by Steve Eddington and Jim Kester
Arkansas Farm Bureau

China’s burgeoning economy and 1.3 billion population of would-be buyers makes it an obvious target for U.S. agricultural products, something certainly not lost on Larry McClendon of Marianna, the recently elected chairman of the National Cotton Council.

McClendon has been on two trade exchange trips, meeting with the China Cotton Association (CCA), an umbrella group made up of Chinese grower interests, mill interests and government agencies. His most recent trip occurring in June 2007, followed two visits to the United States by the Chinese, so interest in increasing trade of U.S. cotton is of interest to both sides.

“The purpose of our trip was to determine if there are any ways we can enhance cotton trade between the two countries,” said McClendon, president of the McClendon, Mann & Felton Gin in Marianna and also an experienced cotton producer, ginner, warehouseman and marketer. “The U.S. is the No. 1 exporter of agricultural products to China, so if you’re going to be in the cotton business, it’s synonymous that you mention China in the same sentence.”

McClendon said he attended a CCA conference at Urumchi, a city of 2.6 million in Northwest China that serves as the capital of the Xinjiang Uyghur Autonomous Region. That conference drew roughly 1,000 people from all parts of the world representing production, milling, trade and any issue that had to do with cotton.” The U. S. group also visited cotton farms and mills throughout the country, traveling some 8,000 miles in the process.

“We toured the mills in that area,” McClendon says. “They are highly efficient, and very productive, with annual mill consumption over 50 million bales. They are producing 30 million and importing 20 million.

Of the 20 they import, presently 8 million comes from the U. S. Obviously, without China we would have a difficult time selling the amount of cotton we do.

“There are 10,000 mills in China presently spinning cotton. There’s one mill that spins enough cotton to equal almost all the U. S. textile industry production. The mill industry is a very vital and growing business over there.”

McClendon says the only tractors he saw were the equivalent of “lawn and garden tractors.”

“One of these would have about 20 horsepower and used to pull a cart or have a 15-foot spray rig. We toured several farms and saw intensive acreage. We saw cotton fields that were yielding 1,700 – 1,800 pounds per acre, but we never saw equipment.

The biggest thing we saw was a hoe with a 60-year-old lady running it.”

Cotton production in China is based “99 percent” on hand labor, McClendon said, though he was surprised with the productivity that was achieved without much mechanization.

“Cotton farming over there is all hand labor. It’s planted by hand and extremely manicured, with no lost space (turn rows). Your plot is adjacent to someone else’s plot. The border between them is a stalk of corn at each corner of the field. That’s how the farmers know they are on the right plots.

“There is really no organized effort to replace (hand labor) because they need people to work on the farms and the farms to keep people busy,” McClendon said. “About 800 million people live in rural areas, with most engaged in small-scale agriculture. Contrast that with about 600 million people who live in urban areas.”

McClendon said the NCC sees plenty of opportunities for expanded exports to China, but acknowledges some obvious obstacles as well.

“The main complaint we have with China is their mill technology,” he says. “They have ring-spinning technology and open-air spinning technology. Our mills are accustomed to U. S. varieties. The Chinese mills are used to a higher grade of cotton, almost like the San Joaquin cotton we have here.

“For us to expand, we would have to have the length, strength and micronaire qualities that exceed the quality of our basic Memphis-territory cotton grown in years past.”

McClendon says the U.S. cotton industry is moving readily in that direction. The quality of the  U.S. product is quite a bit higher than what it was five to 10 years ago, he acknowledges, and says that standard will continue to move up.

“In the meantime, we hope China would adopt mill technology that would give them a broader base of cotton fiber they could work from,” McClendon says. “We are sending people over there now to show them how to use our cotton and what type of mill technology it would require.”

Quality of the U.S. cotton and the potential for China to increase its own cotton production are the biggest obstacles to expanded exports, McClendon says.

“They prefer premium-grade cotton. I also saw a greater capacity for China to produce more cotton. Their average yields today exceed those of the U.S., and I don’t see why that wouldn’t continue. It’s very intensive farming, and in the areas where they irrigate, they consistently yield three bales per acre.

“Our best hope of selling China more is increasing consumption of cotton in China. If we can get cotton usage up over there, and they’re moving rapidly in this direction, that will do more than any one factor for us to be able to sell more cotton.”

McClendon noted that in the last 10 years, 300 million people in China have become consumers, rather than just subsistence farmers.

“We’ve got a whole other market out there. This is why concrete, gasoline, textiles, steel … all those things are priced up in the U. S., because of this demand being generated in China.

“We anticipate in the next 10 years, an additional 300 million people in China and 200 million in India will fall into this consumer category, where they will have disposable income. What we’ve seen over there is that if they get the money, they will spend it. They want a better diet. They want a vehicle. They like nicer clothes. And that is good for cotton.”

McClendon suggests it would take 25 cities the size of Philadelphia to accommodate the annual urban population growth in China. In 2005, rural per-capita income was only $407, compared to $1,312 for urban dwellers.

The tremendous disparity between rural and urban income is causing an influx of people into the cities, putting economic pressure on them and political pressure on government to determine how to manage the influx of people and the loss in the rural countryside.

“Improving the economy would be the greatest vehicle we have for moving more cotton into China right now,” McClendon says. “We traveled on six-lane interstates everywhere we went in the major cities. All the interstates have been built since 1989.

“There’s also a huge amount of growth going on in Beijing for the 2008 Olympics. We wonder if it will be anti-climatic, will this growth slow down afterwards. It was kind of a joke over there about the national bird being the crane, but 40 percent of all the industrial cranes in the world are being used in China today.

“We took a photo of one site with more than 100 cranes. It looked like a forest of cranes. Every square mile of China looks like that, not just every city. The amount of construction on one square mile in China is equivalent to all the construction in the city of Memphis today.”

McClendon says he learned that much of the Chinese business environment is driven by engineers.

“Most people in China are engineers. Their answer to everything is to build something. They can build it rapidly and build it well. They go into an area where there is single-family housing — mud huts and old shanties — and tear it down. Six months later, a city is there with 10 high-rise apartments, 30,000 people living there, retail and office buildings, all on an 80-acre tract of land. It happens that fast over there.”

China’s response to World Trade Organization directives and consistent tariffs are among the issues that need to be more fully worked out, McClendon says, but he believes progress is being made.

“We’re kind of in a tit-for-tat with China,” he admits. “We don’t feel like they are honoring their import agreements with textiles. The other side of this is they are our biggest mill customers. So, it’s almost like a difficult marriage. You have ups and downs, but you’re still better off to stay married. We see this. China is getting there. It has taken a long time with some urging and prodding to make them live up to the trade agreements that we have.

“We’re going to come under pressure from both countries from the standpoint of production. They are going to be able to expand production. Our hope is that the consumer class we see out there will have disposable income and continue to expand its cotton consumption. That would mean at some point there’s going to be enough world-wide demand that China, India and the U.S. can all grow cotton, and we can make a living doing it.”