Cotton gins close as state's cotton acreage declines
Punished by competition, high costs, the worldwide economic crisis and severe water shortages in key growing regions, California cotton acreage has dropped to its lowest level in generations. And, as cotton acreage has contracted, so has the associated business of cotton ginning.
Nearly two-thirds of the cotton gins that operated in California 10 years ago have closed, as farmers and ginners work to assess the future of the state's cotton business.
A decade ago, there were 91 gins processing cotton in California. This year, only 34 will operate, and analysts say more will close if cotton acreage continues to contract.
"There is a future, we just don't know what it looks like," said third-generation cotton farmer Steve Wilbur of Tulare.
This year, California farmers will grow only 199,000 acres of cotton, a stark contrast to the 844,000 acres grown a decade ago. The number of cotton gins has followed the acreage down. In the late 1990s, there were close to 100 gins in California, with 91 of them processing cotton. This year, that number has been whittled down to 40, with only 34 of those confirmed as operational by the California Cotton Ginners Association. The association said 11 gins have closed in the past year alone.
Wilbur, who serves on a number of cotton association boards including the cooperative Mid-Valley Cotton Growers Inc., said Mid-Valley had to close one of the gins it operates.
"The Tipton gin has been shut down for a couple of years and is still sitting there idle. If you can't run 15,000-20,000 bales through it, there's no point," said Wilbur, whose family has grown cotton in California since the 1940s. "The Tipton gin was a very large gin, but cotton acres declined in that area faster than in Tulare, Hanford and Lemoore. So despite the fact that it is a higher capacity gin, it made sense at a certain point in time to just shut it down."
Mid-Valley expects to gin a meager 35,000 bales of cotton this year, down from as much as 140,000 bales at its high point. But Wilbur said he's optimistic that cotton acres will bounce back and his cooperative will have a secure future.
"Mid-Valley has a good opportunity to remain because of our multiple locations and we still have a sizable number of acres to work from. But if we were one of a few gins left in the valley and all of a sudden cotton made a big comeback, we couldn't handle the volume," Wilbur said. "We will have to play it year-by-year. We try to have a long-term plan, but it is hard when you don't know the long-term future of the crop that you are processing."
Earl Williams, president and CEO of the California Cotton Ginners and Growers Associations, predicts more gin closures unless acreage recovers.
"It is certainly something that we're focused on, trying to keep the infrastructure as best we can until this turns around and we're comfortable and confident that it will turn around," he said.
"One of the things that has not helped in the last couple of years is some of the prime production areas for cotton are where we have had these tremendous water limitations," said Bob Hutmacher, state cotton specialist for the University of California Cooperative Extension who's based in Fresno County. "That punched the daylights out of cotton acreage as much or more than anything else."
In 2005, Fresno County grew 213,000 acres of cotton and that figure dropped to 41,000 acres this year, mostly due to the water crisis on the county's west side.
"When water supplies are so limited, some of the annual crops are the ones that you have to eliminate in order to make ends meet," Hutmacher said. "That has really hit some of the moderate value agronomic crops, especially the ones that are perceived as having not as good a profit potential recently."
Aside from a reduction in water supplies, Williams said other factors that have contributed to cotton acreage reductions in California include the world economic crisis, high production costs, expansion of permanent crop plantings and diversification and competition from other states.
"We've prided ourselves with our high quality cotton, but time changes everything. Other areas of the country have improved their cotton varieties so we began to lose that luster in the big markets that we used to have," Williams said. "That is not to say that there are not still niche, specialty markets out there looking for our premium cotton. It is just not the million and a half acres of production that we used to have."
But he said he believes 2010 will be better for cotton growers, based on his expectation that there will be a decline in the amount of dairy silage and feed crops planted.
"Farmers are turning away from dairy silage and feed crops and turning back to cotton, so the possibility of going to 300,000 acres of cotton is not out of the question," Williams said.
Wilbur agreed, saying, "Farmers, especially those who have grown cotton in the past, I think will look back to it."
Another factor that can keep California cotton gins in operation is the fact that cottonseed prices in 2008 hit highs of more than $400 per ton at one point. As an important feed commodity for dairies, cottonseed prices rose along with other feed crop prices last year.
"Cottonseed is the primary revenue source for the cotton gins, so even with volumes low because of fewer acres, per bale returns were very good for the gins last year," Williams said. "Prices have softened this year considerably compared to last year as we near harvest, but we still remain at a profitable level."
The cotton harvest is scheduled to begin in October and observers say they expect moderate to good yields with good quality.
Hutmacher forecasts growers will harvest about 300,000 bales of pima cotton and 160,000 bales of acala cotton.
"Part of it is the varieties and part of it is the climate, but one of the things that California still can do better than just about anybody is produce a world-class-quality cotton crop," Hutmacher said.
(Christine Souza is an assistant editor of Ag Alert. She may be contacted at email@example.com.)
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