- MY TURN -
Tough Times Don’t Last
By Bob Norris
We, as an industry and as a nation, are in one of the most challenging times in history.
U.S. and world economic problems are substantial: retail closures, sluggish American manufacturing, a housing industry collapse, banks and financial institutions have closed or been taken over, and the only job opening I’m aware of was filled on Jan. 20. (By the way, best of luck to the new president. He’ll need it. Frankly, he can have that job).
These are especially difficult times for producers. While the past 18 months saw higher prices in nearly all commodities, cotton was mostly left out. Cotton prices are higher, but they’re still too low. Futures prices did skyrocket briefly last winter, but that was a poisoned apple.
Margin calls made it difficult for many to participate. Combine that with tighter lending standards, and producers may have a difficult time capitalizing on future opportunities.
Substantial publicity has noted troubles in the stock market, but figures for 2008’s fourth quarter show commodities took a bigger hit than stocks. At least oil has come down, which should help reduce costs, but the outlook is pretty gloomy.
What’s frustrating about this is that historically, falling cotton prices mean cash sales, and properly utilizing futures can allow buyers and sellers to capture an acceptable price. But what happens when buyers can’t buy or don’t want your product, regardless of price, and the futures market isn’t helping?
Sales of U.S. cotton have been very problematic, even at rock-bottom prices. Global consumption is shrinking. Ending stocks continue to build. Other world producers likewise are having difficulty selling cotton.
Out west, we’re facing drought (both natural and manmade), which has really made it difficult for us to have reliable, consistent and dependable crop production.
Water availability, higher costs and lower prices have cut our California acreage drastically from 1.3 million acres 10 years ago to 250,000 acres in 2008…and it will fall again in 2009.
Producers here have an array of alternative crops, from produce and commodities, to fruit and nut trees, as well as livestock, dairies and even ornamental plants for nurseries.
The rest of the nation has also reduced cotton acreage, planting corn, beans and wheat, as producers strive for the most profitable crops. Potentially, we’re seeing cotton acres as low as they’ve been since the Civil War, even as grain and oilseed prices have slipped.
It’s about as negative a situation as anyone could imagine.
And yet, despite all these negatives, I have optimism about our business. We’ve been very successful in getting reasonable policies in place for American farmers. Despite repeated assaults on the Farm Bill, legislators have continued to see the wisdom of smart farm policy and have been supportive of the same. This is in no small part due to the efforts of the National Cotton Council.
From forming marketing cooperatives, creating policy bodies like the Council, supporting research and creating demand through the self-funded Cotton Incorporated, cotton producers and the industry have found ways to survive and succeed.
That’s not to say the worst is past. I don’t think anyone knows that. But I do know the industry will continue to adapt. Eventually, world economies will improve, demand will return and we must be ready to claim that success, when it comes.
If we can prepare ourselves, farms and industry for that eventuality, we will demonstrate once again the wisdom of the oft-quoted truism: “Tough times don’t last; tough people do.”
– Bob Norris, Bakersfield, Calif.