Early season looks positive for state’s 2018 cotton crop


Issue Date: October 24, 2018
By Ching Lee

Though it's still early in the harvest season, California cotton growers say their crop so far looks decent, but worries remain about whether the fiber's market prospects will erode due to the continuing U.S.-China trade dispute.

Growers will know more about how well they fared in production and quality once cotton gins begin processing more of the crop, but Roger Isom, president and CEO of the California Cotton Ginners and Growers Association, said initial reports indicate positive results, with higher yields and less insect pressure than last year.

"Right now, guys are tentatively thinking it looks like a really good crop," he said.

With more than a week of harvest behind him, Merced County farmer Bill Crivelli agreed with that assessment, adding that he was able to get an early start this year, as he planted early, important for pima cotton—the predominant variety grown in the state—because of its longer growing season and the risk of rain damage if harvested too late.

"Earliness really helps with everything, especially for pima," he said.

Kern County grower Jim Neufeld, who is a few days away from harvest, said he expects the quality of his crop to be better this year, noting that last year's crop was "clobbered" by the lygus bug because growers were not able to get an emergency exemption early enough for products to treat their crops. More favorable growing conditions and availability of those products this year "made a world of difference," he said.

After two years of increasing cotton acreage, California farmers did not plant as much this year. Total acreage for 2018 stood at 257,870, a 15 percent decline from 2017, according to the California Department of Food and Agriculture. Most of the reduction was in upland cotton, which dropped more than 45 percent from last year, while pima acreage fell nearly 3 percent.

Isom said growers would have planted more this year because prices were up, but announcement of water allocations in late May did not give them enough time to make those decisions. A survey last December indicated farmers intended to plant 10 to 15 percent more cotton this year, he added.

Neufeld said cotton used to take up at least half his total acreage, but it is a "very small percentage" of what he grows now, after he diversified into tree nuts, carrots and other crops.

"Price is the primary reason," he said. "Even though one considers the price (of cotton) not bad, it's not very prosperous, either. It really can't compete with the trees and a lot of the other crops."

Though prices for pima appear to be holding for now, Neufeld said he thinks trade conflicts and the resulting retaliatory tariffs China imposed on U.S. cotton will have a "dampening effect on the price."

"When this 2018 crop is fully marketed, I think we're not going to see that great of a price unless there's a resolution between now and the next six months," he said. "If there's some resolution, there'll be a certain amount of pent-up demand on it and it may bounce back."

Isom agreed that pima prices "aren't bad," but noted there's also not much movement of the product because of trade uncertainties and higher tariffs.

"Everybody keeps hoping that a solution is around the corner, but it sure doesn't look like it right now," he said. "We're a little luckier because it's not a perishable crop, but you can't just sit on it forever. You've got to sell; you've got to pay bills."

Crivelli said even though U.S. trade tensions with China worry him, he supports current American policies on trade, saying, "It's unpleasant now, but I think the end result will be better for all of us if we can hang on." Talking to cotton merchants and brokers, he said they've expressed similar concerns about trade, but they also point out that so far "it hasn't hurt the price." One reason may be because "there's limited places where you can buy pima," he said.

The strength of the dollar has not helped to move more cotton, said Mark Bagby, spokesman for Calcot, a Bakersfield-based cotton marketing cooperative that represents growers in California, Arizona, New Mexico and Texas—the states where pima is primarily grown. He noted that even at current prices—around $1.30 a pound for pima—they are not as high as most growers would like to see, especially as they face increasing production costs.

Neufeld said he thinks the price of pima would "rise substantially" if there were greater crackdown on mills that dilute pima with lesser-quality cotton while passing it off as 100 percent pima.

With upland cotton, Bagby said hurricane damage to crops in Florida, Georgia, Alabama and the Carolinas could help support prices due to reduced supplies coming from those regions. But he noted that global supplies of upland—now selling for about 75 to 80 cents a pound—are much greater compared to pima, so it would take a larger hit to affect prices. With pima's limited market and supply, he said, prices could fluctuate on a change of some 50,000 bales.

Though China has drawn down its stocks and there's demand for cotton, Bagby said China may have difficulty accessing U.S. cotton because of higher tariffs and a shift to alternative sources.

"If they need cotton, chances are pretty good they'll look for it someplace else, like Brazil or Australia or Pakistan or Bangladesh or Vietnam—wherever they can get cotton," he said.

Strained relations between the U.S. and Turkey, a key importer of U.S. cotton, and fluctuations in the value of the Turkish lira also could have negative impacts on cotton prices, as buyers pull back and exporters become hesitant to do business there, Bagby said.

"It's really shaping up to be an interesting year for all kinds of unusual reasons," 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.