our values as an association, will your risk across origins / destinations /
once again be severely tested and that remains qualities in order to hedge against potential
the single largest challenge the ICA will face in the market volatility.
coming months. We are likely to see a significant
• Ensure active counterparty exposure tracking
increase in the number of arbitrations brought to
to help identify potential issues and take
the ICA and we must gear up to handle them in
timely action. Consider risk-management
an effective, efficient and speedy manner. Time is
solutions as insurance against extreme
of the essence when it comes to completing the
market movements. Whether one is a mill
arbitration process, and we must find ways to turn
or a merchant, the need for protection for
around the cases referred to us quickly. Through the
larger or longer term exposures should be
various country focus groups that we have set up, we
considered. Keep reviewing the adequacy of
can actively advise and help with the enforcement
such protection.
procedures in the respective geographies. As an
association, we have a limited capacity to interfere • Good housekeeping! Don’t take the
and we cannot really get involved in settlement administrative aspects of the business lightly
processes. However, we can and ought to engage – ensure firm and duly executed contracts
with all our affiliated associations, partner are in place; communications relating to
associations and other industry bodies, seeking their contracts should be retained; documents
active involvement in encouraging and influencing relating to contract amendments and other
their own members to uphold contract sanctity and operational matters are a must. In the event
ensure contract performance. of a dispute these will form the basis for
subsequent actions.
CO: Comparisons have been made in some
quarters with the turmoil that occurred during and While I wouldn’t wish to trivialize the issues
after the extreme volatility of prices during the by discounting the severity of the impact in either
2010/11 season. Are there perhaps any lessons that season, it is fair to say that 2019/20 can serve as
can be learned from that earlier period? a reminder to the past, but it certainly does not
seem as though events will play out with the same
AS: While we haven’t seen the kind of price
magnitude of risk or losses to the overall trade.
ranges we did in 2010/11, there is always a concern
about counterparty risk when prices fluctuate by CO: The process of internationalisation and
more than, say, 15 to 20 percent within a single diversification of ICA membership and its governing
season. In 2019/20, the position at the start of the structures has been a strategic goal over many years.
season is the opposite to what we saw in 2010/11; at How would you assess the current state of play in
that time, there was a huge run on prices just as the this regard? Are there any particular areas on which
harvest got under way in the Northern Hemisphere. efforts should be concentrated?
The rising price caused a lot of heartache with regard
to margin calls and contract defaults. Then, in March AS: With more than 550 members from over
of 2011 when futures prices began to retreat, the 50 different countries representing all segments
execution of forward sales to international buyers of cotton trading and the associated supply chain,
became extremely problematic as buyers simply the ICA today is truly international and inclusive
did not open LCs or refused outright to honour in nature. Over the past ten years, the ICA’s
contracts. That last scenario is what concerns membership has grown by over 60 percent – while
the merchant community the most as we go into the increase in membership among merchants was
2019/20. Even though futures are down only 16-20 19 percent, the increase amongst producers and
cents from the point at which a lot of sales were mills was 83 percent and the figure for agents was
agreed earlier in the year, the risk of default is higher still, at 136 percent. These striking rises are
enormous and is compounded by the US/China trade testimony to the resonance of the ICA’s vision and
dispute. values throughout the global cotton trade. During
this period, the ICA’s internationalisation journey
However, we did learn many lessons from our continued as the association built strong alliances
experiences in 2010/11; for example: and partnerships with associations in China and
India, significantly improving engagement with
• Know your buyer / seller – there is
associations in Pakistan, Bangladesh, Vietnam, etc.,
no substitute for selecting the right
and welcoming onboard several other affiliated
counterparties and applying risk and
associations. In the past ten years we have had
counterparty limits appropriate to your risk
presidents from South and North America, Africa
appetite and to the counterparty’s position.
and Asia, and from both the spinning and merchant
• Focus on risk management and question communities. Our board members represent several
your business rationale at all times – your different nationalities. Bill Ballenden, president
reason for buying or selling forward, your of the ICA in 2018-19, commented in jest during
need to buy or sell at a fixed price. Evaluate his acceptance speech last year that the ICA’s
the financial capability of your counterparty FGC is beginning to look like a Benetton ad! Jokes
and their ability to handle adverse market apart, one does not have to look far beyond the
movements. Make yourself aware of the current leadership team as well as the composition
6
Liverpool 2019
of the current board to grasp the diversity and training and outreach strategy to offer bespoke
inclusiveness that the ICA has achieved in terms of training across the world in partnership with
both geographical as well as segmental spread. All affiliated associations and local industry bodies.
