U.S. textile mill manufacturers' valuation of cotton quality attributes

Abstract

The innovation and adoption of the High Volume Instrument grading system present the U.S. cotton industry with both new opportunities and challenges. While more accurate information about cotton quality is available for market participants, the understanding and comprehension of the price-quality relationships under the new grading system have increased importance in production, marketing, and use of cotton. This study analyzed and determined the patterns of the market values paid by U.S. textile mills for cotton fiber attributes.

Hedonic price models, based on Rosen's analytical framework, were developed to analyze the information of bona fide market transactions in the textile mill market for the U.S. as a whole and three individual U.S. cotton regions during the period 1992-1995. These models explained how fiber attributes (i.e., trash content, color, staple, strength, micronaire), and other nonfiber factors affected cotton prices.

Results suggest that textile mill manufacturers paid different premiums and/or discounts for different fiber attributes for each individual region in the U.S. The textile mill industry seems to differentiate cotton by the region of origin in both fiber premiums and/or discounts and base prices. Fiber premiums and discounts are substantially different between the West and South Central region. Staple premiums and discounts were significantly different between the West and the South. Micronaire discounts differed across all three regions. Textile mill manufacturers only paid strength premiums for the cotton produced in the Western region. This analysis provides the market participants with information relevant to government cotton programs, cotton preparation, variety selection, and cotton marketing strategies. It also demonstrates methods for collecting and analyzing hedonic market data collected from individual firms.