Extra Long Staple (ELS) cotton production worldwide is like a Cessna 150 on a radar screen full of 747 jumbo jets — It’s hardly noticeable.
A little more than 2.2 million bales of ELS will be produced in the world this year compared to roughly 117 million bales total.
However, Pima cotton, the prized premium American ELS cotton produced almost exclusively in California, is vital to the survival of the San Joaquin Valley cotton industry.
Unfortunately SJV Pima is on a train wreck course with success that only can be avoided if the price of Pima increases by at least 40 cents per pound between now and next spring.
The world textile industry wants to make high value, high quality products from the world’s finest cotton, but the textile mills do not know how they are going to pay the price growers want for that cotton.
Tranquility, Calif., cotton producer John Pucheu told a textile mill executive recently that as a producer he must get at least $1.50 per pound in 2009 to profitably grow the cotton the mill executive desperately wants to spin.
This is the same story Supima, the market promotion arm of U.S. Pima cotton, and other growers are telling world ELS buyers.
“The mill executive told me he could not afford to pay that price. I told him we cannot afford to grow Pima for less than that,” Pucheu said.
The current spot market for Pima is about $1.10. Most merchants and growers at Supima’s recent 54th annual meeting at Harris Ranch in Coalinga, Calif., agreed that it will take a $1.50 per pound contract price to put Pima into the crop mix next season.
Some indicated it may take as much as $2 per pound to keep Pima cotton in the row crop mix long term in California’s San Joaquin Valley, where more than 90 percent of U.S. Pima is produced.
A look at the Pima acreage the last two cotton seasons in the San Joaquin makes it obvious that growers are extremely serious about what it will take to plant Pima.
Last year there were 288,000 acres of Pima planted in Far West Texas, New Mexico, Arizona and California (which had the lion’s share of the acreage at 257,000 acres).
This year it is 193,000 acres total for the five states, according to the latest USDA estimate. However, the government estimate is far too high, according to Supima Executive Vice President Marc Lewkowitz, who cited the recently released California pink bollworm program acreage survey of just under 153,000 acres in the San Joaquin, 40,000 acres less than the USDA estimate.
The bottom line is the U.S. will produce only about 400,000 bales of Pima this season compared to 815,000 last season.
The declining ELS acreage is not just in the U.S. The 2.2 million bales worldwide projected this year compares to 3.4 million last year. Projected worldwide production this year will be the lowest in more than 20 years.
Jeff Elder, chairman of Supima and vice president of marketing for J. G. Boswell, the Valley’s largest ELS producer, says mills “are in denial” of what they must pay to get growers to produce Pima cotton next season.
Jesse Curlee, Supima president, has been citing the rising costs of farming ELS cotton to each and every Supima customer.
Grower prices are going to have to increase substantially to get San Joaquin Valley cotton producers to plant Pima in 2009. At current prices, acreage will surely go down.
Pima is the heartbeat of the SJV cotton industry. There are only a little more than 100,000 acres of upland left in the Valley. For the third year in a row, there is more Pima in the Valley than upland.
The reason for the drop in Pima and upland acreage is that alternative row crops have been far more attractive economically — specifically alfalfa, corn, processing tomatoes, safflower, and cereal grains. Permanent crops like almonds and pistachios also have taken a big slice of the cotton acreage.
In reality, however, the bottom line is water. California’s ongoing judicial, bureaucratic and natural drought has cut water supplies throughout the state, and indications are it will only get worse in 2009, even with a normal water year.
Growers with permanent crops will allocate what water is available first to tree and vine crops. What is left over, if there is any, will go to the crop that will return the most money per acre of water used to irrigate it.
Safflower becomes even more attractive because it can use less water than a summer crop like cotton, and prices have been good for the oilseed crop.
Even though it is a big water user, alfalfa acreage is expected to increase next season. Prices of alfalfa hay are at historically high levels and indications are they will go even higher in 2009 due to a growing dairy industry and the fallout from a lack of rainfall for pasture.
Processing tomatoes are another crop critical to California, which produces about 95 percent of the processing tomatoes in the U.S. This year growers received a base price of $70 per ton, $20 per ton higher than the previous several years.
Processors are bracing for an inevitable price increase they will be forced to pay to get the tomatoes they need to satisfy markets. Reports circulating at the Pima meeting indicated growers will be looking to get $100 per ton for processing tomatoes in 2009, double what they received just two years ago. Again, it is all about water and input costs.
The dilemma in the sharp decline in the Pima acreage picture is for the past 20 years Supima has spent millions in promotions creating consumer and textile industry demand for American Pima. The successful Supima program has made SJV ELS cotton the most sought after long staple cotton in the world.
The U.S. is now the world’s largest ELS producer and by far the No. 1 exporter of ELS cotton worldwide.
The voluntarily grower-funded Supima has done a superb job creating demand, and putting Supima-labeled merchandise on retailers’ shelves and racks, ranging from Saks Fifth Avenue and Brooks Brothers, to COSTCO and Wal-Mart.
By the end of the year, 350 textile mills in 27 countries will be licensed to sell products labeled as Supima. Each pays $5,000 annually for the right to use the Supima label. The license issued from the association says anything that has Supima on the label must be made of 100 percent U.S. Pima cotton. There are literally hundreds of thousands of products ranging from shirts to sheets with that label now affixed. Supima is part of marketing plans for many name brand labels.
Supima has backed up the licensing package with trade show exhibits, fashion shows and even a retail store in New York City. All have been immensely successful, driving up the demand for Pima cotton products.
Whether it remains in demand will be determined by how much Pima is produced in the San Joaquin Valley.
“Something has to give,” said Cotton Council International (CCI) Executive Director Allen Terhaar. CCI is the international marketing arm of U.S. cotton.
“There is not gong to be much Pima cotton to offer” this marketing year to a textile industry eager to get product, he told growers and others at the meeting.
“We have got to get more U.S. Pima production back into the market. There remains a lot of opportunity in the world for U.S. Pima,” he said.
That opportunity comes with a price tag.