• Linkdin

Interview with Doug Christie

Doug Christie
Doug Christie
President and BU Leader
Cargill Cotton
Cargill Cotton

Cotton may not outpace synthetic fibre growth
The Indian cotton industry is set for a revolution in the coming years. In an interview with Fibre2Fashion.com, Doug Christie, President and BU leader of Cargill Cotton talks about the current state of cotton industry in India and worldwide.

Given that there are an increasing number of alternatives to cotton fibre available for the textiles industry, how important is it to ensure security of cotton supply?

Cotton for long has been the fibre of choice. However in the last decade, alternative fibres in particular have emerged as stronger substitutes. What originated from volatility of cotton prices and supply insecurities has been given a new dimension by the way alternative fibres have reinvented themselves, blending style with comfort that was traditionally associated with cotton. For cotton to defend its fibre share, managing supply and volatility will be the key. Both these can be addressed - to a large extent - by increasing efficiencies in the supply chain. The focus is moving from just sourcing to price risk management and from securing supply to buying just in time. This is good for the industry as it pushes it to innovate and throw out inefficiencies. Companies like Cargill play an essential role in this to secure supply and help their customers manage the price risk and volatility.
 

What are the challenges facing production of organic cotton?

Though the demand for organic cotton is growing, one cannot say the same about its production. This is because there are no consistent global standards to produce organic cotton. In addition to this, the cost of production becomes much higher. Typically the chain passes on the premium to the consumer, which makes it a niche product, and therefore limits its use in the fibre mix. Another issue concerning organic cotton is its credibility. It is difficult to test whether an item is genuinely organic or not, irrespective of what the label on the goods may state.

What can be done to limit the impact of climate change/uncertainty on cotton yield?

Bt is a good example of how technology aids yield. Yields in India will improve immensely as long as technology in seeds and other inputs are made available to farmers. However, another factor is irrigation. Indian cotton is largely rain-fed and vagaries on monsoon could swing yields by as much as 10 per cent. The government has initiated a good momentum by promoting investment in technologies like drip irrigation. The scale and scope needs to improve. This will not only help the cotton yields, but across all crops.

What steps does Cargill Cotton take to ensure a greener footprint?

Our work to promote sustainable cotton production parallels our efforts in other supply chains, with an approach that combines farmer training in best agricultural practices; giving them access to resources and markets; helping them raise their livelihoods; and supporting their communities. Additionally, we partner with other organisations and other sustainable cotton programmes to drive improvements across the sector, encourage responsible labour practices and reduce environmental footprint of our own operations. We are a member of the BCI, a multi-stakeholder undertaking to make global cotton production function better for the people who produce the crop, lessen environmental impacts where it is grown, and improve the sector's overall sustainability. Cargill is now the largest trader globally of BCI-certified cotton. In all of our operations, we strive to improve our energy efficiency, increase the use of renewable sources, lower greenhouse gas emissions and reduce freshwater use. Our cotton operations comply with our stringent corporate environmental policies, and support our corporate goals in these areas. Cotton ginning has a relatively low environmental impact, because the operating season lasts for less than six months of the year following harvest, and facilities use minimal resources. Our ginning operations use renewable energy sourced from nearby hydroelectric sources. All of the waste produced at our gins is reused or recycled, including wastewater and discarded plant material. The latter is composted and given to farmers to mix with fertilisers.

World cotton prices are predicted to fall in 2015, and consumption is expected to go up. Can we expect cotton consumption to grow as much as synthetic fibres on a global level?

Change in fibre mix is not only about price, it is about trend and fashion. Today's youth is largely indifferent to the fibre mix as long as the cloth looks and breathes fine. We are in a period of oversupply with less government intervention; so prices should be largely stable and low. This will help in the recovery of cotton consumption, but it has to be more than a year to trend. Cotton's loss, because of price and volatility, can be arrested. After five years, we are going in to a year when consumption outstrips production. But it will take a long time to reverse the trend. So while cotton will grow in absolute numbers, it may not outpace synthetic fibre growth.

Ensuring that China has a resilient cotton supply chain is in the interest of the global textiles industry? Do you agree?

China is the largest textiles manufacturer. So in the near to medium term, stability in the Chinese industry will have a calming effect on the global textiles chain. History will show that textiles, being a labour intensive industry, will naturally tend to move towards regions with the lowest input costs. It happened in the west and is happening in China. China is gradually shifting its textiles and other industries to countries having labour arbitrage and to reap the benefits of tariff-free exports to the European Union or the US, such as those in Southeast Asia and Sub-Saharan Africa. This will happen naturally. The key is to avoid any sudden changes which bring in volatility, destabilise the supply chain and affect the industry.

