Drought, global markets: Royal pain for cotton's reign

Tuesday, 18 December 2007

Photo by Paula Illingworth By Shelia Watson Contributing Writer As in 2002, nature devastated the crop. There was the combination of a hot, dry summer followed by three tropical systems. This year, it was the long period of dry, hot weather, he said. While nature is taking its toll on one of the state’s major crops, its dominion also has been challenged by globalization. And in many cases, farmers are growing higher-value commodity crops like wheat instead of cotton. Baxley, whose business includes farming, ginning and warehousing cotton for both his farms and for other farms, said farmers across the state are sustaining huge losses. “To put it in perspective, our gin, in an average year, processes about 20,000 bales, and we store about 25,000 bales in our warehouses,” he said. “This year we processed not quite 5,000.” Tré Coleman, director of cotton programs for the S.C. Department of Agriculture, said the cotton-producing acreage across the state was reduced this year from 286,000 to 178,000 acres. “It’s a wait-and-see scenario for the market price,” he said. “You can’t plan on the weather; you can only deal with what the weather is doing the best you can. But the other commodity prices are so high right now, and that’s what drove some of the planning decrease for cotton.” But does the drought threaten cotton’s kingdom? “No, not at all,” said Coleman. “This is just a down cycle. Cotton has always been an important crop in this state.” However, the drought has hurt the economy beyond the growers, Coleman said. “This has been a loss of revenue for a lot of people all the way to the grocery stores,” he said. “I’m not an economist or futures expert, but when some of the current inventory goes down, hopefully things will get better. Maybe by 2009 we’ll be back and see an increase.” Battling for supremacy The global markets also have taken a swipe at the domestic cotton industry. “Especially after the WTO (when the World Trade Organization allowed China to enter the world market in 2000), things hit hard,” he said. “Over in China and in other places like Brazil, they’re continuously planting. They spend more time in the field and the restrictions are lower, plus the labor is cheaper.” In recent years, when China, India and Brazil increased their cotton acreage, it drove down the price of the crop on world markets. In addition, with the majority of the cotton grown in the United States now sent to textile mills in other countries, American farmers are at the mercy of the global market. Coleman explained that much of the cotton grown in the United States is shipped abroad to be made into clothing that was once produced at domestic mills. As textile mills have moved out of the United States, cotton farmers have found it more difficult to earn a profit. “In China they pick cotton by hand, and they have so many people who want jobs that this is the way they get it done,” he said. “We’re still the most efficient in the world and the most productive, but the political situation (with the WTO) has us in a bind.” The low prices are also the result of the crop being exported overseas. “There’s basically no domestic market anymore,” he said, noting that about 95% of the crop is exported. “Everything goes to Mexico or China, and they make it into cloth and sew it and send it back here, and because of their cheap labor, they can do it for a lot less than we can do it here,” he said. “I’d love to see more cotton products made in the United States, but it’s hard to compete with that.” As for the restrictions, he said the regulations enforced on American growers are beneficial rather than a burden. “You want to know that the chemicals are put on properly and that the crop is harvested the right way,” he said. “But it still makes it difficult to compete.” Nevertheless, Coleman insisted that the downturn is temporary. “Farmers who grow cotton have too much invested in the crop to abandon it,” he said. “If you own a cotton picker, you can’t use it for anything besides picking cotton. “Despite all the negatives, cotton is still one of the most important crops in the Southeast and certainly in the state. No doubt about it: Cotton is still king. We just have to figure better ways to roll with the punches when they come.” Baxley said he and other farmers are holding out hope that the punches will soon subside. “This is a terrible year and a lot of growers, including myself, are dealing with severe losses,” he said. Those losses are the result of a drought that has a stranglehold on the Southeast, and without any significant rainfall, one that will likely continue well into 2008. “But you have to remember this too. If past trends are any indication, it should get better. The 2002 bad year was followed by a near-record crop the next year, and that helped a lot with recovery. It would certainly be my prayer that we’ll see a much better crop in 2008 than in 2007.”