Cotton acreage in the West is up over last year, but a number of gin closings in important cotton production areas are putting a limit on how much cotton can be produced on some of the most productive agricultural land in the country.
Given production numbers in the West in 2015, the 2016 crop’s approximately 25 percent increase will not strain the limits of gin capacity in that region this year. However, it does raise the issue of future growth in cotton’s market for the West.
Western Gin Stats
In the San Joaquin Valley of California, at least five gins have closed since 2013. Three of those gins have either sold or are in the process of selling the land and equipment.
With those closings, capacity in that area has gone down at least 100,000 bales. However, many gins in the region are not even running at 50 percent capacity. It would take a substantial increase in production to tax the limits of the currently operating gins in Arizona, California and New Mexico.
Over the past 20 years, gins have consolidated and per gin capacity has increased. Larger gin plants generally mean less cost per-bale and better financial returns to the gin. Cooperatively owned gins, which make up the majority of gins in the West, have benefitted from aggressive seed marketing by their managers, resulting in excellent returns to their members. For cotton acres to increase even more in the West, a number of issues need to be resolved, including low cotton prices.
The water situation in California will not be easily resolved anytime soon, even if there is ample rain within the watershed. The acreage of permanent tree crops is increasing, displacing row crops in some areas.
In Arizona, the water situation is a bit different. Although there is more water readily available in Central Arizona than in California, the price will increase as Central Arizona Project water from the Colorado River becomes more limited due to water levels on Lake Mead.
Less land for farming due to urbanization in Arizona means that there are more demands on that land for profitable agriculture.
Dairies have moved from the urban areas around Phoenix into Pinal County south of Phoenix. Production of dairy feed crops such as alfalfa, sorghum and corn are competing with cotton. Naturally, whatever crop makes the highest return on investment will be the one planted. There is a balance of sorts at this point, and it does work for many producers with prices for Desert Southwest cotton.
Understanding that overall capacity within the industry is going down, there is still a fairly substantial unused capacity for cotton gins in the West. Several sites have been mothballed but not disassembled. Because of production challenges in the West, cotton may never again reach a production heyday like the 1980s. However, infrastructure remains secure for current production levels with a capacity for a good increase.
Brent Murphree is the Cotton Board’s Regional Communications Manager for the West. Contact him via email at firstname.lastname@example.org.