Beltwide Luncheon Sound-Off 2007

What’s the final word on the 2006 cotton crop? How will the impending Farm Bill affect America’s growers? Where are cotton prices headed this year?

Some of the top cotton growers and industry experts in the United States gave their answers to these questions and others at the 40th Annual Cotton Grower Beltwide Luncheon Jan. 10 during the Beltwide Cotton Conferences in New Orleans. More than 250 of America’s best gathered to discuss the high and low points of the 2006 season, and offer predictions and recommendations for the season to come.

The Cotton Grower Beltwide Luncheon, sponsored by Case IH and Monsanto, is one of the largest grower-oriented functions at the annual Beltwide Cotton Conferences, and is valued by attendees for the opportunity it presents to gather and prepare for the season ahead.

Cotton Grower magazine would like to offer our sincere thanks to Case IH and Monsanto for their continued sponsorship of the Cotton Grower Beltwide Luncheon. Their commitment to the cotton industry provides a forum for America’s growers to come together to exchange ideas and honor excellence. The 2007 event featured recognition of Larry McClendon, winner of the 2006 Cotton Grower Achievement Award and the Marketers of the Year.

The following are highlights from the Cotton Grower’s traditional “Sound Off!” session, including comments on cotton quality, WTO and the Farm Bill …

Trent Haggard, Case IH

It’s always a pleasure to be with you at this Beltwide Cotton Grower Achievement Award Luncheon. This luncheon has always been a celebration for me, and I want to you to understand the investment Case IH has in the cotton industry as well as the entire agriculture industry.

It’s also been a celebratory time for us at Case IH, and by that I mean we have moved forward rapidly with a project that has been maybe the worst kept secret in cotton – the Module Express 625. 2007 is the first year of the Module Express 625, which is going to deliver excellent savings for cotton growers. When you look at the savings possible: tractors that are not involved in harvest; laborers that are not needed; and a package size that delivers 8 foot by 8 foot by 16 foot modules averaging 10,000 pounds, using reusable 16 foot tarps that have absolutely zero contamination in the ginning process and requiring no changes in the gin feeding system or the module trucks themselves, it is going to add to your bottom line in the form of up to 27% savings at harvest time. That’s serious. That’s impacting your bottom line. That’s what we’re about.”

J. Berrye Worsham
…on priorities for Cotton International in 2007

Of course we all know that the market for U.S. cotton is export today, and we are stepping up our presence in China along with Cotton Council International.

Another key issue that we’ve been working on to increase the demand for cotton is to make sure cotton gets a fair shake in the whole issue of sustainability. We are meeting with mills, we are meeting with brands, and we are meeting with retailers to get that message across. Again, as we go forward, we would like to get the message out that cotton is a better alternative than chemical synthetic fibers – which is the alternative to modern agriculture. It’s not organic.

One of the things we’ve been latching on to is a campaign called the “Mystery Fabric Campaign”. Mystery fabric is not cotton – cotton is something we know and love. Mystery fabrics are those strange names for new fibers that consumers see in the marketplace. So we are kind of doing a little parody on that to make sure consumers think, “What are you really wearing?’ And we’re doing that in TV, print and even on the Internet. We have an actual Internet site devoted to that.

And last but not least, we are continuing to work to reach college-age kids with a positive message about cotton. We visited 14 or 15 college campuses with a program called the ‘Dirty Laundry Tour.’ We used that to promote cotton to this age group, a group that will be important to us for years to come.

Roger Haldenby
… on the 2006 crop in Texas and the future of U.S. cotton

When I look at the 2006 crop for the high plains of Texas, it takes me back to my English roots. Charles Dickens wrote a book called “A Tale of Two Cities” and it starts off, “it was the best of times, it was the worst of times.” Last year, it was the worst of times for the dryland crop. It didn’t rain in West Texas from October 2005 until sometime in the middle of the summer, so we lost about a million acres. But at the same time, when you step back and look at it, it might have been the best of times, because we’re not looking at a very good market.

