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Calcot buys SWIG cotton warehouses for marketing ‘06 crop

For the second time in two years, Calcot, the largest cotton marketing cooperative in the West, has gone east to find more cotton bales to market to replace the rapidly dwindling cotton acreage in California and Arizona.

The Bakersfield, Calif.-based 1,200 member cooperative will market about 120,000 bales of 2006 cotton for 200 members of the recently dissolved El Paso, Texas-based Southwestern Irrigated Cotton Growers Association.

Since 1926, SWIG has marketed cotton for members irrigated in the irrigated valleys of Far West Texas, New Mexico and eastern Arizona. SWIG went away June 21 when more than 95 percent of the SWIG cotton grower-members voted to cease operations and liquidate the company.

Shortly thereafter, Calcot agreed to purchase SWIG’s cotton warehouses in Artesia and Las Cruces, N.M., and in Fabens, Texas, and market former SWIG members cotton.

SWIG approached Calcot two years about a possible takeover/merger. Calcot President Bob Norris said there are still details to be worked out to finalize a formal merger, but for this year Calcot will take over marketing SWIG members’ cotton.

Calcot, formed in 1927, marketed only cotton produced in California and Arizona until two years ago when South Texas cotton producers invited Calcot into the Coastal Bend region to market high-grade spindle picked cotton for them. Last year, cotton from about 15,000 acres of mostly South Texas dryland cotton was marketed by Calcot. Norris said Calcot’s will market cotton from about 30,000 in South Texas this year.

"Assuming all details can be worked out to mutual satisfaction," Norris said, "we will own and operate what are currently SWIG facilities. We look forward to meeting all of our new members, working with them in the months ahead and providing the excellent service and financial returns that Far Western cotton growers have come to expect from Calcot."

Calcot currently owns and operates 145 warehouses in California and Arizona. SWIG’s warehouses total 21.

“Combining of two cooperatives is a very good fit. We both handle similar varieties of cotton and have competed with each other for a number of years in the same marketplace in eastern Arizona,” said Norris.

Both SWIG and Calcot have staked their reputations on marketing high quality Acala and other spindle picked upland cottons and Pima cottons for 80 years. Calcot’s takeover of SWIG will now cover the entire U.S. Pima cotton growing area of Texas, New Mexico, Arizona and California with a single marketing cooperative. These are the only states producing ELS cotton.

Pima cotton is one of the bright spots in the Far West cotton industry with ELS cotton selling for more than double the current upland prices because of growing demand for Pima cotton worldwide.

About 40 percent of SWIG marketed cotton has been Pima. Pima is approaching 50 percent of the SJV cotton acreage and is expected to be the dominant cotton grown in the valley within the next decade.

SWIG and Calcot have sold the vast majority of their members’ cotton in export markets.

Competing crops and urbanization have cut the California and Arizona cotton acreage in half over the past decade. Calcot’s handle this season will fall below 1 million bales of California and Arizona cotton due primarily to competing crops. This is well-less than half of what Calcot marketed in past seasons. The SWIG cotton will bring the total Calcot handle to 1 million bales for the 2006-07 marketing season.

Both Calcot and SWIG have seen their bale numbers decline and this merger will bring some economies of scale back to cooperative marketing of Western cotton.

There is little room for growth in the SJV and Arizona cotton acreage since considerable former cotton ground is now in permanent trees and vines. However, there is some potential for more acreage in the SWIG marketing area, although Norris calls it limited.

“As a whole, cotton acreage should remain relatively stable in the SWIG marketing area,” said Norris. That has not been the case in California and Arizona. Water will be overriding factor for any expansion in acreage in the SWIG areas.”

Norris adds that, like California, permanent crops are taking more row crop ground in the SWIG marketing area. In the Las Cruces/El Paso area it is primarily pecans.

“Certainly in the trans Pecos area, land is available for cotton but expansion will depend of costs,” he added.

New Mexico and Far West Texas are in the final stages of a successful pink bollworm eradication effort. This bodes well for reducing growing costs, but more importantly it could result in more Pima acreage. There is no Bt Pima cotton and threat of pink bollworm damage forced some growers to switch from ELS to insect-resistant Bt upland cottons.

Initiation of a PBW eradication program in Central Arizona has prompted growers there to once again grow Pima this season and the same thing could happen in New Mexico and Far West Texas.

American-grown ELS cotton is in high demand worldwide as textile mills venture more into high value textiles.

A plus for Pima is that there is limited government involvement in Pima cotton production. With so much uncertainty over the new farm program and upland cotton support, growers who want to continue to grow cotton find Pima an attractive option. The only place in the United States that produces Pima is the Far West and Southwest.

“I feel very good about the Calcot and SWIG merging. It fits well with what we are doling and allows us to expand our footprint and continues to give us market presence internationally. It is a win situation for both cooperatives,” Norris said.

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