this was possible thanks to the tireless efforts of past
CO: The ICA’s annual trade event and dinner is
presidents, board members and a very competent
of course a highlight of the cotton calendar. This
team at the ICA secretariat. While growing the ICA’s
year, the gathering returns to Liverpool following an
membership will remain a top priority going forward,
absence of three years. How would you characterise
another key focus should be enhancing engagement
the importance of Liverpool as the venue for
across the association. Deepening ICA’s engagement
this year’s meeting and the headquarters of the
levels with member firms and their employees,
International Cotton Association?
particularly the younger generation, from which the
future industry leaders will emerge, is as important AS: Liverpool, with its rich history, culture
as broadening the membership base. Continuous and splendid architecture, has been home to our
renewal is key to strengthening and improving our association since its inception in 1841, when it was
governance processes. Promoting gender diversity known as the Liverpool Cotton Brokers’ Association.
across various ICA committees, working groups and From the mid-19th century onwards, the city held
the board itself should be another important area of a central position in the global physical cotton
focus. Finally, the improvement of communication trade. It gave the cotton world its first modern
with members should be an area of ongoing priority. futures contract and its first arbitration system.
Subsequently, political and economic landscapes
CO: Training has been a significant element of the
changed, the textile industry in the UK and Europe
Association’s activity over a number of years, and
declined and migrated to other parts of the world,
the number and scope of available courses offered
and global cotton trade-flows adjusted to the
has been steadily expanding. What is the importance
new reality. Keeping in line with the changes, our
attached to training by the ICA within its strategic
association has transformed itself several times to
objectives?
evolve into the International Cotton Association of
AS: The ICA provides a suite of services to today. However, the heritage, rich tradition, culture
its members as well as to the cotton industry and values on which this association was built still
at large spanning from farms to textile mills. remain at the heart of the ICA. The same principles
The four most important among them are: 1) of fairness, impartiality and contract sanctity form
providing impartial and effective arbitral services the basis for our current Bylaws & Rules. Given this
to help resolve disputes between buyer and legacy, while Liverpool is no longer a major trading
seller; 2) promoting equitable and safe trading hub for cotton it remains the ICA’s headquarters
practices through its Bylaws & Rules and through and has a special place in the hearts of its members.
constructive engagement with various industry Liverpool has always been the venue most favoured
stakeholders and associations; 3) providing a ‘centre by ICA members for the annual trade event.
of excellence’ for cotton quality testing, research Deferring to the wishes of those members, the board
and laboratory certification services through ICA decided that the event would be held in Liverpool
Bremen, a joint venture company between ICA and every third year. I am very excited that this year sees
Bremer Baumwollbörse; and 4) running training a return to Liverpool. I am really looking forward
courses to promote a universal understanding of to the event and the dinner at the magnificent St.
ICA’s principles, values, Bylaws & Rules, enhance George’s Hall.
industry knowledge of safe trading practices, impart
CO: What impact could World Cotton Day have
risk management skills, cotton classing skills, etc.
on the international perception about cotton?
Bringing together the many years of experience and
expertise of its members, leveraging their skills to AS: I think it is a great initiative! While it is too
develop industry best practices and sharing all this early to comment on what impact it will create,
with the wider cotton community through various I am very optimistic that the establishment of a
training programmes will remain one of the most World Cotton Day will bring a sharp focus on the
important strategic objectives for the ICA. cotton value chain which forms such an important
part of the global economic landscape and provides
The flagship training programme remains the
livelihoods to millions of farmers and industry
annual Complete Cotton course, which over the
workers across the world. It has the potential to
years has been such a huge success and very well
bring together various governments, multilateral
received. The ICA will continue to explore ways to
agencies, industry stakeholders, investors and
improve the programme and the overall offering.
donors, and persuade them to direct resources
Other training courses designed and run by the ICA
towards the many challenges that the sector faces
(some in collaboration with ICA Bremen) include
today, including improving farm yields and farmer
the Managing Risk course, the Cotton Classing and
livelihoods (particularly in the least developed
Testing programme, the Quality Expert programme,
countries), ensuring environmental stewardship
the Professional Certificate in Commodity
and sustainability, and eliminating child and
Management and various seminars delivered in
forced labour and supply chain inefficiencies. The
different locations across the world to promote an
platform can also serve to promote global cotton
in-depth understanding of the Bylaws & Rules. ICA
consumption.
and ICA Bremen are also working on a targeted
7
Liverpool 2019
CO: Trading is evolving: consumers are becoming farm yields will provide the right incentive
more discerning, the logistical challenges of to produce more cotton, thereby solving the
providing a timely supply of cotton across the world supply constraints. This calls for the adoption
are not diminishing and as the climate evolves, of better agronomical practices, the infusion
pressure on scarce water supplies is increasing. of new technologies and cutting-edge
What are the developments in the world market research.
that might provide the greatest opportunities for
• Given that about 56 percent of global cotton
the sector? And where do you see the greatest
production is rain-fed, climate change is
challenges?
bound to have significant impact on output.
