Thomas Wedegaertner says cotton ginners may have to find another Eli Whitney to help them escape the economic woes more and more Mid-South and southeastern gin operators are facing.
After three years of rising fuel bills and falling cottonseed returns, many ginners are beginning to wonder what it will take to restore their operations to profitability. (One Southern Cotton Ginners Association member said he lost $70,000 in 2005.)
For that reason, the Southern Cotton Ginners Association invited Wedegaertner, director of cottonseed research and marketing at Cotton Incorporated, and two other speakers to their March 2 annual meeting to talk about the “Future Opportunities and Challenges for Cottonseed.”
Using 2005 dollars for comparison, ginners have reduced their operating costs by about 50 percent in the last 30 years, Wedegaertner says.
“In 1975, the average gin processed about 4,000 bales of cotton at a cost of $32 per bale,” he noted. “With the 23.5-million-bale crop that was just harvested, we're estimating the average gin ginned about 20,000 bales at a cost of $50 per bale, according to USDA figures.
“If you convert the cost of ginning in 1975 to 2005 dollars, you come up with an average cost per bale of about $95. That means the cost of ginning has decreased about 50 percent as gins have grown in size and efficiency.”
Putting it simply, Wedegaertner says, if ginners want to improve profitability, there are two ways to do it: They can find a way to decrease fuel costs or new ways to increase the value of their product.
“When I look at the costs and think about what it might take to decrease the cost of ginning by another 50 percent, you know we have added about as many saws and about as much horsepower as we can add. We've gotten these gins about as efficient as we can get them so far.
“A major change in ginning where we might reduce costs by $20 a bale or so will take something revolutionary, another Eli Whitney or similar innovation,” he said. “We're going to have to find a new way to remove lint, using sound waves or micro-waves or some other means. I think we've hit the limit on gin saws or horsepower.”
Gins no doubt will continue to become larger as operators are forced to become more efficient. “One of the things I see in the future as gins get bigger and bigger and begin handling over 100,000 bales of cotton is those gins actually getting in the spinning business,” he said.
Wedegaertner acknowledged that seed weight per bale has become a major concern for many ginners, especially in areas where new varieties with higher lint turnout and smaller seed production have become popular.
To set the stage for what he would say about seed weight per bale, he said he wanted to remind the audience that the value of seed is about 5 cents per pound and the value of lint is about 50 cents per pound.
“If you put this on a per acre basis, in 1993, we had about 600 pounds of lint worth about $300. We had 768 pounds of seed per bale and 962 pounds of seed per acre with a seed value of $48. In 2004, we produced more than 800 pounds of lint worth $400. Seed weight per bale dropped to 600 pounds, but we still had about 1,000 pounds of seed per acre with a value of $51.
“On the way over here, I was thinking about the fact that if we put another 100 pounds of seed per bale back in this equation, that's another million tons of cottonseed we would have to get rid of. That's something to think about as we try to market these crops.”
Despite the problems with smaller seed, U.S. cottonseed production has been climbing in step with the larger lint cotton crops of recent years. After dipping to 6.18 million tons in 2002 after the larger cotton crops in 2000 and 2001, cottonseed production has climbed from 6.67 million to 8.2 million to 2005's 8.3 million tons.
Revenues from cottonseed at the grower level has also been rebounding from the highs of more than $800 million in the late 1990s to about $780 million in 2004.
Cottonseed crushing has also been rising, growing from 2.5 million in 2002 to 2.6 million in 2003, 2.9 million in 2004 and 3 million in 2005, but not as fast as the use of cottonseed for feed. The latter has risen from 3.47 million tons in 2002 to 4.9 million in 2005.
“We were feeding about 3.5 million tons of cottonseed to dairy cows, but you can see that we've jumped about a million tons in the last couple of years,” said Wedegaertner. “So there's about 2 million more dairy cows that were eating cottonseed this year and last year that were not eating cottonseed two years ago.”
Cottonseed oil mill operators face many of the same problems as cotton ginners, he said. They're fighting rising fuel costs while enduring falling vegetable oil and meal prices.
Cottonseed oil, which is a “high quality, very stable” cooking oil, typically commands about a 5-cent premium over other vegetable oils such as soybean oil and palm oil, according to published prices.
“Oil millers have been behind the eight-ball in the last decade,” says Wedegaertner, noting that cottonseed oil has been caught up in issues with hydrogenated oils and trans fats. “More recently, however, cottonseed oil has been selling at a premium to soybean oil that has widened out to 10 cents a pound at times.”
That premium may mean that cottonseed oil crushers could miss out on the increasing demand for soy oil for biodiesel, however. “At first glance, you would expect the biodiesel people to turn to a cheaper oil than cottonseed oil.”
Texas Tech University, meanwhile, is working on a feasibility study, looking at the economics of making biodiesel from cottonseed oil. “Some of us are also getting excited about the prospects for its use in higher value products such as 2-cycle engine motor oil.”
Another research goal: finding a way to remove that last little bit of lint from around that cottonseed without having to wash it away in the acid de-linting solution.
“There's always some lint left in the best of ginning operations,” he said. “Research shows most cottonseed has about 1 percent of residual lint left on it. That equates to about 20 pounds of lint per ton of seed or about one bale of lint per truckload of seed.”
Wedegaertner says it's also clear that the cottonseed industry needs more value-added products.
Cotton Incorporated and other research organizations are working on several potential uses for cottonseed, meal and oil, such as deer feed, as a source for heating similar to corn pellets, for landscaping mulch. One organization is even looking at cotton burrs as a possible ingredient for the composite material used in bathtubs and shower stalls.
CI has created two new brand names, GeoPhillics and GeoSkin Cotton Hydromulch as part of its new product development efforts.
And they're also keeping an eye out for that next Eli Whitney.