A group of US senators have led a call to Congress for additional relief efforts in response to the Covid-19 pandemic to adequately address the magnitude of losses felt throughout the cotton supply chain.
Led by US Senators Thom Tillis and Mark Warner, the letter to majority leader Mitch McConnell and minority leader Chuck Schumer asks that any package should ensure the US Department of Agriculture’s (USDA) next round of assistance considers cotton farmers, textile mills, and the cotton merchandising segment.
“Across the agricultural sectors, the US cotton and textile industry is particularly hard hit as the Covid-19 pandemic is causing unprecedented demand destruction for cotton apparel and textiles,” wrote the Senators. “Billions of dollars of orders have been cancelled as retail shopping outlets remain closed or operate at reduced capacity. The collapse in cotton demand is being felt across the US cotton industry from textile manufacturers to merchandisers to cotton producers, and all segments in between. The viability of the farms and businesses, and the jobs they represent, are at risk of not surviving this crisis.
“When Congress considers additional relief efforts in response to Covid-19, we believe any package should ensure USDA’s next round of agricultural assistance will adequately address the magnitude of the losses felt throughout the cotton supply chain by cotton farmers and include critical relief for textile mills and the cotton merchandising segment, all of which are facing unprecedented economic losses,” the Senators continued. “We want to work closely with you and our other colleagues to ensure adequate relief for the U.S. cotton industry so that this critical industry receives the necessary assistance for all segments to survive and recover.”
From March through May, the Census Bureau reports that clothing sales are down by US$44bn, or 67%, relative to the same three-month period in 2019. US textile mills report a 90% drop in orders for the yarn they produce and are consuming cotton at a seasonally-adjusted annual rate of just 250,000 bales, down over 90% from year-ago levels.
With mill consumption at an all-time low, the loss in monthly yarn production value is $200-$300m, the Senators report.
“US textile manufacturers have idled much of their production capacity, with the notable exception being the industry’s efforts to redirect production lines to manufacture PPE and other health-related textiles. However, that production is costly to maintain when running at less than optimal capacity. The response of the textile manufacturers underscores the importance of supporting and rebuilding this domestic production base,” they add.
In response to the global economic disruptions, USDA lowered its estimates of global mill use for this year and next by a combined 23m bales, which exceeds the size of annual US cotton production, representing a market value of almost $8bn. The slowdown in cotton demand has caused the cancellation of 1.5m bales of export sales since January, resulting in additional carrying costs that include storage, interest, insurance, additional interior and ocean freight costs associated with destination displacement, and other uncontrollable costs, the Senators say.
Cotton prices fell by as much as 30% since early this year, representing a loss in market value of approximately $160 per acre of cotton.
“In the US cotton industry, from the textile mills through the merchandising and production segments, the economic pressures are mounting with businesses and farms struggling to survive. Given the precipitous decline in retail demand, the loss of textile production and lower cotton prices that are expected to persist into 2021, the economic damage to the US cotton industry is currently estimated to be at least $4bn.
“Given the severe pressures facing US cotton and all of our agriculture industry, we believe Congress should pass the necessary legislation before the August recess. We want to work closely with you and our other colleagues to ensure adequate relief for the US cotton industry so that this critical industry receives the necessary assistance for all segments to survive and recover,” they conclude.