News & Runway

What’s (Not) Growing in Your Backyard? California Cotton is Having a Tough Year

"We are all on pins and needles ourselves. It’s going to be an interesting year."

This week, I talked to Mark Bagby from Calcot, Ltd. after reading an article about the drought in California, and the prospect that farmers are now planting much less cotton than they were the year before.

cotton bud

Image: Getty

Bagby told me that cotton actually does grow reasonably well in drought conditions. Last year, cotton was planted on 280,000 acres in California; the best guess this year is less than 185,000 — that's a drop of over 100,000 acres and a reduction of 34%. 

The reduction in cotton acres in the Golden State has been ongoing for a decade, as farmers have been transitioning their acreage into forage crops for dairy cattle, vegetable crops grown on contract, or into fruit and nut orchards, or vineyards. In spite of that reduction, though, California’s production has borne up surprisingly well, due to its very high yields (cotton produced per acre). America’s average yield is about 800 pounds per acre, while California produces 1,500 to 1,600 pounds per acre. Consequently, even with lower acreage, California is the country’s third largest producer behind Texas and Georgia.

Worldwide, production is approximately 117 million bales grown yearly. The U.S. is still in the top three growers of cotton in the world with about 13 million bales, behind China with 32 million and India with 29 million. China is not only the largest grower of cotton in the world, but the largest user, spinning over 35 million bales in its mills. 

With this being the third year of an extended drought, California farmers, in general, might leave as many as 800,000 acres of cropland fallow in the San Joaquin Valley. The drought leaves farmers to make choices that are not only based on both economics and demand, but also on scarce water supplies and availability. With the price of ELS (extra long staple pima) cotton currently being traded at about $1.80 a pound, it certainly makes some economic sense to take a chance on planting cotton, which may take less water than other crops.

Cotton's total economic activity is estimated at some $100 billion. With all of the ups and down in the world cotton market, I asked Mark if, in fact, there was actually a deficit in the cotton market and he said possibly yes, but if there was more cotton available in the market, the prices may possibly go down. So that, in turn, leaves farmers with less incentive to grow the cotton, because an oversupply can create a drop in price.

Technically there is a deficit, as China’s reserves policy has tied up so much of global stocks that supplies elsewhere are in somewhat short supply, which has helped support prices. However, if China ever decides to unload those supplies, prices could drop, especially short term. The world is producing slightly more cotton than it’s consuming, but mills are consuming less than many expected because they see prices as too high — or too high to sell their products at a profitable level to retailers.