AS: We are today living in a world driven by Developing efficient water-management
exponential growth in technology and changing technologies and investing in research to
consumer preferences. Today’s consumer is far more develop more drought-resilient varieties
discerning and increasingly demands sustainably will be necessary to increase production
produced products at an affordable price. This sustainably.
desire may still be viewed as niche by some, but
• Unblocking supply chains – our storage
it will be mainstream tomorrow. Therein lies the
and logistics systems are inefficient and
greatest opportunity for increasing global cotton
expensive. Innovative solutions involving
consumption: cotton products can be pitched as a
new technologies for warehousing, handling
sustainable alternative to those made from synthetic
and transportation are needed to improve
fibres and as a mitigant of the detrimental impact
flow efficiencies and cut costs.
of micro-fibre contamination. The potential to grow
the use of cotton not just in apparel and home • Growing demand for sustainably produced,
furnishings but also in industrial textiles is immense; ethically sourced and traceable products
we just need to be innovative and communicate – environmental stewardship, the
the cotton story effectively to the consumer. Over development of end-to-end traceability
the past 40 years, while global fibre consumption solutions spanning from farm to the final
has grown by over 300 percent, cotton’s share has garment, and the adoption of sustainable
declined from about 48 percent in 1980 to about farming and production practices are
27 percent today. I believe this trend has been essential to satisfy the needs of today’s
driven more by serious supply constraints and consumer.
inefficiencies within the cotton sector than by an
inherent advantage offered by man-made fibres. Of course, these problems are not going to be
While solving these problems remains the biggest solved overnight, and efforts continue at different
challenge faced by our industry today, our greatest levels and on the part of various stakeholders to
opportunities lie that way too. address the challenges. However, what is lacking
is a collaborative effort by all stakeholders to
Some of the most critical challenges and communicate the cotton story in an effective and
opportunities include: compelling manner to the consumer. If we can
achieve that, I think we can truly look ahead to
• Increasing farm incomes, particularly for
an exciting phase of innovation and growth in our
smallholder farmers in developing and least
industry.
developed countries. Significantly improving
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Liverpool 2019
Your Association
Bill Kingdon
Managing Director
International Cotton Association
This has been a turbulent year for cotton. New conditions, we have seen a rise in most membership
tariffs, droughts, significant price adjustments and categories through the year.
falling demand for yarn have had a detrimental
Our focus in the past 12 months has been on
impact on the international trade. Conditions have
developing the engagement of our member firms
become increasingly tough for producers, merchants
with the ICA. There are three initiatives which
and mills. Yet your Association is continuing to thrive
together are helping us to engage better with the
and there are many positives to report.
cotton community. Women in Cotton is a network for
This time last year, the ICA was making the cotton professionals intended to promote diversity
final preparations for what proved to be a highly and the positive role that women can and do play
successful trade event in Hong Kong, and now in our industry. Next, ICAspire is a new membership
we look forward to welcoming current and future category aimed at younger cotton professionals
members alike to our Liverpool 2019 trade event, for and those new to the trade. We hope to help these
which the theme is Coming Home. We welcome you individuals improve their professional skills in the
all to England’s North West, which contributed so industry while engaging closely with them to better
so many innovations that are now commonplace in understand what the ‘future of cotton’ will need.
the cotton trade, such as the trading of commodity Look out for the launch of ICAspire at Liverpool
futures, arbitration for dispute resolution and 2019. Finally, we are exploring how to make it easier
the technological advances that caused the rapid for those who work for ICA member firms to gain
expansion of the trade to service over 2,000 access to the members’ area of our website, where
spinning mills in Lancashire alone in the 1870s. You they can check the full list of companies who are not
can expect an interesting conference with leading safe to trade with as well as accessing many useful
speakers, plenty of opportunity to network and resources. Watch out for notifications about this
an exciting finale at the gala dinner in the iconic St next year.
