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'Vietnamese cotton industry needs to manage risk' – Expert
22
Jun '11
Vietnam's cotton industry can protect itself against volatile world market prices by enhancing its focus on risk management, says Dr. Gary Adams, Vice-President of the National Cotton Council of America's Economic and Policy Analysis.

While addressing a seminar in Ho Chi Minh City, Dr. Adams said that it is essential for Vietnam to identify ways to deal with the fluctuating cotton prices.

“Vietnam would have to work out ways for hedging of some costs of raw inputs, formulating strategies within the future market or hedging to cut down on that risk”, Adams said and added that some of the textile units could even consider working with traders supplying cotton.

He, however, also said that though adopting some strategies and risk management techniques while working with these traders may prove helpful, these may not necessarily lead to reduction in cotton prices. But, it may possibly alleviate some of the risks that come with volatility in prices, he added.

General Secretary of the Vietnam Cotton and Spinning Association, Nguyen Hong Giang said that Vietnam needs to depend on imports, to fulfil its domestic demand. He added that around 40 percent of the country's shortfall is met through imports from the US, 15-16 percent from India and the rest through imports from Australia, former Soviet Union nations and West Africa.

To cope with this heavy dependence, cotton growers are given several incentives to persuade them to undertake cotton cultivation, as the Government intends to enhance the self-reliance in yarn supply, for which cotton is a raw input.

Giang further said that domestic production remains low, as cotton production is undertaken in the country on a very small scale which hardly comes to one hectare per household. Due to this, it has become difficult to introduce mechanisation in cotton cultivation, which increases the cost of production.

Presently, cotton is grown in Vietnam in Son La, a northern upland province, and in the south-central provinces of Ninh Thuan and Binh Thuan in the Tay Nguyen (Central Highlands) province of Dak Lak, Giang said.

Adams said that he foresees Vietnam will continue exporting cotton textile items, particularly to the US.

He said that Vietnam is emerging as a textile item supplier to the US and that much depends on rise in demand for cotton textile items from the US's customers, as Vietnam is as competitive as other countries to get a market share in the US.

Editor's note-Risk management in the face of volatile market prices is recommended as a necessary tool everywhere.

Fibre2fashion News Desk - India

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