Market and water trends increase cotton acreage


Issue Date: May 24, 2017
By Ching Lee
Farmers and market analysts say more cotton will be planted in California this year, due to market forces and improved water availability.

For the second year in a row, California cotton acreage has been trending upward, thanks in large part to improved water availability.

Growers say a brighter market outlook for cotton and lower prices of other crops such as processing tomatoes also made cotton a more-attractive choice for them to grow this year.

"It certainly had to do with having enough water. That's why we're growing the cotton that we're growing," said Rick Worth, who grows cotton in Fresno and Kings counties.

He hadn't planted cotton in four years due to water cutbacks during the drought. Because processing-tomato prices were more favorable then, he decided to sacrifice his cotton acreage to stretch his water supply for other crops, which also include almonds, pistachios, onions and garlic.

But with tomato prices down this year and canneries reducing contracted acreage, Worth said farmers have excess ground and more water to work with. Even without the increased water, he said he may have planted cotton anyway because tomato prices are so low.

"Cotton prices have moved up a little, so I think that's why you're seeing a lot of acres," he added.

California farmers are expected to grow 275,000 acres of cotton this year, with 190,000 acres of pima cotton and 85,000 acres of upland cotton, according to a prospective-plantings report released in March by the U.S. Department of Agriculture. The state's farmers planted a total of 221,000 acres of cotton last year, up from 164,000 acres in 2015.

A preliminary planting-intentions survey conducted in March by the California Cotton Ginners and Growers Association shows an estimate of 256,000 acres for the 2017 cotton crop, with 186,000 acres of pima and 70,000 acres of upland. This represents a 22 percent increase in state pima acreage and a 6 percent increase in upland acreage compared to 2016.

California cotton acreage during the past decade peaked in 2011, when farmers planted 456,000 acres.

Kings County farmer Ted Sheely said he's growing 20 percent more cotton this year and would have planted more if full Central Valley Project water allocations for farmers had been announced 60 days earlier. Because he had not planned on a full allotment, he did not work his ground, in order to save fuel and money. By the time the announcement came in March, the weather had turned cool and rainy, and his fields became too soggy to get in.

"I didn't want to work wet ground and not get a good seedbed—and then not get a good stand, and then not make a good crop," he said. "It's not one thing; it's a domino effect that we're afraid of."

Sheely had maintained some cotton acreage during the drought, even though "it's been not very profitable with the price of water," he said. The lack of water forced him to fallow about 35 percent of his land during the last three years. This year, those fields are being planted to cotton and onions. He also grows pistachios, winegrapes and processing tomatoes, which he's cut back due to lower prices.

About 60 percent of his cotton crop is in pima. The rest is in upland, grown on contract for seed because seed crops earn a higher price.

After two years of depressed cotton prices and farmers around the world turning to other, more-profitable crops, the cotton market is now seeing a "modest recovery," with textile mills drawing down supplies and cotton prices rising, said Mark Bagby, a spokesman for Calcot, a Bakersfield-based cotton marketing cooperative that represents growers in California, Arizona, New Mexico and Texas.

Upland prices have improved from a year ago, and for those who are growing it for fiber, he said "it would be wise" for growers to lock in the price for some of their crop.

"My sense is the prices for the (upland) crop this fall are historically pretty good," Bagby said. "The world is going to produce more cotton in 2017. That usually means the market will get softer."

Increased acreage in California won't have much impact on the global cotton market for upland, because the state grows so little of it, but it could affect the pima market, he added, noting that pima, unlike upland, is not sold on the futures market but rather on a cash basis.

"The pima market is kind of touchy in that it's not a huge market around the globe, so it's really easy to oversupply that market and bring prices back down," he said.

But even if that happens, Bagby said he thinks pima prices will still be 20 to 25 cents per pound ahead of upland. Right now, pima is about $1 per pound more than upland. With production costs for pima and upland similar but slightly higher yields on upland, he said many growers would choose to plant pima if they could.

With early-spring weather being so cool and rainy this year, California farmers struggled to plant their crops. Fresno County farmer Mark McKean described the cotton-planting season as having "a rough and rocky start," though he noted most fields appear to be "getting reasonable stands, but they're just not growing rapidly."

With more water this year, McKean increased his cotton acreage about 18 to 20 percent. He typically grows both pima and upland, but he's growing only pima this year because prices are more stable and have stayed up, whereas upland prices tend to fluctuate. Upland, he noted, also faces more competition from synthetics.

With a wetter year and a later start to planting, Bagby said growers may face greater insect pressure that could reduce yields. Typically, growers prefer to have their fields planted by Easter. Farmers McKean, Sheely and Worth all said they finished planting the last week of April.

"You get planted later, you lose some precious development time on the front end," Bagby said. "The plants really need to get started well to outgrow diseases and insects that affect them early."

As with similar wet years when cotton was planted late, Bagby said farmers may end up spending more money on inputs and hands-on management to protect their crop, which could erode profits.

"History doesn't necessarily repeat itself, but oftentimes, it echoes," he said.

(Ching Lee is an assistant editor of Ag Alert. She may be contacted at clee@cfbf.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.