What is in this article?:
- Highest cotton prices in history followed by equally squat low-valued lint forced a frightening situation in futures market.
- 350,000 cotton acres or less in California this year brings the industry close to the minimum needed to maintain industry viability.
- Association (ACSA) members revealed that “up to 3 million bales of U.S. cotton at an estimated value as high as $1 billion is either in default or at risk. That is a staggering number.”
The U.S. cotton industry has experienced historically volatile and economically brutal trading in the past 18 months, and the roller coaster ride may not be over.
The highest cotton prices in history followed by equally squat low-valued lint forced a frightening near collapse of the cotton futures market. That could happen again, according to a seasoned cotton trader.
Acreage continues to fluctuate, merchants and others were told at the recent Western Cotton Shippers Association 89th annual convention in Monterey, Calif.
This unprecedented period of change plunged California cotton acreage to less than 200,000 in 2009. By comparison, California farmers planted 1.6 million acres of cotton in 1979 and for 25 consecutive years until 1997, acreage never dropped below 1 million acres, according to Earl Williams, president of the California Cotton Ginners and Growers Association.
Fortunately, says Williams, it rebounded to a little more than 300,000 acres in 2010 and went up another 150,000 acres last year to more than 450,000 acres. USDA says it will drop back to 400,000 this year. California cotton ginners say otherwise. This season it will be “something less than 350,000 acres” with a 60-40 split between Pima and Upland cottons, according to a survey Williams conducted of association gin members. Cotton prices compared to income from competing crops and a shortage of relatively inexpensive irrigation water this season are two key reasons for the drop.
“We thought last September that the 2012 acreage would not change much from 2011, but the ups and downs in the industry (since then) has taken its toll in a lot of ways,” Williams told WCSA members.
(For more, see: Bears back in control of global cotton market)
The acreage decline has also had a dramatic impact on the industry infrastructure with just 37 gins operating in the state last year. Fortunately, cottonseed prices have remained high, despite the economic malaise in the dairy industry, the primary market for cottonseed. Cottonseed sales, says Williams, have kept some gins open.
This anticipated drop to 350,000 acres or less this year brings the industry close to what Williams believes is the minimum needed to maintain industry viability, 300,000 acres.
Fortunately, advances in growing the crop have helped stabilize the industry. For example, 20 percent of the San Joaquin Valley’s cotton acreage is now drip irrigated, and the Roundup Ready technology has “worked well. We are also well positioned for exports,” Williams adds.
“There are some things about the cotton industry that should allow cotton to remain a viable rotation crop in California,” he says.
Cotton, like other crops in the state, is not without challenges. Fusarium Race 4 is one. The industry is aggressively pursuing solutions to the soil-borne disease that has no cure and can render a field useless for cotton production.