Beyond the Numbers
September 14, 2009 Even a quick glance over acreage statistics will tell the most casual observer all they need to know about cotton production in the Mid-South in 2009. This year, both Mississippi and Louisiana have planted fewer acres of cotton than they have in any single year in recorded history.
Unfortunately, Mid-South gins have no way of avoiding that economic blow. While the Mid-South’s growers can switch to alternative crops when prices seem favorable, a ginner has no such options. That’s one of the reasons Drs. Matt Fannin and Ken Paxton, professors with the LSU AgCenter’s Department of Ag Economics and Agribusiness, set out to gauge the economic impact Mid-South gins were having in the region.
Fannin and Paxton surveyed nearly 60 gins from five Mid-South states – Mississippi, Louisiana, Arkansas, Tennessee and Missouri – about the 2007 ginning season. That was the first year cotton acreage saw a significant drop in the region. In the late spring and early summer of 2008, he followed up with his survey’s participants. The conclusions he drew shed some light on the ginning industry at a critical moment.
One aspect of their study focused on the rising percentage of ginned cotton that is produced by the owner(s) of the gin.
“Gin ownership cotton was making up a little over 50% of overall cotton ginned from Mid-South gins in 2007. That had grown a little bit over 2006. It is a trend that we expect to continue here in 2009,” Fannin says. “What it suggests is that the gins are more dependent on their own owners’ cotton than they have ever been.”
While this isn’t the first time the Mid-South’s versatile soil has transitioned into alternative crops, Fannin notes that the current trouble for gins lies in the number of consecutive years that soybeans and corn have held onto Mid-South acres.
“A gin’s profitability in large part is driven by the number of bales they can run through that gin. So if they don’t run that many bales over a long period of time, it’s harder for them to maintain profit and stay in business,” Fannin says.
“In the summer of 2008 we asked the question: ‘Do you expect your operation to survive over a 5 year period if conditions don’t improve?’ It was a situation where 25% said they didn’t see themselves operating in 2013 if the situation stayed the same.”
Fannin and Paxton’s study wasn’t entirely negative, however. The economic impact portion of the survey revealed that cotton has a vastly more beneficial economic effect on the region than its competing crops.
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Matt Fannin
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