George’s Hall, all thanks to the superb organisation
Last year I mentioned that we planned to
of Tom Lowndes and his team.
broaden and strengthen the community of cotton
As you know, your Association is run on not-for- professionals who are committed to safe trading. We
profit lines for the benefit of its members and the have done this in part through our well-established
wider global cotton community. We are constantly trade events and our Complete Cotton networking
looking for incremental steps we can take to develop and training course held each year, and our outreach
the sense of community within the ICA, and to and training with partner organisations in key
reinforce our values of safe trading and contract markets around the world. In the past 12 months
sanctity. Perhaps it is this approach that continues we have delivered training in association with the
to attract new members and retains existing China Cotton Association in Henan Province, China,
ones within the ICA. Notwithstanding the trading and with the Karachi Cotton Association in Karachi,
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Pakistan, and we have more training planned in outreach and training in key markets alongside our
Vietnam this November. partner associations. He also manages the affairs
of CICCA and provides efficient and timely support
Your management team here in Liverpool
to the CICCA chair, who is invariably based away
comprises a small group of energetic, dedicated
from Liverpool. And, in his spare time, he keeps the
and cheerful people all of whom are committed
management team ICT and data security on point.
to providing the best support we can to you, the
members. Their roles, too, adapt and evolve to Awarded a PhD from the University of
match the changing demands of the Association. Manchester Institute of Science and Technology,
Esrin Graham, who has previously worked with ICA Robert has published several papers on spinning
Bremen and as the Events Officer, now leads on technology. He joined us as manager of our cotton
communications and marketing for the ICA. Not only laboratory in June 1990 and during the coming
does she bring lots of experience from her previous year he will celebrate 30 years of service for the
roles, she also approaches everything she does with Association. This is a fabulous achievement and we
a delightful smile. are lucky to have his expertise, energy and cheerful
commitment to the ICA.
Dr Robert Jiang is our
Business Operations and We also celebrated Tracy Dignan’s 10th
Development Officer. As anniversary as our Membership Officer earlier in
many of you know, he the year. No membership application or renewal is
has a broad portfolio. In complete without her efficient and lovely personal
addition to leading the engagement. Casandra, too, is now well-established
management team on as our Business Intelligence Officer and is focusing
matters related to cotton keenly on identifying trades with companies who
quality, he also works appear on our ‘no-trade’ lists.
closely with Karsten
Our arbitration team comprises John Gibson (a
Froese in ICA Bremen on
notary public and barrister), who has led on this key
laboratory testing. It is
area for more than six years, and Lynne Thomas,
almost entirely due to Robert’s rigour and energy
who has been with the ICA for five years. John
that we now have 12 international laboratories
and Lynne both bring strong legal experience, a
certified by ICA Bremen’s International Laboratory
network of friends and colleagues who are involved
Certification Scheme.
in arbitration and legal work, and a commitment to
Robert is critical to our strong relationship this critical means of dispute resolution in support of
with China and he plays a central role in delivering the cotton trade. You will not be surprised to learn
12Liverpool 2019
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that they are increasingly busy members I would like to
this year as applications have highlight the contributions
increased with the decline of made by so many members
raw cotton prices. who participate in our
committees and working
In the past year we have
groups, and offer my
welcomed three new staff
thanks to our directors who
members into our team: Diane
hold responsibility for the
Lewis who has joined the
oversight of the company,
hard-working Vanessa Harris
and in particular, to the
in the finance team as Finance
officers who give so much
Manager, Angela McGeagh as
John Gibson Lynne Thomas time cheerfully and willingly
Executive Assistant and Michael
to benefit the ICA. The ICA
Armstrong as Communications
remains true to its values: it is run for the benefit of
Officer (ICA Bremen) / Events Assistant (ICA).
its members and in the interests of the global cotton
I hope that you will agree that, although it is community. It is heartening to see that so many
a difficult year for the cotton trade, it has been feel this is a commitment worth making in these
another good year for the ICA. On behalf of all challenging times.
13Liverpool 2019
The role and reality
of women in cotton
Rhea Wakefield
Compliance and Sustainability Manager
Wakefield Inspection Services, Ltd.
I am a young (thirty-something) female, who now statistics, drawn from my personal experiences, that
has three years of direct cotton experience working show the female/male ratio:
for Wakefield Inspection Services. I say direct, since
• I attended ACSA International Cotton
as a member of the Wakefield family, I have had lots
Institute 2017 – five women / 29 men
of indirect experiences from a very young age. These
ranged from listening to cotton topics discussed • I attended ICA Complete Cotton 2019 –
around dinner tables and at family gatherings, seven women / 25 men
to attending the Liverpool Cotton Association
ladies’ events with my mother and going to the I also looked into the female/male ratio of ICA
International Cotton Association Dinner when my members:
father Peter Wakefield was president of the ICA. • ICA individual members – 22 women / 211
Wakefield Inspection Services was first men
established as a private entity back in 1993 and • Currently registered for 2019 ICA Event – 20
since then I am the only female Wakefield to join the percent women / 80 percent men
business. However, while I may be the first woman
from my family in the company, we do have many Up to this point in my career, I have not faced
female country managers who are an indispensable any substantial challenges in the cotton industry
asset to the team. In some ways, trying to make my because of my gender. However, there continue to
way in both the family business and the industry at be opportunities within the industry to advance
the same time has been a challenge. This industry women’s roles and responsibilities, and this should
does not differ from any other: any new recruit, male always be the goal. Other factors that affect the
or female, faces a steep learning curve! advancement of women in the workforce are
different cultural practices and religious preferences.
