Similar reports have been rumored of late about the West’s largest cooperative cotton marketer, Calcot, but the board of directors of the 1,500-member marketing cooperative dispelled those murmurings with almost $28 million in final settlement checks for California and Arizona members for their 2002-03 cotton crops.
The new president of the Bakersfield, Calif.-based cooperative, Robert W. Norris, said that final settlement "speaks for itself as to our ability and financial health and should go a long way to ending the talk about our stability."
Calcot marketed just over 1 million bales of cotton last season on sales of almost $470 million. Bale sales represented about 40 percent of the Western crop.
Norris, speaking at the first of three of the cooperative’s 76th annual meetings in Visalia, Calif., acknowledged that the cooperative has struggled in recent years and the board firing of David Farley in June as Calcot president after only eight months on the job "led to numerous rumors as to Calcot’s ability and financial health."
The final settlement checks answered Calcot’s critics and competitors. However, Norris acknowledged that "timing was everything" in a healthy final settlement as the cooperative was able to capitalize on high Step 2 payments in late summer, a "critical factor" in final grower checks.
When Farley was fired, Norris was name interim president and in August he earned the title of permanent chief executive office.
Won’t get easier
"We have come through some tough times," said Norris. However, it will not get any smoother for Calcot and other U.S. cotton marketers in an increasingly competitive world marketplace.
"I am not deluding myself as to the difficulties we face, and I am not going to...make wild promises I cannot keep," said Norris, an obvious reference to his predecessor who wildly predicted among other things that San Joaquin Valley almond growers would pull out orchards to plant more lucrative cotton. Almonds are now one of the valley’s most profitable crops.
Calcot’s efforts to improve grower returns is a bit easier these days as cotton prices continue their slow, two-year advance from a low of less than 30 cents per pound. There has been a sharp price upturn in recent weeks as world supplies tighten due to world record consumption of a record 98 million bales last season and production reaching only 88 million bales because of record low prices.
U.S. exports rose to a record 11.9 million bales last season. Unfortunately, the domestic textile industry has been all but destroyed by textile imports.
The future of the U.S. cotton industry will continue to rest in the export market, where Calcot has been a strong influence for decades. Eighty-five to 90 percent of Western cotton is now exported.
For this season, Norris said USDA is projecting a sharp world production increase (93 million bales) along with another record consumption year of 99 million bales. However, Norris does not believe production is growing as evidenced by USDA cutting its estimate monthly for the past four months.
Norris calls the 16.9-million-bale USDA 2003 U.S. crop estimate "probably pretty close. Crop losses in some areas have been offset by increases in others.
State wild card?
"California could be the wild card. While our crop has made up a lot of ground, we really won’t know what we’ve got until we get further into harvest," he said. Defoliation is just beginning in many areas. The same uncertainty hangs over the Arizona crop.
USDA’s latest 2003-04 forecast puts exports at 12 million bales, representing two-thirds of the U.S. crop. It would be the largest export total ever. That may be difficult to achieve with recent jumps in prices sending "sticker shock" through textile mills. However, Norris is optimistic sales will pick up in the months ahead.
On the flip side, domestic mill consumption is projected to be the lowest in 20 years, 6.6 million bales, a precipitous drop from the 11.3 million bales just five years ago. And, Norris considers the USDA 2003 estimate optimistic.
If USDA is right on exports, it will be the third straight year total off take has topped 18 million bales.
"With this scenario, U.S. ending stocks will be 3.8 million bales, the lowest in six years," added the new Calcot president.
Bottom line is Norris believes tight stocks equate to better prices.
However, there are no guarantees and the situation can change "in a big hurry. The world economy is soft, though improving. Cotton stocks are tight, but polyester production exceeds demand and prices for man-made fibers are very competitive."