Cotton farmers are experiencing their worst financial circumstances since the early 1980’s, and solutions to the problem are proving hard to find. Because we can’t find a quick fix, many farmers believe that National Cotton Council leaders just don’t understand how bad things are.

Believe me, this Council leader knows how bad the problem is. We have a farm program that allows almost total freedom to plant other crops; and cotton farmers have been doing just that, to the extent feasible. But, alternative crop prices have fallen along with cotton prices. Unless corn and soybeans were contracted months ago, return prospects on those crops also are pretty bleak.

Even as we struggle to stay afloat in the midst of the worst cost/price squeeze in more than a dozen years, lawmakers and regulators seem determined to squeeze the remaining life out of us.

In evaluating options for dealing with the profitability problem, we need to do so with realistic expectations. Solutions are not likely to be quick, nor are they likely to be one dimensional. In the most fundamental sense, the problem is a global cotton supply that exceeds global demand. Quick fixes to this kind of problem tend to be supply adjustments that are made once a year - at planting time.

Strategically, we can help ourselves by continuing efforts on several broad fronts:

· Holding and enhancing federal assistance programs

· Strengthening demand and reducing production costs.

With respect to federal assistance, recently we’ve seen some marginally encouraging developments. For example, when the House followed the Senate and approved an agricultural research bill, it allowed us to preserve some important funding for agriculture.

If we’re realistic in our expectations, we’ll surely conclude that our problem will have to be resolved in the market through some combination of supply adjustment, demand stimulation and lower production costs.

Price improvement hinges on a supply/demand adjustment. Most of what we could realistically expect to do with regard to supply adjustment was done when growers made their planting decisions. From this point on, every producer will try to harvest the biggest crop he can, cost effectively.

Any combination of actual U.S. plant-ings, abandonment or reduced yields resulting in a crop near the level suggested by the Council’s January planting intentions survey (12.1 million acres) would, more than likely, be bullish. If actual plantings turn out to be near the acreage suggested by USDA’s March survey (13.2 million acres), then the best prospects we have for quick supply adjustments are disaster-related and fall outside the realm of human management.

With respect to demand building, the Council successfully worked with USDA late last year to get credit guarantees approved for Korea, Indonesia and other countries. This has helped generate export sales.

We shouldn’t lose sight of the importance of marketing certificates in stimulating demand. Rule changes have made it more difficult for the value of certificates to be reflected in U.S. price quotations for export sales. Still, we’re told by experts that certificates have enabled them to make sales, as well as prevent cancellations, under very competitive market conditions. And, domestic customers say that certificates have helped cotton maintain market share that otherwise would have been lost to cheaper polyester.

Reducing production costs is the dimension of a suggested strategy for improving profitability that tends to be most frustrating to farmers. That’s because they’re initially encouraged when they hear about the cost-reducing potential of new technology. Then they’re discouraged when it comes to market with a price tag that makes it, at best, only marginally more cost-effective than conventional technology.

Among other things, Council and Cotton Foundation leaders have met with officials of supplier firms in an effort to strengthen our partnership and make both producers and suppliers profitable.

While we perhaps should not look to cost reduction as the most fruitful short-term solution to our cost/price squeeze, it may very well be the most beneficial long-term solution. Council staff and others who focus on cost reduction opportunities see prospects of reducing production costs by 7 to 10 cents a pound over a period of 5 years. Examples of tools that can help include: genetically engineered plants and aggressive application of space age technology for precision management of pests and nutrients. If these technologies are reasonably priced, they offer cost-cutting opportunities similar to those the Southeast experienced with boll weevil eradication. DBJ

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Site last updated January 10, 1999.