The role of females in the workforce has We must all recognise these cultural and religious
become more prominent over the last decade. The differences and be respectful of everyone’s rights
increased attention paid to female empowerment and beliefs. This means that we must continue to
is a necessary and positive shift that will advance adapt and use our voices whenever and wherever
equal opportunities, positively impacting the growth we can to advance this necessary social movement
of individual businesses and whole sectors of the within our industry.
economy.
A common phrase we have all heard highlighting
The cotton industry is largely male-dominated. the differences between the sexes is: “Men are from
This is common knowledge, but here are a few Mars and women are from Venus”. Women and men
14Liverpool 2019
tend to use their brains differently in the ways they
analyse, interpret and manage opportunities and
risks. This is a positive that needs to be utilized in
the industry. If everyone was identical and had the
same thought process, there would be no growth,
no change, and a very stagnant industry. We need to
find opportunities to increase this diversification.
A successful career in the cotton industry is
based on creating good relationships – with partners,
clients and governing bodies throughout the value
chain. This is one aspect of the cotton industry I truly
enjoy. I believe individuals working in the cotton
industry are fortunate to have so many international new ideas. We hope this will expand greatly and I
events that can bring everyone together to discuss encourage all women involved in the cotton industry
the opportunities for continuous industry-wide to join (simply contact the ICA for details).
improvement. One way to move our industry The mission of the Women in Cotton group is:
forward faster is through diversification and by
having more female-led discussions at these events. ‘To increase engagement and the impact of
I have to mention, however, that we do have vital women within the industry by giving these women
male role models in the cotton industry, from whom a stronger voice, sharing and learning from each
younger, newer professionals in the business should other’s experiences and helping networking amongst
be learning, regardless of whether they are male or women in the global cotton community.’
female. The objectives include increasing female
Personally, I think the biggest challenge women representation on ICA committees and the number
face in the industry is overcoming a fear of standing of female speakers and presenters at high-profile
up and voicing opinions to a traditionally male- events.
dominated base. I am not saying that women are In my opinion, the mission statement is strong,
afraid to talk, but I believe they can contribute more, and the ICA has set has meaningful objectives. There
especially as new young females start their careers is the possibility that a women-only group could be
in the industry. The notion that women are the ‘note seen as negative, having the effect of segregating
takers’, or work in the ‘back office’ must be dropped. women further; however, the discussions will also
I believe that women have to stick up for themselves include opinions and guidance from men on how to
in all circumstances and this will allow for greater improve the presence of females in the industry.
strength throughout our industry.
We all face a world that is changing rapidly as
Another challenge is that women are naturally a result of environmental issues, social media and
thought of as mothers. This can cause some new technologies. Today, people both male and
challenges when managers and directors are looking female have more opportunities to grow and use
at the structure of a business and their employees. these changes to their advantage. Diversity in the
Women will obviously need to take time to have workplace is critical and to be encouraged. Women
children, but again, times are changing, and more want to have more of an impact in all aspects of the
men are taking shared parental leave, allowing for industry and the Women in Cotton group is a good
women to return to work earlier and continue their first step to encourage this much-needed change.
careers.
What would be ideal would be to see an
It is interesting that George Holt was the increase in female participation at industry events,
first president of the Liverpool Cotton Brokers in participation of women on the ICA board of
Association back in 1842 and since then there has directors, and even a female ICA President one day.
been no female president of what is now the ICA! I think the industry is in need of this change and
That means in 177 years, every president has been is ready for it. In order to bring it about, women
male. Moreover, in that lengthy period of time, themselves need to be more forthcoming and
there have been very few women on the board of willing to put themselves out there. This is vital in
directors – something I know the ICA are taking order to support female entrants to the industry
steps to address. If there are no visible female role and prepare for the future. Such a strategy will
models in the industry, then it does not help to also tie in with another new initiative from the the
promote growth of the younger females. The only ICA – a new category of membership, known has
way to increase the number of female role models is ICAspire, designed for young professionals. I hope to
to increase exposure of those great women who are see some female mentors and speakers at ICAspire
already working in the industry. events as this will help with the development of the
To further tackle this divide, the ICA have set up a new generation of industry participants, both male
new working group during 2019 – Women In Cotton and female. I for one thoroughly enjoy working in
– of which I am a member. After initial meetings cotton and feel fortunate to have the role models
to establish the focus and strategy of the group, a that I already do. I believe that in order to keep our
closed LinkedIn group has now been set up providing industry successful and allow it to keep growing, we
a platform to network, share experiences and discuss need more diversity, more participation, and more
ideas for both sexes.
