The pain of low agricultural commodity prices is exceeded only by the excruciating consequences of extraordinarily high prices.

No one knows that better than the U.S. cotton industry, which has seen cotton demand plummet by 12.5 million bales in the wake of prices that reached an astounding $2.30 per pound in 2011.

California’s cotton growers were told at the 14th annual meeting of the San Joaquin Valley Quality Cotton Growers Association that the hangover will remain for at least another marketing season.

High prices “ration demand,” according to veteran cotton marketer Bruce Groefsema, sales and marketing consultant for the association.

That is particularly agonizing since the cotton industry’s check-off program has spent decades moving cotton from just 30 percent of the textile market to more than 60 percent only to see 8 percent disappear almost overnight as prices rose from 90 cents to stratospheric levels, mauling demand. World economic woes also contributed to the sharp decline in cotton consumption.

J. Berrye Worsham, Cotton Incorporated president and CEO, said the industry is rebounding, but it is likely to be a long haul with new marketing paradigm challenges.

It would bode well for other California commodities to learn from what happened to cotton when prices crammed farmers’ bank accounts at very high long-term consequences. It is not uncommon today to hear California farmers, especially those producing almonds, walnuts and pistachios, to fret a bit about crops falling short of promotion-created demand, resulting in high prices. Prices like those seen for cotton can kill the demand side of the equation quickly.

It was so devastating that foreign cotton buyers have not honored contracts on U.S. cotton worth nearly $1 billion, covering sales of more than 4 million bales. The industry has turned to the federal government to intervene to get the money.

Fortunately, members of the SJV quality cotton association received payment for all their 2011-2012 cotton marketed in two pools, one put together early to take advantage of early prices, according to Association Executive Vice President Greg Palla.

Groefsema reported good returns for pools: $1.11 and 113 per pound for saw-ginned Acala pools, $1.16 and $1.18 for roller-ginned Acala and $1.50 and $1.56 for Pima.

Some 6.5 to 7 million bales of upland will be added to already burdensome carryover that carries a stocks to use ratio of more than 70 percent. It should be around 50 percent to generate good prices for cotton, according to Groefsema.

Half of the 78 million-bale world carryover is in China, much of it expensive cotton the Chinese government bought from local growers. Once again, China stands as the 800-pound gorilla in the world cotton market and no one knows when it will be selling or buying.

No. 1 issue is sustainability

Groefsema believes U.S. acreage will be 9.5 to 10 million acres, down from 12 million last season. “There will be a significant shift out of cotton,” he said. He said California acreage could be down a third. Palla believes upland/Acala could be down 25 percent and Pima 35 percent or more,” depending on water availability. A lot can happen between now and March though.”

Worsham is “cautiously optimistic” that CI can regain market share, but the check-off program’s focus will be far different than it once was. The quality attributes of the U.S. grown fiber have long been cotton’s strong suit from the textile mill to the retail shelves.

U.S. cotton quality has not changed, but “absolutely” the No. 1 issue with people who buy cotton is now “sustainability. You cannot market cotton without a strong sustainability story.”

Worsham believes CI can make a strong sustainability case why retailers and textile manufacturers should go back to cotton now that prices are more reasonable.

It has taken two years to put together a credible set of facts to market a sustainability message. Cotton’s environmental footprint is smaller than it was 20 to 30 years ago with advanced technology like improved water and energy efficiencies, reduced soil losses, GPS technology and the like. There is also solid information to refute cotton’s critics, who claim cotton is a big water and pesticide user.

“Cotton has to remake itself to regain market share. However, cotton can carry its own weight in a tough crowd,” he said, admitting however that some of the environmental information cotton buyers and retailers often ask for can be nebulous and difficult to quantify.

Worsham said CI has had success in turning around cotton’s fortunes, and the textile industry is “moving back to cotton.” It is once again “very competitive” with synthetics on price. “I am cautiously optimistic,” he says of the future.

Palla may not have as much cotton to wrangle as he did last season, but he will be kept busy ramping up management of the storiedformer Cotton Research Station in Shafter, Calif.

The San Joaquin Valley Quality Cotton Growers Association is leasing the 80-acre facility in Shafter, Calif., and managing it as a research site.

The Shafter station has been the focal point of San Joaquin Valley cotton industry since 1922. USDA-ARS abandoned the station last June. The association stepped in to preserve it as a research site.

Palla told the association members there has been considerable clean-up of the site. In fact the association’s annual meeting was held in one of the complex’s newer conference rooms.

Palla say the association will build a solar energy plant on site to reduce the energy cost. The facilities are owned by Kern County.

At least a dozen private and public organizations, including the University of California and California State University, Bakersfield have expressed interest in conducting research on the site.

“Our goal is to have a 50 percent utilization rate on the labs and greenhouses by the end of next year,” said Palla. “The experimental plot land will be utilized to a 100 percent value, either for active research use or commercial cropping of the land, as we have done this year.” As a transition measure, the association produced an Acala cotton crop yielding 2,076 pounds per acre on the station’s experimental crop landin 2012 with profits going to the association for station management.

“Reasonably, we should be full within two years. We are in the process of soliciting specific facility component interests from potential research clients, and we already have some wish lists coming in.”