Improved prices and water supply aid cotton farmers

Higher prices and a promising start to the water year could position cotton farmers nicely for the upcoming season, according to growers and others who work in the cotton business.

“There’s actually quite a bit of enthusiasm among growers just because of the higher cotton price. I doubt if anybody expects it to hold the way it has been, but even if it stays a bit higher than the last five- or 10 year-average, that will definitely be encouraging,” said University of California Cooperative Extension Cotton Specialist Bob Hutmacher in Five Points. “A better water situation in some of the key San Joaquin Valley areas ought to help with making cotton an option. It allows some people that had a lot of fallow ground or that are really quite diversified to go ahead with their contracts on things like lettuce, tomatoes and melons, and make their own decisions on cotton.”

President and CEO Earl Williams of the California Cotton Growers and Ginners Associations in Fresno said he anticipates a good year for cotton.

“Cotton does look very promising with more acres this year. 2010 was a pretty good year after a very poor start because of cold, wet weather, but we saw a 60 percent increase in overall acres, so that was positive,” he said.

California’s planted cotton acreage reached 306,000 in 2010, up from 190,000 acres in 2009. Williams said he expects California to reach or exceed 400,000 acres this year, with 250,000 acres of pima and 150,000 acres of upland cotton.

Williams added that prices broke the record ceiling with demand far outpacing supply, which helped California farmers overcome yield losses that happened in 2010. The demand is expected to continue into 2011.

An imbalance of the world’s supply and demand for cotton has driven the higher price, which currently stands at about $1.50 per pound, compared to the low 50 cent per pound range growers experienced three years ago, said Mark Bagby, spokesman for Bakersfield-based Calcot, a marketing cooperative that represents growers in California, Texas and New Mexico.

“Demand has caught back up to supply and the U.S. should have about 2 million bales left over at the end of this (2010-11) season, and those are spoken for,” Bagby said. “Two years ago, you had world stocks of about 60 million bales and that has fallen to 42 million bales. Those kinds of shifts in supplies versus demands will lead to a market rally and that’s what we’ve got going on.”

Earlier, weak demand during the recession resulted in low cotton inventories and the world cotton supply from major producers Pakistan, China and India was depleted due to weather-related problems.

“What has happened over the past few years is you’ve had some production cutbacks in the U.S. and by other large producers, and we had something of a crop disaster in Pakistan,” Bagby said. “In the meantime, China’s consumption has been steady. They’ve been consuming about 45 (million) to 47 million bales of cotton every year and Pakistan and India have both seen some upturns as well.”

In the United States, there were about 110 million bales of cotton consumed in 2008, and in 2009, that number rebounded to 118 million bales. Consumption remained at 2009 levels last year, with expectations for higher consumption in 2011.

“2010, at least on paper, looks to be a pretty good year and 2011 ought to be even better,” Bagby said.

The only drawback, he said, is how quickly the market could change.

“With investors driving so much of this, it can also turn very quickly and the prices that you see now may not last,” Bagby said. “There’s always the potential for a weather or insect problem and there’s not much room for shortfall in this. There’s no room for error.”

Cotton farmer John Pucheu of Tranquillity agreed that farming is a gamble, but said he plans to plant more cotton this year because of the solid price.

“We’re very happy about the prices and hopefully they will stay that way for awhile,” Pucheu said. “There are good prices now that you can lock in for the 2011 crop, so you can eliminate a lot of the price risk. What is left is production risk and that is mainly weather. Weather is probably the biggest variable.”

The third-generation grower said he expects to increase his cotton acreage by 10 percent.

“We’re not radically changing our crop rotation, but we’re planting more cotton. This will all be pima cotton; that is all we’ve grown for the last several years,” Pucheu said.

He noted that water shortages have caused many San Joaquin Valley farmers who had grown cotton to switch to permanent crops or to vegetables.

“People still have water issues here on the west side of the San Joaquin Valley. The U.S. Bureau of Reclamation just made its announcement that the supply (to farmers south of the delta) is only going to be 45 percent,” Pucheu said. “It may go a little bit higher, but it is a long way from 100 percent supply.” (See story, Page 5.)

Ginning capacity is another infrastructure issue for cotton farmers, but even with the consolidation of cotton gins in recent years, Bagby said he expected capacity to be adequate.

“Infrastructure is one of the concerns in the West. It might take the gins a little bit longer to get through production, but basically we’ve got the infrastructure,” Bagby said. “The gins ran below capacity last year, so I think from that standpoint that is pretty good. We certainly have the capacity to ship it and the warehouse capacity to store it, so that side of it looks pretty good.”

Many people involved the state’s cotton business said they believe those who held onto cotton acres will most likely be planting more. Those farmers already have memberships or access to a cotton gin and have kept infrastructure and equipment that they need in place.

This month, the California Field Office of the U.S. Department of Agriculture National Agricultural Statistics Service estimated the state’s pima production in 2010 at 456,000 bales, with yields averaging 1,216 pounds per acre. Upland production was estimated at 420,000 bales, with yield calculated to be 1,639 pounds per acre.

(Source: http://www.cfbf.com/agalert/AgAlertStory.cfm?ID=1669&ck=CDF1035C34EC380218A8CC9A43D438F9)