15Liverpool 2019
Hong Kong to Liverpool:
a momentous
twelve months
Mike Edwards
Editor
Cotton Outlook
Collapsing prices The single most significant driver of the market’s
persistent decline since then has of course been the
The period since the International Cotton protracted trade dispute between the United States
Association’s gathering in Hong Kong in mid-October and China. But in October 2018, few could have
last year has been a momentous and, for many foreseen that the impact on cotton prices would be
players in the international cotton market, a painful so severe. Indeed, a more common view at the time
one. As delegates arrived in Hong Kong, world was that either a reasonably swift resolution would
prices, as measured by the Cotlook A Index, were in be reached or the cotton market would adjust to
the high 80s cents per lb – still substantially above the shift of trade flows that the conflict would bring
the nominal, long-term average, despite having lost about.
14 percent of their value since the peak in mid-June.
The May/June period had seen the A Index briefly As the dispute has escalated and its scope has
surpass the dollar mark, a threshold crossed on only broadened well beyond the narrow, trade-related
a handful of occasions since its creation in the mid- issues initially in play, the repercussions on the
1960s. global economy have been far-reaching. And for
the cotton and textile sectors, this has not been a
simple matter of the Chinese spinner substituting US
cotton for other origins and the US retailer shifting
sourcing of textiles and apparel from China to other
low-cost producers (though these have indeed been
100.00 Cotlook A Index
identifiable trends).
- US cents per lb -
95.00 18/19 Falling consumption
19/20
90.00 The impact on world raw cotton consumption
as a whole has been far more profound than was
85.00 predicted twelve months ago. At the time of the ICA
80.00
gathering in Hong Kong, it still appeared likely that
in 2018/19 world raw cotton consumption would
75.00 surpass 27 million tonnes for the first time, a level
of global demand that the world’s cotton producers
70.00 might be hard-pressed to meet on a regular
basis and one that would thus have had bullish
65.00 implications for world prices.
1-Aug-18 12-Dec-18 24-Apr-19 4-Sep-19
Since then, Cotton Outlook’s estimates for the
season have fallen progressively, as have those for
16Liverpool 2019
Cotlook’s world consumption global financial crisis of 2008/09, the second with
estimates the aftermath of the record prices and extreme
volatility of the 2010/11 season). How deep and
27,500 long-lasting the current downturn will prove to be
2018/19 2019/20
27,000 only time will tell.
26,500 With the exception of some brief rallies
26,000 (most notably during the January/April period,
as it seemed that Beijing and Washington were
25,500
steadily edging towards an accommodation),
25,000 the downward trajectory of the market has been
24,500 relentless. In mid-August, the Cotlook A Index
dipped below the threshold of 70.00 cents per
24,000
t v c n b r r y n ly g
lb for the first time since May 2016. The decline
p
Se Oc No De Ja Fe Ma Ap Ma Ju J Au
the 2019/20 campaign. At the time of writing, World Consumption
the figure for 2018/19 stands at just 25.3 million 28,000
tonnes and that for 2019/20 at 25.6 million. 26,000
One might at some point expect that lower raw 24,000
cotton replacement costs will start to stimulate
22,000
raw cotton consumption, but as yet there has
20,000
been scant evidence of such an upturn. For
the present, the negative macro-economic 18,000
environment appears instead the overriding 16,000
factor. 14,000
12,000
The direct and indirect effects of the Sino-US 10,000
conflict would thus seem to have provoked the
third major shock to world cotton consumption 01 03 05 07 09 11 13 15 17 19
0 0/ 02/ 04/ 06/ 08/ 10/ 12/ 14/ 16/ 18/
of this century (the first associated with the 20 20 20 20 20 20 20 20 20 20
17Liverpool 2019
since the peak of mid-June 2018 amounted to more US-China dispute was witnessed during the early
than 30 percent. months of 2019, just as planting decisions were
being made in the US and some other parts of the
The consequences of a market collapse on that
Northern Hemisphere. Sowing across the US cotton
scale have been many and varied.
belt was well under way by the first weekend in
May, the point at which social media posts from
President Trump brought the mood of optimism
Unfixed on -call sales to an abrupt end.
180,000
(contracts) US farmers’ view of the likely returns from
160,000 cotton vis-à-vis soybeans and corn meant that
140,000 the area devoted to cotton proved only slightly
120,000
lower than that sown the previous season.
