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BUSINESS & SEEDS: Mississippi Deltaís GE cotton crop canít weather economic downturn

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SOURCE: Lubbock Online, USA

AUTHOR: The Wall Street Journal, USA, by Joe Barrett


DATE:   29.11.2008

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TUNICA, Miss. - Volatile global commodities markets have King Cotton on the run in the Mississippi Delta.

Farmers like Brad Cobb have started to plant other crops, even though his family has raised cotton in the region?s rich soil since the Civil War. The crop grows very well in the warm climate, while others, such as corn, can be tricky. ?It?s the crop that pulls you through the droughts and the floods and the storms,? Mr. Cobb says.

But over the past two years, cotton prices haven?t kept pace with the surging prices of grains like corn and soybeans - as well as farming supplies like fertilizer and diesel fuel. Mr. Cobb and his family, who were farming cotton exclusively on about 13,000 acres in 2006, switched to other crops on all but 5,000 acres over the last two years. Next year, he expects to cut his cotton crop by an additional 25 percent.

The story is the same across Mississippi. Farmers harvested a historically low 360,000 acres of cotton this fall, down from 1.2 million acres just two years ago - the steepest drop of any big cotton-producing state. Nationally, farmers harvested 7.8 million acres of cotton, down from 12.7 million in 2006.

On Monday, economists at the U.S. Department of Agriculture predicted that global demand for cotton would drop 3 percent for the 12 months through July 2009, as China and other big textile makers are hit by the global economic slowdown. And late last week, Weil Brothers Cotton Inc., a Montgomery, Ala., cotton merchant for more than a century, told customers it would be winding down operations after a spike in prices in March left it with big losses. Weil and an affiliated company, Weil Brothers & Stern Ltd., based in Liverpool, England, plan to close by early 2010 after trading out of their existing positions.

The March price swing had already forced the U.S. unit of Switzerland?s Paul Reinhart AG, one of the world?s largest and oldest cotton merchants, to file for bankruptcy protection.

Part of cotton?s problem is that corn and soybeans, despite a recent drop in prices, are benefiting from new demand from developing nations and biofuels makers. Meanwhile, cotton prices are being held down by rising yields resulting from the spread of genetically modified cotton seeds. U.S. subsidies are also under attack from overseas trade officials, who say they foster overproduction. Brazil is moving to secure sanctions against the U.S. in its successful cotton-subsidy case before the World Trade Organization.

?We shifted to other crops because we had to, not because we wanted to,? says the 62-year-old Mr. Cobb, who has been farming since 1970.

Jim Pegram, general manager of the local John Deere dealership, says that most years he sold 20 cotton pickers for $300,000 apiece, but this year he hasn?t sold even one. Meanwhile, sales of combines for harvesting grain have picked up. ?We?re adjusting to it,? he says.

Cotton?s economic influence has actually been waning for decades. The advent of the mechanical cotton picker ushered in much bigger farms with far fewer laborers. By the end of World War II, hundreds of thousands of black farm workers had headed north in search of jobs.

Still, the recent shift out of cotton in the Delta is clearly visible and carries real economic consequences.

Before, most of the fields here in early fall appeared to be dusted in snow as white cotton balls peeked out through the dark green leaves of the cotton plants. But as W.W. ?Tutt? Sullivan, 63 years old, bounces down dusty farm roads in his white Ford pickup, he passes by acres of soybeans yellowing in the sun and brittle corn stalks awaiting harvest.

This year, Mr. Sullivan planted cotton on only 200 of the 6,000 acres he farms, down from 2,500 in 2006. He is unsentimental about the switch. Starting two years ago, farmers walking into their local banks to secure loans for the next planting season were told, ?You don?t need that much cotton,? he says.

Cotton gins here have been cutting back on hiring, and some have closed. The gins - large machines housed in metal sheds - separate the fluffy white cotton fiber from the hard seeds, which are then used as cattle feed or pressed into an oil that is increasingly in demand because it?s free of unhealthy trans fats.

Mr. Cobb, who also owns the 3-Way Gin here, says he used to employ 35 migrant workers for 10 weeks during the harvest. This year, with the gin?s production down to 23,000 bales from about 55,000 in recent years, he needed only 17. ?These people are like family. It was very difficult to let them go,? he says.

And the switch to other crops hasn?t helped Mr. Cobb sleep better. In 1997, the first time he went heavily into corn, he lost about 25 percent of his crop to aflatoxin, a poisonous chemical produced by molds that often afflict corn in the warm Delta.

This year, he spent about $1 million on new equipment and refurbished some grain bins to accommodate increased corn production. But wary of another catastrophe, he sold contracts on only half his corn when prices were high in the spring, in case he couldn?t deliver the crop.

He plans to keep his hand in cotton in case things turn around. ?It?s an amazingly resilient plant,? he says.



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