Even the most optimistic observer — optimistic to the point of being delusional — would have to agree that these are not the best of times for U.S. cotton producers. And the misery index grows considerably if you happen to be a cotton producer in the state of Georgia.
On the national scale, growers are being hammered by a slumping market and world trade issues. At the same time, Georgia producers are being told that certain textile mills want no part of their cotton, and influential merchants are making a public airing of Georgia's quality problems.
On the trade front, the United States — yielding to pressure from a coalition of developing nations — agreed recently to make a 20 percent cut in some of the $19 billion in subsidies it pays to its farmers. Subsidies will include those paid to corn, rice, wheat and soybean producers. In a special accord reached with four African nations, the United States also agreed to eventual cutbacks in cotton subsidies.
While the trade accord has drawn praise from some farm groups and alarmed others, Bob Goodman, an Alabama Cooperative Extension System economist and Auburn University associate professor of agricultural economics, says cotton producers shouldn't spend a lot of time worrying about it — for now, at least.
For one thing, he says, there's a long way to go before the measures are even put into effect. Trade negotiators, for example, have stressed that no concessions will be made until U.S. policy makers are convinced other countries will follow through with their own promises to lower trade barriers.
In the meantime, while conceding cotton producers face a period of uncertainty and change, Goodman says he has every confidence they'll be able to maintain their competitive edge.
Even so, from the standpoint of the individual producer, two things are crucial, he says.
First, while it may seem like squeezing blood out of the proverbial turnip, producers will have to work even harder to cut production costs.
“The things that are really going to matter are the things that have always mattered,” Goodman says. “An individual producer should be worrying about becoming a highly efficient, low-cost producer.”
That, he says, is the “way of the world” whether producers are operating in a high-price or low-price cotton economy.
“In high-priced years, the low-cost producer is going to make more money than the low-cost producer, and in a low-price year, the low-cost producer is going to stay in business while the high-cost producer doesn't.”
The virtues that will matter most in the new global farm economy, Goodman says, are “timeliness, efficiency and good labor and machinery management.” Farmers will also need to develop a keener understanding of financial markets, leveraging debt, and reducing expenses.
“Interest alone is a huge expense,” he says. “Farmers spend more on interest than they do on labor.”
Goodman says producers should also double their efforts to insure more fuel efficiency.
As for Georgia's quality dilemma, fiber quality problems have been brewing for several years, says University of Georgia Extension Cotton Specialist Steve M. Brown, and they've finally come to the forefront this season.
“Over the last couple of months, there has been some major rumbling in the textile industry,” says Brown. “Probably the world's most renown merchant made a statement in South Carolina in June that of all the cotton grown in the United States — ranked in terms of buyer preference — Georgia was last.”
Four major U.S. textile companies also have stated a bias against Georgia cotton, he adds. “I have seen one of their contracts stating their intentions not to buy Georgia cotton in 2004. Others will buy Georgia cotton but only at higher specifications than they purchased it at in the past.”
Rest assured that Brown, along with fellow members of the University of Georgia Cotton Team, the Georgia Cotton Commission and others interested in the preservation of Georgia's cotton industry are working diligently to find solutions to the state's quality problems.
This much is known for sure, says Brown — there's no “magic bullet” or one thing that'll turn around the fortunes of Georgia cotton growers. In all likelihood, it'll be a combination of things, starting with a timely harvest this season.
e-mail: [email protected]