However, USDA’s forecast of harvested area is
100,000
12.5 million acres, representing an increase of
80,000 over 22 percent from last season, primarily owing
60,000 to a lower anticipated rate of abandonment in
40,000 West Texas. As things stand, the US is forecast
20,000 to produce a crop of 4.76 million tonnes (21.86
0 million bales of 480 lbs), the third-largest crop on
record, surpassed only by those attained in two
10 011 012 013 014 015 016 017 018 019
20 2 2 2 2 2 2 2 2 2 successive seasons in the mid-2000s, when more
than five million tonnes were produced.
Indian farmers are likely to be insulated from
One has been a waning appetite on the part of the market’s downturn by virtue of a Minimum
spinners for forward purchasing, on-call New York. Support Price for seed cotton that was hiked by
The return of mill buyers to a more hand-to-mouth some 26 percent in 2018/19 and raised a little
orientation is consistent with the data published further for the season ahead. Confidence that the
by the Commodity Futures Trading Commission. Cotton Corporation of India will intervene in the
Unfixed on-call contracts reached an all-time high market, the firmness of domestic cotton values
in May 2018. The previous peak had been attained during 2018/19 and a generally favourable Monsoon,
late in 2010, when the bullish phase of the 2010/11 have doubtless all contributed to a planted area of
season was in full swing. record proportions. Forecasts of higher production
are also predicated on a recovery of yields and
Market disruption for spinners and international
farmers’ capacity to keep pest attacks under control.
merchants, as well as those traders in China that had
taken an unequivocally bullish view of the market in The Southern Hemisphere’s two principal
the first half of 2018, has been difficult to digest. The producers and exporters have experienced sharply
scale of contractual difficulties that have arisen is differing fortunes.
probably still not yet apparent.
Brazil has achieved a quantum leap in production
Looming oversupply with the 2018/19 crop (whose movement is only
slightly in advance of that of the 2019/20 Northern
What then, of the supply side of the world cotton
Hemisphere crops). It has long been acknowledged
market? At first glance, it may seem paradoxical that
that, of the major producing countries, Brazil has
the downward spiral of prices during the past twelve
the most available land that can be brought under
months should have had so little impact on world
cotton. In Mato Grosso alone, an additional 300,000
production.
hectares or so have been planted in 2018/19. This
As indicated above, one of the periods of has been principally safrinha cotton, sown after the
(ultimately misplaced) optimism with regard to the early soybean harvest. This double-cropping model
6,000 US Production
thou tonnes Brazil Production
5,000 3,000 thou tonnes
2,500
4,000
2,000
3,000
1,500
2,000
1,000
1,000 500
- -
00 02 04 06 08 10 12 14 16 18 00 03 06 09 12 15 18
20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20
Season beginning Aug 1 Season beginning Aug 1
18Resized_1-8th_Cotton Outlook Ad_1.pdf
Liverpool 2019
1 3/15/13 1:05 PM
has proved lucrative in Brazil’s largest
producing state, where it accounts for the
bulk of Mato Grosso’s cotton plantings We ready for just
and over half of the national area.
On current indications, the depression
about anything.
of prices will result in only a modest Rekerdres & Sons Insurance Agency constantly strives to keep ahead
downturn in the area planted to Brazil’s of the ever-changing rules, laws, and customs issues involving cotton
next cotton crop. Farmers have invested shipping and storage. This allows us to identify exposure, control risk
heavily in cotton-specific infrastructure
and more fully understand the supply chain, from origin to destination.
and machinery and must service the
associated loans. Moreover, the bulk of
the 2018/19 crop was sold at prices well
above current levels, as well as a more
modest proportion of the next crop.
Defining the Future of Cargo Insurance Since 1953
In sharp contrast, output in Australia
13760 Noel Road, Suite 860 Dallas, Texas 75240 • 214.520.2345 • www.reksons.com
has been on a downward path. At
480,000 tonnes, the 2018/19 outturn
marked a decline of roughly fifty percent
from the previous season and unless
a massive rain event transforms the
situation, production from the next crop is forecast World production
to decrease by a similar proportion. However, 30,000 thou tonnes
reduced plantings are due to a lack of water rather
than a response to market signals. Indeed, at over 25,000
AU$ 500 per bale, ex-farm cotton prices would still 20,000
provide a strong incentive to plant cotton. Quality-
related market premiums, high yields and a limited 15,000
choice of alternative crops have invariably kept the
10,000
Australian farmer in the game – when sufficient
moisture has been available. 5,000
-
1 2 3 4 5 6 7 8 9 0
Australia production 0 /1 1/1 2/1 3/1 4/1 5/1 6/1 7/1 8/1 9/2
1,500 1 1 1 1 1 1 1 1 1 1
thou tonnes 20 20 20 20 20 20 20 20 20 20
1,250 Season begining Aug 1
1,000
No. 2 cotton contract. USDA forecasts that ending
750 stocks will have risen during 2019/20 from 4.85 to
7.2 million bales (480 lbs) – the largest carryover
500 since the 2007/08 season. That projection, however,
is based on the premise that exports of 16.5 million
250 bales can be achieved, one that some observers
consider optimistic, in the context of barriers to sales
-
to China, competition from a bumper Brazilian crop
00 02 04 06 08 10 12 14 16 18 and slowing global consumption.