When it comes around to the irrigated producer, it was the best of times because the technologies we are using these days – the staple length, the qualities we’re looking at, the yields we’re looking at – it absolutely is the best of times to be a cotton producer when you’ve got water under that cotton crop.

We shouldn’t be ashamed at all of producing cotton in this country. And I get tired of hearing about the U.S. cotton industry being the seat of the problems in West Africa. WTO is dependent on the U.S. cotton industry changing. I really wish somebody would listen and hear that we are producing the fiber.

We’ve changed the slogan now – it used to be called “the fabric of our lives” – but cotton still is the fabric of everybody’s life in this room. We are proud of that and by the time we get to the end of 2007 I certainly hope it will have been a year with the best of times. Maybe we’ll leave the worst of times behind us.

Dr. O. A. Cleveland
… on the outlook for 2007

China, India and the U.S. – that’s the key in my opinion for the coming season. Economic growth in China is still booming – it may not be a double digit increase this year, but if it’s not, it’ll be 9.5%. We’ll probably continue to see the value of the Chinese yuan currency appreciate. Which means that, in their dollars, U.S. cotton will be cheaper to them. Hopefully it will mean they can be aggressive in buying cotton relative to other commodities. Chinese consumers are still very aggressive in demanding cotton-rich goods. They’ve caught on to that increasing middle class and they are where we were a number of years ago.

India – another booming economy – will be facing some inflation and a growing middle class that wants to buy cotton. Also, we’ve got an increasing middle class in the less developed countries who want more cotton finished goods.

The demand for energy has declined somewhat – basically what that comes back to tell us is that the consumer is going to have more of a disposable income here in the U.S. So cotton goods could possibly take some of that disposable income. Picture 2006-2007, this year the supply/demand deficit is about 5-6 million bales. So that tells us with the decline in world stocks we should look to higher prices. The planted acres will decline in China this coming season, because of the demand for feed grains there, reduced acreage worldwide. We see a coming decline in U.S. cotton acreage.

Finally, we are going to lock up some 12 million bales in the loan, so that pulls that cotton off the market. The market is going to have to get hungry and its going to have to rise a bit before it can buy this cotton out of the loan. The loan is a two edged sword — for the most part it’s positive.

Finally, as we look at the unknown factors and what’s going to take place here in 07-08 as we get in the farm policy – that’s really unknown. Hedge funds have been extremely active in the grains and the oil seeds. Hedge funds must come in to buy. So this spec money, as it gets reallocated, will look for another market. Cotton is still quite cheap, so we could have a tremendous influx of funds come into the market.

Ray Young
…on ethanol, biodiesel and subsidies

I was interested this morning about all the things that were said about ethanol and biodiesel. These are very exciting times for me. This alternative fuel concept can change the way this country operates. It’s certainly going to help agriculture, and it’s going to help keep us from having to import so much oil. We’ve been on a cotton and corn rotation for several years and we’ll probably continue about the same acres as we’ve been planting. Most of our clients will stay about where we are, but by and large there will be about a 15-20% decline in cotton acreage and most of that will go into corn.

But it’s good – when we first started doing corn rotation 7 or 8 years ago, we said, ‘well, if we can break even on corn, we can make a little extra cotton and make up what we’ll be improving the land at the same time.’ It’s good that we can make a few dollars raising corn and still be improving our cotton yields and improving our land as we go.

I’m tired of hearing about the commodities that are subsidized and the commodities that are not subsidized. Those guys that are not getting subsidized are claiming to be hurt in the process. I say that if 3 or 4 commodities are subsidized, every commodity benefits. Because if subsidies keep us in business for certain commodities, then we’re not going over into their ballgame and causing a surplus. I think if just 3 or 4 commodities are subsidized it helps everyone, and I don’t think it’s a valid argument to say everyone should share and share alike because I think everyone’s sharing in the benefit.

Alan Helms
… on trade and the Farm Bill

We’ve still got a tremendous amount to do on the trade front. It appears there will be an effort to revitalize the Doha round. We certainly feel like our negotiators have made a very generous offer and we are concerned in that it is a negotiation, and we certainly need a lot more market access. It doesn’t appear as if it’s coming forth at this point.

