Gaines County cotton production on track For surpluses; optimism tempered by slowing global markets
When the talk turns to farming, it's not unusual to hear the word `gambling' in the same conversation, and nowhere is that more a reality than here in West Texas, where sometimes unpredictable weather patterns can create a "make or break" scenario for the industry, its contributions to the local economy, and to domestic and global supplies. West Texas farming is not for the faint of heart, but for the most part, those who hand down the farming skills to the generations that follow, also pass on that acceptance of risk as a natural part of an increasingly complex equation.
"It can cost upwards of $65,000 to cultivate 120 irrigated acres", one industry insider told the Sentinel, while at the same time remaining optimistic about the prospects for 2014. "That's why, In most other parts of the country, a farmer might work an average of 600 to 1,100 acres, but around here, that number's probably closer to around 1,500, and that's with about a third of the water to work with. That's why farmers here are so exceptional. You can't just sit on your tractor all day and never go into town. You have to be a businessman who knows how to make things grow."
While devastating drought has plagued the western U.S. in recent years, and the deep south has experienced fairly stable weather patterns during that period, semi-arid West Texas has only recently gotten some relief from a near four-year dry spell that saw area cotton farmers launching this year's spring planting season only after double-checking the status of their crop insurance and keeping an eye peeled to the Weather Channel. What most farmers perceive to be diminishing support from the U.S. government, by way of the last two farm bills, only added to the uncertainty, and with a bleak forecast, some would have to consider hedging their bets by diversifying their crops with the production of wheat, corn, soybeans, sorghum, peanuts, sunflowers, or even sesame.
And many did, as a continuation of the extended dry spell threatened to reduce 2014 cotton output to a 23-year low, according to the U.S. Department of Agriculture, with projected inventories dropping to 2.5 million bales by July 31st. As recently as mid-April, Bloomberg News reported that uncertainty in the markets would have cotton futures rising by as much as 32% by year's end. At that point, more than a quarter of the state of Texas was in "extreme to exceptional" drought conditions, according to the U.S. Drought Monitor. The cotton belt was the hardest hit, with an average year-to-date rainfall of about a half-inch.
If the spring began with some anxiety, though, a series of well-timed rains beginning in May has led to cautious optimism. Above average rainfall in subsequent weeks has only heightened anticipation of an ample harvest, and sent the numbers crunchers at the USDA scrambling for their calculators. Futures trading - which actually sets prices following the all-important July 1st industry-wide farm report, shows prices trending downward as projected surpluses increase.
Overall, the last two months have seen parts of the area saturated by as much as eight inches in cumulative rainfall, the highest amount during any planting season since 2007. With that, our industry source expects production this year to return to 2009 levels that preceded the most severe drought period. "But," he cautions, "we're still paying for the high prices in 2010, and the losses that were incurred in (during the sustained drought years of) 2011, 2012, and 2013. It changed the infrastructure - and to some degree it changed the farmer's mindset. You just don't fix things overnight."
The planting season has not been without its hurdles, as high winds and even hail, in some parts of the county, proved to be a setback. A number of area farmers lost their initial seedlings of other crops, and replanted cotton. The chance of foul weather always lingers as a potential wild card, a fact not lost on Jackie Warren, who manages his own farming operations in Dawson County and leases considerable acreage from Golden Farms in the eastern part of Gaines County. Warren was one of many who was forced to return to the fields to replant his cotton, a grueling, time-sensitive operation that him and his crew finally completed on Independence weekend.
And, of course, too much rain is still too much of a good thing. "We didn't get the hail, but the wind and rain got us," said Warren's foreman, David Clausen. "Three inches all at once was just too much."
"The weather is like childbirth ," our industry source said. "The rain is a good thing, but the wind and hail that sometimes come with it are the birth pains."
For the most part, though, area cotton farmers have reason to be optimistic about output - preferably with some additional rain over the next ten days or so, according to Clausen, and ideally with some additional showers in late August to early September, prior to harvest. The yields will be further enhanced by less wind, a mild fall, and ideally, temperatures comfortably under the 100 mark until then.
With the optimism comes some wariness of U.S. and global markets that will dictate the demand for their product. Those new July 1 numbers set the benchmark for global prognosticators, and the prospects for surpluses have had the inevitable ripple effect through the ranks of commodities traders and even the garment industry. The USDA predicts a six-year high in cotton inventories before the 2015 harvest, as output could see increases as high as 32%. Fed in part by data emerging from West Texas, the USDA raised its production forecast from a month earlier by 3.4 percent to 15 million bales, a 16 percent gain from last year. Additional rains since then, and ideal growing conditions for the next few months, could send that figure to 16 million.
In short, concerns over supplies have eased for the foreseeable future. In an effort to put the data into numbers that consumers might more likely relate to, the Tennessee-based National Cotton Council estimates that predicted domestic inventories of cotton in 2015 would provide the material sufficient for more than 924 million pairs of jeans and more than five billion t- shirts. Projected global supplies could provide 16 t-shirts for every person on the planet. That might be good news for the casual dresser, but consumers remain cautious in a still struggling economy. The industry also finds increasing competition from manufacturers of polyesters and other synthetic fibers, favored by some in the apparel industry for their near flawless consistency.
Under normal circumstances, less than ideal weather conditions in America's two largest competitors in the cotton market may have served to boost U.S. exports somewhat, as both China and India have experienced lowered output, due to reduced rainfall. Still, any hopes of increases in U.S. exports is tempered by the fact that the planet has produced more cotton than it will consume this year, and mega-consumer China's own slowing economic growth will result in a more than 40% decrease in imports from the U.S, to a five- year low, say industry analysts, with nearly 60 million bales sitting in reserve, according to our Sentinel source. Having been plagued by rising costs over the previous three years straight, apparel manufacturers across the globe will welcome reduced costs for fiber, but globally, as in the U.S., the consumer will have the last word.