According to you, what exactly is the market opportunity for brands in the Indian cotton industry?

The opportunities are huge. The Indian apparel market is about US$ 3.2 billion, but less than 25 per cent is branded. India has a population of 1 billion that adds 12 million every year. Throw in the fact that GDP growth is around 7-8 per cent, and 36 per cent of the population is in the 20-44 age-group, i.e. upwardly mobile, drives consumption, is brand conscious; the opportunities are immense. FDI in single brand retail, when through, will also act as a catalyst for this growth.

What is the consumption of cotton in India, and how are the prices behaving in India as compared to other parts of the world?

Indian consumption is growing, and USDA, for this marketing year, estimates it to be at 25.75 million bales. India for the last decade or so has been a surplus producer. Indian cotton has generally remained the cheapest high-grade cotton, and domestic mills have catalysed this to help grow the domestic consumption. However, there have been times when export bans, import duties and a higher farmer-support-price have led India to become a high-priced island. We are entering another such year when Indian prices are higher relative to world prices.

How has the growth of e-commerce impacted marketing and communication?

In developed countries, a lot of farm inputs are marketed through e-commerce; and farmers increasingly rely on technology to conduct business from their farms or fields. E-commerce has allowed greater access to timely market information. Like e-commerce in general, it cuts down cost and puts the farmers directly in touch with the technology provider.

What are the trends expected to shape up marketing and communication in the next one year or so?

In developing countries, the advent of smartphones has changed the way farmers access information. Traditional information sources like the state owned KVKs (Krishi Vigyan Kendras), print and television media are supplemented by more active information sources like web portals and apps. It is not only shaping up marketing, but also farm advisory. Farmers are getting more aware and better informed. The source of information today is as powerful as the information itself. At the consumer level shopping 'on the go' is becoming more convenient and proffered. With information being bombarded all over, going forward - the farmer and the consumer both - will demand more timely, customised and relevant information.

What are the biggest challenges for the cotton industry in India?

The biggest challenges that the cotton industry in India faces are as follows.
  • First and foremost is the quality of cotton. Indian cotton despite being intrinsically of good quality is handled very poorly from the farm to mills. The world discounts the Indian bale for this reason, and the domestic industry is compelled to use a raw material delivered sub-standard.
  • Another problem is the myriad taxes because of which India competes within itself more than the rest of the world. It costs more for cotton to move from Gujarat to Coimbatore than to China.
  • Even though the raw material is available, a lot of the factories still run on obsolete machinery, which makes it difficult for the Indian cotton industry to compete with countries such as China.
  • Erratic power supply further adds to this problem. Power is a major component of the cost. Interruption not only hampers productivity, but running generators adds to the cost.
  • A large portion of the consumption growth has been fuelled by China's demand for yarn. As China unwinds its cotton stockpiling programme, demand for yarn is expected to fall. Unless this surplus is consumed locally or placed elsewhere, it will affect the margins.

Organic cotton is set to witness greater demand in future. Are major cotton producing countries geared up for the same?

Consumers are attracted to organic cotton because of sustainability, traceability and clear standards and labels. However, organic cotton holds minimal share in the cotton textiles market on the whole. It is important to remember that organic cotton finds resonance with the sustainability platform, but is not the only sustainable cotton product. Products like Better Cotton Initiative (BCI), CMiA, etc, have more flexibility due to mass balancing, etc, and are therefore easier to expand. They are gaining more traction in the supply chain. Due to the forces of demand and supply, the organic cotton market will grow. But because of other products that have the same appeal, it is unlikely that major cotton-producing countries are giving any major focus on development of organic cotton per se.
Published on: 10/07/2015

DISCLAIMER: All views and opinions expressed in this column are solely of the interviewee, and they do not reflect in any way the opinion of Fibre2Fashion.com.

Other Interviews

Mauro Dallavalle
Sr. Marketing Manager Fibers Global, Color & Additives
Avient Corporation
 
Folker Stachetzki
Marketing Manager
Brother Internationale Industriemaschinen GmbH
 
Kimberly Morgan and Rik Veltman
Chief Commercial Officer & Fashion Technology Evangelist
K3 Business Technology Group PLC
 
Dr. Harald Weber
Managing Director
VDMA Textile Machinery Association