Cotton warehousing woes return as wait times mount
Some US traders are waiting more than three months to take delivery of their cotton from warehouses, traders said, kindling memories of last year's controversy over logjams and fuelling calls for tougher regulation. Two merchants were waiting more than two months for bales in sheds in Memphis, the hub of US cotton trading, and Southeast regions to be loaded out, they said. In one case, the wait was over three months.
Copyright Reuters, 2015
That is similar to last year when traders complained of months-long queues and the industry introduced new data collection systems to improve transparency of the more then 350 warehousing companies under US Department of Agriculture (USDA) regulation. Some warehousing sources say the load-out rates are still within and above the minimum standard set by the USDA, which requires storage firms to load out a minimum of 4.5 percent of a firm's shed capacity each week, if there is demand for the fiber.
But traders say the current standard is not fast enough and the USDA's efforts are not working. "A lot of our members don't think the standard is high enough, but it's going to be an uphill battle," said William May, President of the American Cotton Shippers Association (ACSA).
The complaints come at a critical time for merchants as shipments of the 2014/15 harvest pick up. The new measures have not been successful because merchants have not used a new data collection system rolled out by the USDA this summer, said Charlie Jackson, Chairman of the Cotton Warehouse Association of America.
The industry, including merchants, needs to collaborate "to identify currently underperforming warehouses and rectify the problem," he said in an emailed statement. Warehousing companies say loading out at a faster rate would require more equipment and increase their costs. Increasing the minimum standard arbitrarily even to 6.5-percent would create an additional $500,000 in annual expenses for each warehouse, said Andrew Jordan, Executive Director of the Cotton Growers Warehouse Association, a US warehouse group that represents storage operators. The association and warehouse operators have advocated for expedited shipping options for additional fees.