Fraud Suspected in Financial Havoc in Texas Cotton Pools
February 22, 2011 Tracey Griffith, a cotton grower in Whiteface, TX, isn’t quite sure who or what to attribute his losses to this year in the cotton market. But by his estimates, due to under-deliveries, his participation in the West Texas Pool comprised of Beltwide Cotton Cooperative Members cost him somewhere in the range of $300,000.
“There are a lot of disappointed farmers. We’re going to end up taking about .68 cents a pound on our cotton. I would’ve been happy with .80 cents or .78 cents,” says Griffith.
“Fraud looks to be the biggest part of it.”
While nothing has been proven, sources indicate that some farmers may have reneged on their previously signed contracts, choosing instead to gin their cotton elsewhere and cash in on record-high new crop cotton prices.
A letter signed by Allenberg Cotton Company’s Chuck Hilboldt indicates that the company suspects foul play among some of the West Texas Pool participants.
“In this particular case it is not reasonable to attribute Beltwide under-deliveries strictly to lower yields. In its recent production release, USDA reported ginnings in districts 1S and 2S (the primary regions supplying cotton to Beltwide) are above the previous month’s production figure. We believe there is, but cannot yet prove, incidence of producers in your coop who have engaged in deliberate under-delivery,” said Hilboldt in a letter addressed to Beltwide Cotton Cooperative Members dated February 14.
Regardless of the reasoning, Griffith says the under-delivery will affect many growers in the Southwest this year.
“We’re going to lose about $300,000. Everybody who’s in our gin, which is probably 30 customers, will be affected. That’s just our gin. No telling how many farmers in all will be affected by this,” says Griffith.
Griffith says he isn’t ruling out simple mismanagement on the part of the merchants who handle the pools he belongs to. He says he plans to attend meetings in late February and early March with representatives from ECOM and his cooperative to help bring the situation to light.
For their part, cotton merchants have been steadfast in pursuing any claims of farmers who have engaged in deliberate under-delivery.
“Allenberg Cotton Co. fully understands the gravity of this year’s situation. The pool results for 2010 are not in keeping with past results, and for that we apologize,” said Hilboldt in his letter.
Growers like Griffith, who will bear the brunt of the financial burden, have little sympathy for anyone – merchant or farmer – at the root of this problem.
“If there are guys out there who took their cotton somewhere else when they had already signed a contract, I hope they prosecute every one of them,” says Griffith. “They cost me and my family money. I honored my end of it. To me, its thievery if you took your cotton and sold it somewhere else,” says Griffith.
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