And of course we’ve got a Farm Bill year coming up. We’ve already heard today that we’re not all in the same camp. It’s going to be very difficult to maintain what we currently have in the Farm Bill. I think cotton – and I think I can speak for just about everybody – would like to keep the Farm Bill as close to what we have as possible.

I think our first battle is to make sure the money’s there. The budget process is going to precede the Farm Bill debate. We can’t get too wound up in what the Farm Bill is going to be, and concentrate on making sure we’ve got the money. I think we all have a chance to at least try to make a difference and work through channels such as the National Cotton Council and other organizations. We’ve got a different congress right now, a new mix, and I’m not sure any of us know exactly what to expect.

Dr. Carl Anderson
…on cotton quality and 2007 outlook

We have probably improved the quality of cotton by a much greater percentage in Texas that we have over the rest of the Belt. Somehow, some way, our Texas growers have caught on that the future of the American Cotton industry hinges on high quality cotton that is very competitive in the international market.

This past year, we had a severe drought in Texas. We planted about 6.4 million acres and we lost about 2.2 million that were never harvested. I was thinking we would be very fortunate in Texas to make 4.5 million bales from 6.4 million acres planted and about 4.4 that could be harvested. I have to admit, I underestimated the ability of our cotton producers, as well as the varieties of cotton that we have today. That we could come up with a big crop of 5.7 million bales in Texas even though we lost 2.2 million acres tells me that our irrigated farmers have caught up. We used to think a bale and a half of irrigated West Texas cotton was pretty good. Now we are very disappointed if we make less than 2 bales, and we’ve got a lot of folks making 3 bales to the acre.

We planted 6.4 million acres last year, I think that we’ll at least cut that by 500,000 acres. We’ll go to 5.9 and we could go to 5.8, where there is a chance for cotton farmers to grow another crop like the grain crops. I’m thinking for this coming year – I’ve got all my numbers in pencil, they are tentative – but it looks to me like we are setting the stage in our cotton industry worldwide for higher prices.

Jim Zimmer, Monsanto

Monsanto is a company solely focused on agriculture. Each employee, every day, comes to work thinking about the same thing – and that’s production agriculture.

Roundup is an herbicide that’s been very valuable to Monsanto and it’s been a good tool to you as a farmer. We will continue to look for ways to improve the performance of Roundup. However, most of the $2 million a day we spend on research and development goes towards biotech solutions and germplasm improvements. You’re well aware of the biotech solutions we’ve been able to bring since 1996. And we’ve got a pipeline of new biotech solutions that we’re bringing to the market in the next decade.

We are just as excited about what we’ve been able to accomplish in germplasm. We felt several years ago that we had solutions to technologies that, if applied to germplasm, would lead to significant increases in yield. So back in 1999 we purchased a seed corn company that, when going head to head with the market leader Pioneer, we found ourselves losing more side-by-sides than winning. We applied our sciences – our molecular breeding – and our other technologies to the genetics we acquired and we find ourselves in corn, when we go head-to-head against the market leader Pioneer we win 83% of those side-by-sides today.

You might ask, what does that have to do with cotton? We believe we can apply those same sciences to cotton. And so in August of last year, we announced our intent to acquire Delta and Pine Land – a company rich in tradition, history and commitment to American cotton. We believe that with a combination of what they’ve been able to accomplish with our science and our technologies, we can do for cotton what we’ve been able to accomplish for corn. So, given the opportunity, we think that we will bring new, better products to the market faster than ever before.

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Trent Haggard
Marketing Manager, Case IH
Cotton Harvesting

J. Berrye Worsham
President and CEO of Cotton International

Roger Haldenby
Plains Cotton Growers, Inc.

Dr. A.O. Cleveland
Mississippi Economist

Ray Young
Texas Producer/Consultant

Alan Helms
Chairman of the National Cotton Council

Dr. Carl Anderson
Texas Economist

Jim Zimmer
Vice President,
U.S. Branded Business for Monsanto