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The Rupp Report: The 30th Global Summit Of The Cotton Industry

Jürg Rupp, Executive Editor

Whenever Bremen calls for the next edition of the International Cotton Conference, the global cotton professionals are there. The 30th International Cotton Conference took place March 24 - 27 in the historic city of Bremen, Germany. This year, the Bremen Cotton Exchange and the Fibre Institute Bremen welcomed some 500 participants from 41 countries.

The conference agenda reflected the changes and developments on the global cotton market: Not only were the latest research results presented, but also hot issues like genetic engineering and sustainability, which have received in the past years -- and not only in Bremen -- growing interest.

Great Feedback

The cotton industry too was facing a turbulent time in the financial crisis. The Rupp Report has reported regularly about several issues of the cotton industry. In his speech, Wolfgang Vogt-Jordan, president of the Bremen Cotton Exchange, also mentioned some of the current problems, but also hopes for the future. He was pleased that in spite of the economic crisis, almost 500 participants from 41 countries gathered in Bremen for the conference, which is undoubtedly the most important event for the global cotton industry.

Trading Mechanisms Washed Away
Vogt-Jordan said that over the past two years, there has been great turmoil, and not only in the cotton world. "In March 2008, erratic movement on the futures and options market brought serious problems to the cotton industry and cotton trade," he said. "Almost like in a tsunami, hedging instruments and trading mechanisms were washed away and suspended, with wide-ranging and extremely negative consequences for the entire textile industry. Even up to today, the after-effects of these developments continue to affect our economic sector."

He gave one example and asked: "What effect do the decline and the disappearance of renowned cotton trading companies have on trade and the textile industry?" His belief is "that the reduction in the number of suppliers and traders definitely does influence competition in international cotton trading. The heavily reduced willingness of banks to provide sufficient credit to trade and industry must also be seen as a result of the events of the past few years and the resulting economic recession. This is still a great problem for the entire textile industry."

A Look Into The Crystal Ball
In his outlook, referring to considerably higher prices in 2009, Vogt-Jordan said, "We have observed a strong increase in prices, both on the futures and options markets, as well as in physical prices, since the beginning of the year." He mentioned that cotton prices increased sharply in February 2010. The Cotlook A Index rose from 75.35 cents per pound on February 1 to 85.55 cents per pound on February 26. In his view, cotton prices are supported by strong fundamentals such as the reduced production and rebounding mills, and the increased use is expected to generate a 15-percent drop in global cotton stocks.

"Higher prices paid for 2009/10 cotton will encourage farmers to increase cotton plantings in 2010/11," he said. "World cotton production is forecast to rebound by 10 percent to 24.4 million tonnes. World cotton mill use is expected to continue to recover in 2010/11, growing by 3 percent to 24.8 million tons driven by continued improvement in global economic growth."

The Shift Of Production ...

As a matter of fact, Europe lost its importance as a location for the primary textile industry, like spinning and weaving. However, cotton is still the single-most important textile fiber, accounting for around 40 percent of total fiber usage. According to Vogt-Jordan, the amount of cotton traded worldwide is currently at a record level of approximately seven million metric tons. "And there are still more than 80 producer countries which are producing a raw material whose price is changing daily and whose quality changes from crop to crop, just as it did 150 years ago," he added.

... And The Needs For Standardization

Everybody knows that the direction has changed, sometimes painfully for industrialized nations in Europe, Japan and the United States. Today, the music of the cotton industry is playing mostly in China, India and Pakistan. In this move, it is of greatest importance to Vogt-Jordan "that the cotton organizations provide a central function, in order to keep this volatile raw material on the right track with reliable and neutral regulations. For worldwide trade there is the need for a uniform set of regulations and a strong, accepted cotton organization. For this reason, the Bremen Cotton Exchange adopted four years ago the trading rules of the International Cotton Association (ICA) in Liverpool. Currently, there are intensive discussions about the further cooperation between the ICA and the Bremen Cotton Exchange."

Textile World will keep the readers of the Rupp Report updated on this subject.

April 6, 2010

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