Pandemic magnifies 2020 cotton concerns

Issue Date: July 15, 2020
By Christine Souza
California cotton growers are expected to plant only 205,000 acres of cotton this year, due to concerns including pandemic-related mill closures, trade issues, reductions in water availability and an oversupply of cotton from last year. Crop estimators say California farmers planted a record low 40,000 acres of upland cotton, such as the acala cotton shown above at Pedretti Ranches in Merced County.
Photo/Christine Souza
Despite market challenges, Gino Pedretti III of El Nido, seen checking acala cotton for lygus pressure, says he has planted the same amount of cotton, but a lower proportion of pima cotton.
Photo/Christine Souza

Pandemic-related losses have added to trade turbulence and other marketing woes for California cotton farmers, leading to a significant reduction in planted acreage this growing season.

The U.S. Department of Agriculture estimates California farmers planted 205,000 acres of cotton, down more than 20% from a year earlier. Acreage of upland cotton reached a record low of 40,000.

At the same time, the pandemic could cause $166 million in losses in the California cotton business, according to an economic study released last month.

Farmers and people in the cotton sector say COVID-19 has had a significant impact on global cotton markets. Other factors cutting acreage include an oversupply of cotton inventory from 2019, trade challenges and reduced water supplies for some Central Valley farmers.

Merced County farmer Gino Pedretti III of El Nido said the trade dispute between the U.S. and China "put a damper on what farmers were planting, and with COVID, people are worried about just having a market, especially for pima cotton, which has been really hit hard."

He said lack of water for farmers on the west side of the San Joaquin Valley also reduced acreage. In his case, with full supplies from the Merced Irrigation District, Pedretti said he planted his usual cotton acreage but put less of it into pima.

"We would have planted 10% more pima if it wasn't for COVID," he said. "We felt planting acala was more of a safe bet," in part because rains at the end of March delayed planting by a week.

Mark Bagby, communications director for the Bakersfield-based cotton cooperative Calcot Ltd., described 2020 as "clearly a year none of us have ever been through," noting that California now has the fewest acres of upland cotton in the nation.

"Growers did plant less; I'm not sure how much of it was due to the pandemic, but lower planting decisions were driven by already low cotton prices and uncooperative weather," Bagby said, citing late spring storms.

"There was a lot of planting that probably could have happened in March and April that just didn't happen," he said.

Riverside County farmer Grant Chaffin of Blythe said he cut his cotton plantings 30%.

"It certainly wasn't an optimistic market going into planting, so we said, let's reduce our planted acreage and let's go with short- to midseason varieties," Chaffin said. "This is the first time in 25 years that, when I was planting cotton in March, I hadn't sold any of the cotton crop that was produced the preceding December."

The market has been "absolutely terrible," he said: "It's been an extremely difficult market to try and sell cotton."

Chaffin said the trade dispute with the U.S. led China not to buy cotton and, once the pandemic hit, other overseas mills also backed away from California cotton purchases.

The economic study by Davis-based ERA Economics said the pandemic cut demand for cotton as mills closed and shoppers scaled back retail purchases. This was especially the case for mills in China that import pima. The American pima export market experienced a larger relative decrease in demand than other markets for cotton, the report said, and because California is the major U.S. pima producer, it has experienced the brunt of the losses.

The study was commissioned by a coalition led by the California Farm Bureau Federation.

With mill closures overseas and domestic retail difficulties, Bagby said, "it doesn't take too many rattles and a link or two in the supply chain before the chain is really vibrating up and down."

"If the mills are closed for months at a time, it's going to affect the markets," he said. "Supply will adjust to demand, but the swings always seem to take a year or two to be felt. Until we have some solution to the pandemic, I think this will continue."

In addition, domestic retail sales of cotton products have dropped dramatically since shelter-at-home orders took hold— contributing to unsold inventory from the 2019 cotton crop.

"The carryover was larger than normal going into this season, and everybody's got inventory and prices are low," Bagby said. "Textile mills are closed, retail stores are closed, and customers have asked for cotton shipments to be delayed or postponed or renegotiated, if not outright canceled."

Studies indicate face coverings made of cotton fabric are effective in helping stem the flow of COVID-19, but Bagby said any resulting increase in cotton demand wouldn't overcome damage already done to the cotton business.

To aid cotton farmers suffering from pandemic-related losses, USDA has offered relief payments through the Coronavirus Food Assistance Program—specifically to growers of upland cotton. Pima farmers have not yet been included.

Roger Isom, president and CEO of the California Cotton Ginners and Growers Association, said pima cotton "definitely had more" than the 5% price decline needed to qualify for the aid program, "but we had to go back and get sales data and submit that to USDA for consideration, and we're just waiting to hear back whether we qualify."

USDA did not include pima cotton in a list of crops added to the aid program last week, but said it continues to consider further expansion of the eligibility list (see story).

Isom said eventual inclusion of pima cotton "is not going to solve the problem or make us profitable, but it's going to lessen the blow."

Projecting future pandemic impacts to cotton, the ERA Economics study said it is not clear whether they will increase or stabilize, but said China is slowly beginning to increase imports as mills begin to reopen.

"We are so far below where it's even profitable, I don't see us hitting the break-even point by the time the crop is harvested," Isom said. "I'm just hopeful that worldwide, the economy opens up and we start seeing some demand, to get the prices up by the first of next year."

(Christine Souza is an assistant editor for Ag Alert. She may be contacted at csouza@cfbf.com.)

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




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