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Cotton farmers look for market stability

Issue Date: November 4, 2020
By Christine Souza
At Borges Farms west of Tulare, a cotton harvester dumps a load of acala cotton into a Boll Buggy, which drops the load of cotton into a module maker. California farmers report market conditions for cotton may be stabilizing as mills reopen overseas.
Cecilia Parsons
After harvest, cotton goes into a module builder to be compressed before being taken to the cotton gin.
Photo/Cecilia Parsons

About halfway through their harvest, California cotton farmers say the market may be stabilizing amid trade challenges, water shortages and market conditions unsettled by the COVID-19 pandemic.

Kern County farmer Jake Cauzza, who is growing about 500 acres of mostly pima cotton and some acala, said things are starting to turn around.

"In the last few months, the mills and spinners are coming back," Cauzza said.

"We've had some more purchases and, talking to my cotton broker, we're looking at like more of a 15- to 30-cent positive gain in price, so we're looking to get back to normal," he said. "We have a lot more acala planted around here this year compared to the last five or 10 years, just because that price has stayed somewhat stable, whereas the pima price has pretty much crashed."

Farmers report good crop quality, average to better-than-average yields and very little pest pressure.

When growers made planting decisions early this year, trade challenges, reduced water availability and an oversupply of cotton inventory from 2019 led to about a 30% reduction in total acres planted.

The U.S. Department of Agriculture said it expected California farmers to grow about 186,000 acres—146,000 of pima and 40,000 of acala or upland cotton—down 53,000 acres from 2019.

"A lack of water played a big role, oversupply from 2019 played a role, and the fact that cotton wasn't moving even before COVID happened due to the Chinese tariffs," said Roger Isom, president and CEO of the California Cotton Ginners and Growers Association.

Isom said he estimates this year's California cotton production will reach about 280.5 million pounds.

Rick Borges, who was harvesting cotton west of Tulare last week, said he was happy with his decision to plant only acala cotton this year.

"The COVID pandemic led to closures back in March, and I didn't get the cotton planted until April," Borges said, adding that the pandemic didn't affect his planting decisions. "Once we got to the end of March/1st of April and it was still raining, that's when I made the decision to not plant pima."

Had springtime weather been dry, he said, he probably would still have planted pima.

"The way it turned out, and the price for pima cotton right now, I am much better off," Borges said.

Pleased with the quality of the acala crop this year, he added, "I'm not happy with the price, but at least it is moving in the right direction right now."

Mark Bagby, communications director for the Bakersfield-based cotton cooperative Calcot Ltd., said American pima—a premium cotton that goes into products such as sheets, pillows, towels and dress shirts—commands a higher price than upland cotton, but "at the moment is coming down off of its highs." He said the price for pima is $1.10-$1.15 a pound, whereas upland or acala is about 75 cents.

"One of the things that pima has struggled with is we have ample supplies and no market," he said.

People in the cotton business said textile and retail sales have been hit hard by the pandemic. In the spring and summer, retail outlets were closed or closing, textile mills were closed and it was difficult to ship product overseas.

Isom said retail reports from the summer show that "the single biggest drop was clothing," and described permanent store closures and bankruptcies of retailers that feature California pima cotton as "devastating."

"The most important thing is that we get those back open," Isom said. "Prices have just recently started to rebound, so it's going to be tough for a while."

Bagby said the challenge of not having retail outlets to sell cotton products "makes you wonder what the future market is going to be."

"Is it going to be done mostly through discount outlets and by big-box stores, or is a mix of retailers?" he said, noting a rise in popularity of secondhand clothing and clothing exchanges.

To aid cotton farmers suffering from pandemic-related losses, USDA offered relief payments through the Coronavirus Food Assistance Program—initially to growers of upland cotton and later to pima growers as part of a second installment of the program. Bagby said the aid equates to $15 per acre, or about a penny a pound.

The U.S. is the third-largest producer of cotton, with production this year expected to be 17 million bales, he said. The world's largest cotton producer is India, with anticipated production of 30 million bales, followed by China with an expected production of 27.3 million bales. Bagby said China is the world's largest consumer of cotton at 37 million bales a year, and must import what it doesn't produce.

"The trade-related tariffs have affected cotton quite a bit, and China has been looking at alternative suppliers like Australia and Brazil, and so our market share has shifted," he said. "Every year, the markets just kind of move around and we have to find the best homes we can for the bales that we have."

Bagby said he anticipates a slowing of world cotton consumption next season.

Borges said he's hopeful conditions will improve for California cotton growers, and fellow farmer Cauzza agreed.

"The trade war with China has hit us hard, and then COVID hit and everything stopped," Cauzza said. "I know China was getting low in inventory, so they're looking to buy. Now, we're seeing some positives in the market, but we'll see what happens."

(Christine Souza is an assistant editor of 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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