Arizona cotton acreage is not likely to change this year. However, acreage will continue its decline in California's San Joaquin Valley, according to Bob Norris, president of Calcot.
The big question in the West this season will be how much Pima will be seeded in the San Joaquin Valley, and the weatherman may be the only person who will answer that question.
The West's largest cotton marketing cooperative just completed its annual grower meetings. Norris said for the first time in a while, growers are not overly concerned about irrigation water supplies, especially in California, with above average rainfall and snow pack.
However, the growing producer concern about the future of the federal farm bill continues to fester, said Norris.
This will be the last season under the old farm bill, and Congress has already waded in on the 2007 bill and the prospects do not look bright, admits the president of the Bakersfield, Calif., cooperative.
“We really have no answers to the questions of what the new farm bill might look like. However, it will present challenges whatever it looks like. We will work through those challenges just like we have with past farm bills,” said Norris.
Norris admitted agriculture is “losing the battle of public opinion” over federal support of American agriculture, “but I do not think it is quite the gloom and doom many are looking at,” he said. “However, we do have a lot of work to do.”
Norris noted that there is remains strong support in Congress for American farmers. He cited the leadership of Mississippi Republican Sen. Thad Cochran and Senate Agriculture Committee Chairman Saxby Chambliss, R-Ga., as signs of hope for maintaining a foundational federal farm program.
“The farm program is certainly at the top of the list of concerns for Western cotton producers,” said Norris, adding that there continues to be talk of extending the current farm program at least one more year to await outcome of World Trade Organization talks.
Back to the field, Norris said Arizona has been without rain for more than 100 days, but Central Arizona Project water should be adequate, but expensive, to produce another year's Arizona crop.
Norris expects another 230,000-acre year in the Grand Canyon State in '06.
Farmland continues to be bought by developers in one of the most rapid growing states in the nation. “It will be many years before some of it will be developed, therefore, Arizona cotton producers will still be able to lease land for cotton production for the foreseeable future,” he added.
The same urban pressures are coming to bear in the San Joaquin Valley, now one of the most rapidly growing areas of California. However, cotton acreage is also being pressured lower by higher value crops replacing cotton.
Another ongoing, dramatic change in the valley is the proliferation of dairies and the demand they are creating for forage crops like corn and alfalfa.
Cotton in rotation
“However, corn prices have been down and as long as that land is in row crops, there is always a chance of a cotton comeback as a rotation crop,” he said.
Nevertheless, 2006 SJV acreage will drop from the 660,000 acres last year.
“The final number will depend on how much Pima acreage goes in,” said Norris, who right now estimates SJV total cotton acreage for next season at between 600,000 and 650,000.
“I have heard Pima estimates from 275,000 to even as high as 400,000 acres. My gut sense is that it will be in the 275,000 to 300,000 range.” This represents an increase of 45,000 to 70,000 acres from 2004. Since Pima takes longer to mature, weather plays a major role in final acreage. A wet, cold spring extending into May will have growers switching from Pima to shorter-season Acalas and California uplands.
Norris acknowledged that there continues to be upland producers trying Pima for the first time and that could be more widespread than ever if there is an early, warm spring.
“We are not adding a whole lot of roller ginning capacity and if we reach that 300,000-acre level, we could be ginning well into late winter and even early spring if we plant 300,000 acres or more,” Norris noted.
Prices of more than $1 per pound and promises of yields near equal to upland are driving growers to Pima. Plus, the federal Extra Long Staple (ELS) program is not expected to be affected by changes in the federal farm program. American Pima has a federal loan program and an export market enhancement program, but no deficiency payments.
Demand drives price
High Pima prices are being driven by demand in places like India, China and Pakistan where growing economies are creating demand for higher quality consumer textiles.
“In the past, Pima has been very inelastic in regards to demand. That has now changed with these new and growing markets for Pima. Pima demand is not as inelastic as it once was. It remains a niche market, but Pima has more market potential than it has had in the past.”
Although Western upland is the highest quality produced in the U.S. belt, prices for Western upland cottons remain low as the industry works off a bumper 2005 crop.
With falling Western cotton acreage, Calcot's handle has declined. The cooperative tried to leverage that loss by creating an almond marketing pool a few years ago. However, that failed.
When Norris took over at Calcot three years ago, he was hopeful to leverage the future of the cooperative by expanding the cooperative cotton marketing effort into other areas of the U.S. Cotton Belt, and he found that in South Texas.
Growers there invited Calcot to market high quality cotton from that area and at the initial grower meetings the California-based cooperative held there, there was a shortage of contracts to meet the demand.
“We had a very good reception in South Texas where they produce a premium spindle-picked cotton,” said Norris. Calcot will not handle stripper cotton from South Texas.
High quality Fibermax has been popular in this area and growers there invited Calcot in because of the cooperative's reputation as a marketer of premium quality SJV Acala cotton. This Australian-bred Fibermax cotton has been competitive with SJV Acala in world markets.
There about 350,000 acres of cotton produced in that area. Calcot marketed about 15,000 bales of cotton picked in South Texas last year before Hurricane Katrina hit.
Declined to estimate
Norris declined to speculate on how much South Texas cotton the cooperative will market. “You tell me how much it will rain in South Texas and I will tell you how much cotton we will market,” laughed Norris. A two-bale average yield from 350,000 acres would be a considerable handle for Calcot.
Norris said marketing agreements signed with growers stipulated that Calcot would handle all spindle picked cotton delivered by the new Calcot members.
Norris said the South Texas cottons will fit nicely into Calcot's marketing framework. It will give Calcot a better presence in world markets by marketing a “fuller and more complete line of styles,” added the cooperative's president.
“Our marketing will be a different approach than what growers are used to in that area. We are not accustomed to purchasing equities. We market cotton based on established quality standards. We will market there on HVI readings just like we do in the West,” said Norris.
Calcot's South Texas cotton will be warehoused there and if sold to mills in places like Mexico or Turkey, it will leave Gulf Coast ports. If it is sold to the Far East or similar destinations, it will be containerized in South Texas and moved to West Coast ports for shipment.
Calcot marketed a little more than 1 million bales of California and Arizona cotton last season. Sales totaled $400 million. It has marketed more than two million bales in the past when Western acreage was much larger than it is now.
Calcot has more than $133 million in assets, the bulk of which are 145 warehouses in three locations, enough to store more than 1 million bales under roof.
If Calcot is successful in marketing South Texas cotton, it could go after more cotton from Texas growers.
Norris emphasizes that Calcot was invited in by Texas producers, but acknowledged Calcot is invading Plains Cotton Cooperative Association's territory and that is creating tension.
Since it was created in 1953, PCCA, based in Lubbock, Texas, has grown to become one of the largest handlers of U.S. cotton, marketing three million to five million bales each year for about 29,000 members in Oklahoma, Kansas, and Texas. PCCA also owns a denim mill in Littlefield, Texas and cotton warehouses in Altus, Okla., Liberal Kan., and Sweetwater, Texas.
Last year PCCA gross sales topped $1 billion.
Calcot was formed in 1927. It expanded into Arizona in 1955. It now has 1,475 grower members. It once had more than 2,000 members. It once topped $1 billion in sales before Western cotton acreage gave way to more profitable permanent crops and urbanization.
PCCA has reportedly not marketed in the past South Texas cotton from the growers who invited Calcot to visit.