Global oversupply means cheaper cotton; some farmers seek crop switch

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PLAINVIEW — Chance McMillan is only 32, but he decided to retire.

Well, as a cotton grower, at least.

The young Hale County farmer anticipates a successful, lengthy future raising corn, grain sorghum and wheat. He grew cotton five of the six years he’s been farming, but became frustrated with its rising operating costs and dwindling profits. Now, he’s releasing his equipment and essentially giving up on the crop.

“Unless it goes back to 90 cents or a dollar, I’m not gonna grow cotton anymore,” he said. “The input costs are too much. There’s not enough return on investment with 60-cent cotton.”

Among cotton’s high operating expenses is weed removal. Because weeds have grown resistant to Roundup — their once-most-effective herbicide — McMillan faces heavy labor costs with hoe crews.

Winter wheat, on the other hand, grows during the opposite time of year as the weeds with which it would have to compete. Corn, unlike cotton, grows tall enough to shade weeds, he said.

Now in the 60-cents-a-pound range, cotton prices have already dipped below the threshold of a healthy profit margin. If they reach much lower, it could cost more to produce the stuff than a farmer can earn from selling it.

“Certainly, cotton prices are not where we would like for them to be,” said Mary Jane Buerkle, communications director for Plains Cotton Growers. “Our producers and everyone else would like to see prices that are higher than that.”

Cotton undoubtedly remains the South Plains’ No. 1 crop. Even the most loyal farmer still likely has bills to pay, though, and will take notice of the alternative-crop market.

“Even though you would consider yourself a cotton farmer, when you have this kind of price discrepancy, you may shift a portion of your crop,” said Calvin Trostle, an agronomist with Texas A&M AgriLife Extension Service.

That means McMillan isn’t alone in his crop switch.

As the owner of Halfway Farm Chemical, Kevin Igo tries to monitor trends in Hale County’s farming community. While producers start to consider their 2015 planting options, he won’t be surprised to see changes.

“The typical topic around the coffee table is leaning toward more grain and less cotton,” he said.

Nationwide, expect to see about a 15 percent drop in cotton acreage, said Darren Hudson, a Texas Tech agricultural economist.

“It’s been a while since we’ve had prices this low,” he said.

Like those for other goods and services, prices for cotton come from supply and demand. A heavy supply — as the world is seeing for the moment — means cotton is cheap.

Much of that high quantity is in China. The Chinese began stockpiling the crop a few years ago, gradually accumulating much more than they can immediately use.

Of course, that makes the export market to China fairly limited.

“They’ve stopped stockpiling, but they’re not buying as much because they can take cotton out of their stockpiles,” Hudson said. “That’s putting a lot of pressure on price.”

India is in a similar position of liquidating its stockpiles, Hudson said.

A third global price effect comes from Turkey. A Turkish anti-dumping lawsuit accuses firms in the U.S. of selling into its markets below production costs, Hudson said.

“Between China, India and Turkey, there’s a lot of downward pressure toward prices,” he said.

But there are still reasons cotton has long been so heavily planted in the South Plains. With cotton-suitable climate and soil in the area, other crops tend to have their own drawbacks.

For instance, you can’t just switch your cotton acreage to peanuts unless you somehow find a large amount of extra water.

“Price is one of many factors that a producer takes into consideration whenever they’re going to be making decisions about what they’re going to plant in 2015,” said Buerkle of Plains Cotton Growers.

Corn is also known as a thirsty crop, but McMillan plants genetically enhanced breeds that don’t consume as much.

“It can be, but with the hybrids we have and the technology, it doesn’t take more than with cotton,” he said. “That inch of water we put on lasts.”

When planting time arrives, some grain crops might also appear more attractive than cotton because of their larger safety net, Hudson added.

“In a lot of these other crops, there’s some price protection in the new farm bill,” he said. “If the price declines, you’re protected. Cotton doesn’t have that.”

Buerkle added that with spring planting deadlines still months away, there’s still time to hope for a market upswing.

“A lot could happen between now and then,” she said. “Certainly, we’d like to be optimistic.”

– lubbockonline.com

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