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Logistical challenges for cotton industry

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A late cotton crop coupled with ongoing supply chain issues is creating challenges for cotton shipping.
What’s causing cotton shipments to be off the mark? And what, if anything, can be done to ensure marketing opportunities aren’t squandered?

It’s an exciting time for cotton. Prices are strong. Demand is robust. As a whole, U.S. growers just produced one of the most valuable cotton crops ever.  

But lingering supply chain challenges continue to be a thorn in the side, and could cost the U.S. cotton market, according to Buddy Allen, president and CEO of the American Cotton Shippers Association. 

“The supply chain challenge is real, and we’re not executing well,” Allen said during a presentation at the 2022 Beltwide Cotton Conference in San Antonio.  

USDA’s December WASDE Report (the most recent report available at this article’s deadline) estimates U.S. cotton 2021/2022 exports at 15.5 million bales. But at current shipping rates, cotton exports are roughly one million bales behind, according to Allen. 

“We do believe we’re going to get there, but it’s going to take a big shift in shipments going forward to meet our export goals,” he said. 

“But if we don’t meet our estimates, we’re going to add stock, and, like it or not, there’s an undeniable relationship between price and U.S. ending stocks,” he continued. “You can see over the last 20 years, simply put, when the stocks go up, the price goes down. We’ve taken more stock off the books more quickly than we ever had in this two-year cycle, but if we fail to execute in shipping this cotton, we will accrue stocks and that will be a significant factor for price.” 

What’s causing shipments to be off the mark? And what, if anything, can be done to ensure marketing opportunities aren’t squandered? 

“In order to seize this opportunity, we will have to become more efficient as shippers,” Allen said. “Right now, we’re way behind. We’re shipping 140,000 -190,000 bales per week. We’ve got to ship 385,000 bales each week from now until the end of the marketing year to hit the 15.5 million bale mark. To do that, we’re going to have a lot of big weeks. That can happen. But as it stands, we’re poised to come well under the estimate. We will miss the mark tremendously if we languish at this rate.” 

Supply chain issues 

Supply chain gridlock is certainly not news, but data shared by Allen during the Beltwide conference was eye opening. Few vessels are arriving on time at key ports like Los Angeles. Shipments are more frequently beings split between vessels, which creates documentation challenges and further delays. Most surprisingly, 72% of shipping containers are sailing back to Asia empty, according to data provided by the Port of Long Beach. 

“Traditionally, approximately one-third of containers return empty. You simply can’t fill every box due to weight,” Allen said, “but we’re sending back 72% of containers empty.” 

U.S. agricultural markets have been stymied by the inability to secure shipping containers for their goods. Instead, maritime shipping companies – they own the bulk of the shipping containers worldwide – have prioritized empty containers for quick shipment to Asia where they can collect top dollar for exports coming back to the United States and elsewhere. 

Approximately 60% of U.S. cotton exports are shipped through California ports. 

Another supply chain issue delaying exports is truck driver shortages, which Allen described as “perhaps the single biggest challenge.” 

An industry that was running low on drivers pre-COVID is now seeing exponential shortages as drivers resist vaccine mandates and other regulations. The American Trucking Association says the trucking industry is currently short 80,000 drivers. Meanwhile, the costs of moving goods by truck have increased almost 40%. 

“The most simplistic metric to explain the supply chain gridlock is that total inbounds cargo over the last two years has been twice the normal level,” Allen said. “We are continuing to inundate our supply chain with more cargo than it is physically able to handle. This challenge is real. We have no idea when this will be over, but there is no real indicator of significant relief on the horizon that we see.” 

Temporary relief could come with the Chinese New Year, which falls on Feb. 1. (It’s a year of the Tiger.) Celebrations typically last 16 days, but the public holiday spans one week. 

“The New Year provides a pause and a chance to catch our breath,” Allen said. “The holiday coupled with increasing COVID restrictions in China could slow down their outbound cargo and give us a chance to realign and reset.” 

Policy changes 

In his presentation, Allen addressed ongoing efforts to improve the movement of goods. While all long-term solutions, improving the efficiency in which cotton and other commodities are shipped is crucial to the future of U.S. agriculture. 

The Infrastructure Investment and Jobs Act that was signed into law in November promises to address the issues at our nation’s ports — investing $17 billion in port infrastructure and waterways.  

The FREIGHT Act, introduced in the U.S. Senate by Sen. Roger Wicker, R-Miss., looks to address ongoing freight challenges by proposing standardized terms used in documents and operations to expedite communication among stakeholders. 

Rep. David Kustoff, R-Tenn. has recently introduced the Improving Chassis Capacity for Memphis’ Supply Chain Act, to address the shortage of chassis through public-private partnerships. A companion bill was introduced in the Senate by Sen. Marsha Blackburn, R-Tenn. and Sen. Wicker. 

“We’ve identified the way we provision chassis as a weak link in the chain,” Allen said. “We would like to see there be more choice and more efficient use of existing equipment and infrastructure so we can move as much cotton or other cargo as possible.” 

Future 

While the logistics of moving cotton expeditiously are not ideal for the short-term, Allen was still optimistic about the future of U.S. cotton.  

“We think global consumption of cotton is on the increase. Barring a major disruption, like the trade war, or the COVID lockdown, we’ll take global consumption to a place it’s never been. In the U.S. we’ll see an opportunity to grow more cotton, sell more cotton, and have a larger more-profitable industry. If we can execute and manage the risks I’ve been describing,” he said. 

“Our goal is to be able to sell 23 million bales of cotton by 2030. In order to do that, we’ll have to export roughly 20 million bales. Domestic consumption will be relatively static during this time. We’ve never exported that much cotton, we shipped 18.5 million in 2005, but our average is closer to 16.5 million.” 

“In order to seize this opportunity, we will have to become more efficient as shippers.” 

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