20 20 20 20 20 20 20 20 20 20
Season begining Aug 1
12 US carryover (USDA, Sept 12.)
480lb bales
Like their counterparts in other major
producing countries, Australian cotton farmers 10
have also benefited from currency factors, a
theme explored in more depth elsewhere in this 8
publication.
6
Despite the anticipated downturn in Australia,
world production in 2019/20 is forecast by Cotton 4
Outlook to rise by over four percent to 26.5 million
tonnes, implying a surplus over consumption 2
approaching one million tonnes.
Within this rather bearish global context, 0
the statistical position in the US is of course 1 4 7 0 3 6 9
0 /0 3/0 6/0 9/1 2/1 5/1 8 /1
of particular interest, given its paramount 00 00 00 00 01 01 01
significance for the behaviour of the New York 2 2 2 2 2 2 2
19Liverpool 2019
Cotlook
Subscription Services Other Services include:
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Cotlook In One gives you Cotlook Daily, Cotlook Price Series
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Cotlook Daily The Price Series database includes:
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for a wide range of cottons
• The Daily A Index and its constituent prices
Cotton Outlook Weekly news
• Electronic format
• FREE Special Features
• FREE Annual Special Edition www.cotlook.com
The manner in which the excess supply will US loan vs. Indian MSP over ten
influence market dynamics over the coming seasons
months is the subject of much conjecture. 200% 20010/11 = 100%
Support mechanisms have assumed a greater
significance as world prices have moved lower. 180% Indian MSP
Only a modest proportion of the prospective 160% US loan
US crop is believed to have been sold from
first hands and the likelihood is that a good 140%
proportion will be entered into the Commodity 120%
Credit Corporation loan, which affords producers
cash liquidity and allows them to await a more 100%
advantageous opportunity to market their crop.
80%
The provisions of the Marketing Loan, introduced
in the mid-1980s, are intended to ensure the
20 /11
20 /12
20 /13
20 /14
20 /15
20 /16
20 /17
20 /18
20 /19
0
/2
international competitiveness of US cotton,
10
11
12
13
14
15
16
17
18
19
20
whatever the level of world prices. To this end,
cotton can be redeemed at the Adjusted World
Price if that value falls below the Basic Loan value bullish, whatever the short-term movement of
(52.00 cents per lb), as occurred in late August, for prices. Most traders subscribed to the view that
the first time since May 2016. once the State Reserve stocks reached a level
considered the ‘point of equilibrium’, the country’s
One other reference point of potential structural deficit would result in a rising import
significance over the months ahead will be India’s requirement that would transform the dynamics
Minimum Support Price for seed cotton. As of international supply and demand. As the
mentioned above, this season’s higher MSP has consequences of the trade conflict with Washington
provided an incentive for farmers to plant cotton. have become clearer, however, estimates of Chinese
However, the mechanism also has implications for consumption have been reduced sharply: today’s
the interaction of local and international supply and structural deficit looks nearer to two million than
demand, and for the relationship between Indian three million tonnes. The former figure is close to
and world raw cotton prices. In contrast to the the volume of imports recorded during the 2018/19
US Basic Loan value, the MSP has been increased season. Moreover, the impressive reduction of State
substantially over recent years. Reserve stocks over recent years has coincided
As a result, the 2019/20 season’s MSP implies with a less dramatic, but nonetheless significant
an Indian export price well above the international increase in uncommitted ‘commercial’ stocks in the
market. How that disparity is resolved will depend local market. Imported cotton consigned at Qingdao
in part on the policy pursued by CCI, not only as and other ports have also risen to unprecedented
regards the scale of its purchases, but also – crucially proportions.
– the manner in which it proposes to dispose of its For the time being, therefore, the galvanising
accumulated stocks. prospect of more active Chinese import buying
Until recently, China provided the world market appears to have receded into the middle distance
with an underlying narrative that was unmistakably once again.
20You can also read
