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Quality premiums rare for Plains growers

Editor’s Note: A few months ago, I received an e-mail from Karen Clawson, who works for Bula Gin, near Littlefield, Texas, regarding a Southwest Farm Press article in which we quoted a cotton merchant saying if farmers produced high quality lint the markets would pay for it. Experience had indicated otherwise to Ms. Clawson, who suggested that meeting with some Lamb County farmers and others in support industries might offer a different perspective. I agreed. Through several e-mail exchanges, Ms. Clawson and I discovered a day that fit our schedules. We met with farmers, ginners and farm lenders and talked for the best part of a morning and then continued the discussion over lunch. Mostly, the farmers wanted an opportunity to voice their concerns about a number of issues that affect their livelihoods. The following article is derived from discussions at that meeting regarding cotton marketing and technology costs. Subsequent articles will deal with concerns about the farm bill, and the future of agriculture and rural communities.

LITTLEFIELD, Texas – Cotton farmers in the Texas Southern Plains see no benefit from investing the money it takes to produce the highest quality lint possible.

Despite what they hear from mills and merchants, premiums for quality rarely materialize and they come out just as well with traditional varieties, as opposed to the often more expensive ones preferred by some merchants. Karen Clawson, who works for Bula Gin, near Littlefield, Texas, and farms with her husband Larry, says with loan deficiency payments, 42-cent per pound loan cotton brings as much as cotton with a 52 cent to 54 cent per pound loan value. “And that premium cotton costs more in seed, fuel, water and other inputs.”

The Clawson’s were part of a group of farmers, ginners and farm lenders who recently met in Littlefield with Southwest Farm Press to express their frustration with the cotton economy.

“Merchants are buying cotton on physical price, not quality,” says farmer Jerry Sowder. Jimmy Drake agrees. “A lot of time, 40-cent cotton brings 1000 points over loan and 48-cent cotton will get 200. We still get 50 cents a pound. Quality means nothing.”

“Transgenic varieties cost as much as $70 per bag of seed, compared to $12 for conventional cotton,” says Brad Heffington. “Then it costs extra to gin and we still get the same price for it. Our cost of production is so much higher than the rest of the world and the market offers us 28 cents per pound, physical price. We can’t justify extra costs necessary to produce higher quality.”

Sowder says the government wants to see trade geared to the “world economy. But (much of) the rest of the world pays $2 an hour for labor. There is no fairness in the world market. They seem to want to drag the United States down to a lower economic standard.”

Tim Farris, of the First United Bank in Littlefield, says inputs for Texas farmers “are not based on the world economy.”

“The rest of the world doesn’t work under the same labor laws and regulations we do,” Drake says.

Heffington says the price of cotton during the Civil War was about 55 cents per pound. “That’s what we get now, with government supports. I can’t imagine anyone else would want to work for the same wages available in the 1860s.”

With carryover so high and prices so low, Karen Clawson wonders: “Why are we importing cotton?”

“We just need to know what merchants want,” Drake says. “When they’re paying 25 cents to 30 cents a pound, regardless of grade, it doesn’t pay to produce quality.”

“Mill buyers say they want one thing but they buy something else,” Heffington says.

Farmer Randall Gray says the LDP was set up as “an addition to the loan price to pay farmers. Merchants take it away from us. Merchants get the advantage; they are the ones being subsidized. If the LDP goes up one cent, the physical price of cotton goes down.

“We can work all year to make $15 a bale profit. Merchants make that on one transaction and they have less money tied up in it.”

“When the LDP is equal to or above the physical price of cotton, something is wrong,” Farris says.

Heffington says with the Step Two payments, merchants can get a bale of cotton real cheap. “And our production costs have gone out the roof the last two years. If we don’t make a bumper crop, we come up with nothing. Ten years ago, we could make half a crop and with 60-cent cotton still break even. In the past few years the cost of fuel, pesticides, parts, seed, equipment, boll weevil eradication, and irrigation costs have gone up.”

A general consensus of farmers at this meeting indicates they’ll look carefully at technology costs for 2002. And they expressed frustration that companies are hiking technology fees when farmers can least afford it. “They are putting their stockholders ahead of their customers,” Heffington says. “We are in no position to tell suppliers what we’ll pay. We have no leverage. If cotton was bringing 85 cents a pound, we could afford technology. At current prices, technology is not paying for itself.”

“We get more from the LDP than we do from the cotton,” Drake says.

“We learned to reduce seeding rate on transgenic varieties,” Gray says, “so companies increase the technical fee to make up for selling less seed.”

Sowder says farmers will judge each field to determine if transgenic seed is justified. “It depends on the farm and the weed control needs,” he says. “In some cases, Roundup Ready technology will be the best option, but we still may not get a return from it.”

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