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By Lana Robinson
Field Editor
The courtship started when a team of Texas Farm Bureau leaders and staff trekked to Mexico last April to drum up some business between that country's textile industry and Lone Star cotton producers. In late September, a delegation of Mexican textile industry leaders travelled to the South Plains to continue the conversation. A romance has developed, and now it's a matter of working out logistics and overcoming barriers to make the marriage work.
"We have willing partners, but it will take cooperation and work between producers, gins, banks, and the Mexican buyers to make it work," said Bryce Myrick, Texas Farm Bureau's Marketing Education director.
Representives of seven gins, 15 banks and/or loan guarantors, along with 34 producers and four representatives of Mexico's Industrias Parras, met in Post, Sept. 21, to explore trade opportunities. One of those attending, Linda Taylor, co-owner with her husband, Dan, of Buster's Gin, Ropesville, said, "I was surprised and pleased to note the varied farmer representation at the meeting, which indicates a need for another marketing avenue."
Texas Farm Bureau Vice President Lloyd Arthur, a Ralls cotton grower, said the Post conference and associated Texas cotton industry tours, and the trip to Mexico last spring, were aimed at finding markets for cotton and other Texas products for TFB members. Arthur said Mexico seemed to be a good prospect.
"They already buy 90 percent of their cotton from the U.S. We have the edge, being neighbors," Arthur observed. "They say they favor U.S. cotton because of our classing system. They can depend on it being what they want. Mexico's domestic cotton has a higher percentage of discrepancy."
Accompanying Arthur to Mexico last spring was Dist. 3 State Director Steve Cochran, Aspermont, Dist. 6 State Director Gary McGehee, Mertzon, TFB Cotton Chairman Kody Carson, Olton, Bryce Myrick and TFB Associate Director of Commodity and Regulatory Activities George Caldwell. Lupe Torres, Agribusiness and Rural Economic Development specialist for the Texas Department of Agriculture, escorted the group, and was on hand at the Post meeting. Torres assuaged producers' and financiers' jitters with these words:
"Industrias Parras is the fourth largest textile industry in the world. We have done it with grain sorghum (Planter's Cooperative, Odom) and initially, people had the same uncomfortable feeling...This is a time to see what their needs are, what you have to offer, and get acquainted. It is probably the first of many meetings."
Ruben Zermeno, cotton procurement officer for Parras, said the textile giant has four plants in Mexico that use 28,000 bales of cotton each month. Two of the mills are at Torreon. Cotton is delivered by truck from warehouses in Laredo. Each truckload holds a "mark," or 90 bales. A "lay down" consists of one mark of cotton, he said. The mills use a blend of grades to control quality and cost. Each mill contains 122 automated, computerized weaving machines and a state-of-the-art cleaning machine. Eighty percent of the fabric produced is blue denim and 20 percent is in other colors. Fabric is prepared in shrinkwrapped, ready-to-ship lots, with computerized tags.
"We buy from merchants," said Zermeno. "It can be bought at any time, many times before the cotton is planted. U.S. cotton can be bought on credit, up to 180 days."
Zermeno pointed out the importance of the Step 2 program, which has been targeted for elimination.
"The Step 2 program makes U.S. cotton very attractive," Zermeno said. "It's usually 9 to 10 cents. The broker gets half and I get half. That makes your cotton competitive."
As a part of its overall response in the Brazilian WTO (World Trade Organization) case, the Bush administration has proposed statutory changes that would eliminate the Step 2 program, remove a 1 percent cap on fees that can be charged under the export credit programs, and terminate the Intermediate Export Guarantee Program (GSM-103).
A real eye-opener for many attending the Post conference was the availability of government loan guarantees for these types of transactions. Joe Ringer, business development officer for the Export-Import Bank of the United States (Ex-Im Bank), explained the details of the program. According to Ringer, Ex-Im Bank, in its 71st year of helping finance the sale of U.S. exports, does not compete with private sector lenders, but provides export financing products that fill gaps in trade financing.
"We assume credit and country risks that the private sector is unable or unwilling to accept," said Ringer, a private sector banker before joining the Ex-Im Bank staff. "We also help to level the playing field for U.S. exporters by matching the financing that other governments provide to their exporters."
Ex-Im Bank provides working capital guarantees (pre-export financing); export credit insurance; and loan guarantees and direct loans (buyer financing). No transaction is too large or too small.
In fiscal year 2004, Ex-Im Bank authorized financing to support $17.8 billion of U.S. exports worldwide.
"Our goal is to create more jobs in our country related to products for export," said Ringer.
He explained that other goals are to: 1) expand sales and boost borrowing paper; 2) speed cash flow; 3) migrate losses; and 4) enter new markets.
Ringer said the traditional "cash-in-advance" way of doing business causes Americans to lose lots of sales because many foreign buyers can't get financing in their own countries. The Ex-Im Bank guarantees funds for qualified buyers on an exporter, open-account basis. They also offer export credit insurance as an alternative to Letters of Credit, which are often wrought with discrepancies.
"The export credit insurance is cheaper. No collateral is required and you have less paper. It works. Not only is it a marketing tool, but you can borrow against it. And it's open to 145 countries, including Iraq, China, and Guana. It will either protect the bank or the seller," Ringer said.
Ringer said the policy would be good on export orders for bulk cotton, and other commodities, and related equipment for a period of 180 or 360 day terms. Premium rates are $1.35 per $100 for a 180-day term, single buyer policy ($1,000 minimum premium/$750 for small business).
"We just reduced rates to Mexico," he said. "The premium for 180 days is 1 percent per $100 of the invoiced amount to Mexico."
A multi-buyer policy is also available for experienced exporters. The policy is issued for a period of one year and is renewable annually. It covers all eligible shipments.
"We guaranty 98 percent on bulk agricultural products," Ringer added.
Ex-Im Bank's Financial Institution Buyer Credit Program (FIBCP) insures the lender.
"The foreign buyer has 180 days. The producer gets cash down when they present the shipping documents. We'll finance anything except import duties," he said.
For specific details and other information regarding Ex-Im Bank services, visit www.exim.gov, or contact Ringer at the Southwest Regional office in Houston: (281) 721-0465.
During the meeting, lenders, including Luis Requejo, Farm Credit Bank of Texas, Mark Keller, Southwest Texas ACA, and a host of local and regional bankers expressed an interest in financing export sales.
TFB's Myrick said all the elements are in place for a successful marriage. Now is the time to tie the knot.
"We welcome help from anyone with experience that can help with any aspect of it," said Myrick. "If you can help us put parts of the puzzle together to facilitate trade, we'd love to visit with you."
Anyone interested in contacting Myrick may do so by calling 254-715-5055; or by sending an email to bmyrick@txfb.org.
