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The Secret to More Valuable Cotton

By Jayci Bishop

Added value is at the core of PCCA’s mission to grower-owners. In most cases, the secret to adding value is finding the best markets. PCCA has focused on finding profitable markets since its inception. In 1961, PCCA opened a sales office in Japan, making it the country’s largest supplier of U.S. cotton at the time. Then in 1972, PCCA negotiated the first sale of U.S. cotton to China in 20 years, valued at $60 million for the 400,000-bale sale.

Fast forward to the present day. Most U.S. cotton is exported, making trade even more critical. The U.S. is the world’s largest cotton supplier, with exports valued at $9.02 billion in 2022. The top ten export markets for cotton last year were China, Vietnam, Turkey, Pakistan, Mexico, India, Bangladesh, Indonesia, Peru, and Thailand (USDA).

A Global Quest

“Exports are very important to our grower-owners because it opens up the world to U.S. cotton, and we need that,” said Keith Lucas, PCCA Vice President of Marketing. “Quite frankly, over 80% of the cotton produced in the U.S. year-in and year-out is exported. If you are not part of that particular market, you are really putting yourself into a pigeonhole as far as where you are able to sell your cotton. The export market is not only something that we want to explore for price and diversity, but we also want it there because that is the marketplace.”

PCCA must maintain its reputation and relationships with foreign mills and customers because of the large volume of exported cotton. Carlos Garcia, PCCA Export Sales Manager, said many of these relationships with mills go back 40 to 50 years, and it is his job to build on those longtime relationships with customers.

“We need to continue to do a good job when we make a commitment to those buyers,” Garcia said. “We need to ship the best cotton on a timely basis, and just continue to uphold the reputation that PCCA holds in the export markets around the world, and domestically. PCCA is a well-known company, so it sells itself.”

Exporting cotton has changed over the years. One of the most significant differences is the industry’s reliance on USDA High Volume Instrument data. Most mills understand and prefer to use USDA Green Card Final, the trade’s term for HVI. Simply put, Green Card Final means that the mills will accept the USDA class for the cotton, and by using HVI data, they know exactly what qualities they will be receiving.

“I would say that 95% of the cotton is traded on USDA HVI data,” Garcia explained. “Number one because of the reliability of the HVI data and number two, the different innovations that have come about we are producing a more uniform bale of cotton that allows us to ship it with Green Card Final.”

Exporting cotton for PCCA all starts with developing the market itself; One the co-op wants to be a part of, along with a customer base in that specific market.

“What goes into that is we have to assess the risk that is involved from both a credit risk and a country risk,” Lucas said. “We would not want to be selling cotton into Ukraine right now, as an example. We have developed those markets over time, and we try to look for newer markets when those become available. We have actually had an emphasis the last several years of building our market share in Pakistan. It has become a very good home for U.S. cotton.”

Service is the Difference

PCCA maintains a strong reputation with export partners, Garcia said. They know the local buyers and minimize the risk that we run by only selling to the best mills. PCCA utilizes agents around the world because they understand different languages and cultures.

“Selling cotton is the easy part,” Garcia said. “Obviously having the right cotton available is the big thing for our customers. We publish a daily offer sheet that goes out to a network of agents in these textile-producing countries. Then those agents take those offers and put them in front of the buyer. The buyer decides if there is something that they are interested in buying and we negotiate on the price. Making the sale is the easy part. The next part is the hardest, and that is where we get to start the shipping process.”

Ensuring that cotton is shipped on time and that we have received payment for it before shipment is the responsibility of PCCA’s Traffic and Invoicing department. PCCA never wants to lose control of the cotton.

“They do a very good job because they make sure the cotton can be loaded at the warehouse for a specific period of shipment that we promised,” Garcia said. “Then they have to manage getting that cotton to the port of departure, and at the same time, they have to make sure that we have the payment instrument or way that we are going to get paid available and ready to be used so that we don’t ship something or put something on the water without it being paid.”

There are a lot of moving parts in play when ex-porting cotton. It takes teamwork from the entire PCCA team to ship it effectively and efficiently.

“All the other commitments that we make are more difficult to fulfill,” Garcia said. “Obviously, without our invoicing staff, IT department, and all our other staff at PCCA, and of course our grower-owners, we could not do this because we wouldn’t have the cotton available for us to market. Without IT, we would not have systems available to be able to ship cotton effectively and quickly.”

Logistics can be challenging, but perhaps the most difficult to navigate are politics, natural disasters, or external forces. A recent example is the earthquake in Turkey.

“This year, there was a lot of cotton that was committed to Turkey that then had to be delayed or maybe invoiced back because the buyer’s textile mill was destroyed, and it was going to take a while for them to rebuild or repair the factories,” Garcia explained. “There are issues like that, and other issues like currency issues in Pakistan and Bangladesh, that impact our ability to ship cotton we’ve sold. Sometimes disputes between other countries and the U.S. triggers retaliatory reactions like imposing tariffs on cotton. Those are issues that weren’t there at the time we made the sale, and now we have to ship the cotton under new considerations. Those are probably the biggest factors. The unexpected issues that we cannot predict are probably the most difficult to manage.”

PCCA’s Sales team works daily to extract value from the export market. Added value is at the core of our mission, and it is top of mind when finding markets for your cotton.