Shipping cotton from West Texas to California or Arizona to ease storage problems during boom production years makes little economic sense to either High Plains' producers or warehousemen.
The idea comes from William Dunavant, retired CEO of Dunavant Enterprises, Memphis, Tenn. Dunavant, in an address to the recent Mid-South Gin Show in Memphis, said Mid-South or Southeast growers should be unhappy about the situation in West Texas.
“There is ample storage space in the country for this crop, though it's not in Texas,” he said.
Recently USDA allowed some easing of restrictions on outdoor storage, allowing the practice temporarily if the bales are properly covered and placed on dunnage to protect them from weather and to maintain quality.
The problem with shipping cotton farther west is cost, says warehouseman Jackie Wyley, with Lov-Cot Industries in Lubbock. “Warehouses don't want to store CCC cotton outside either, but we have to handle our producers' crops,” Wyley said. “They need a place to put it and we don't want it standing out in the fields.
“Shipping costs to California comes to about $20 a bale,” he says. “That's passed on to the grower.”
Wyley says it's not a new situation and he's a bit perplexed why merchants are making an issue out of it this year. “For some reason they're bent out of shape.”
Wyley was one of a number of warehousemen who received notices recently informing them they had to get loan cotton inside or stored properly outside.
“We have to put the bales on dunnage and protect with a dust cover,” he said. “We didn't have enough dunnage and we decided we could move the bales inside before we could get the required materials. We now have all the loan cotton inside.”
Also, warehousemen point out that only Commodity Credit Corporation (CCC) bales come under the regulation prohibiting outside storage. And not all West Texas CCC cotton is stored outside.
Storage regulations have been relaxed somewhat the last two seasons because of the record crops on the Texas High Plains. Dunavant said a reversal in governmental regulations means, “West Texas warehouses trying to ship cotton are getting behind every day, and this is going to (mean) even more congestion.”
Congestion results from two factors. For the second year in a row, West Texas made a record cotton crop, outpacing the region's long-term storage capacity. Even that large crop normally would move out of the area in a timely manner but transportation bottlenecks slow the process even further.
Hurricane Katrina continues to affect more than the Gulf Coast. Much of the truck fleet and containers needed to move cotton from one part of the country to another is tied up hauling freight into New Orleans and other Gulf Coast locations.
Kandice Poteet, executive vice president of the Texas Cotton Association, says reports indicate more than 25,000 trucks normally available to haul cotton have been diverted to FEMA use and into the Gulf Coast.
She says labor issues also add to the congestion. Warehousemen may not have adequate labor to move cotton indoors if they have the space. Some also would need three shifts to handle the volume of cotton on hand because of the record crop. That means extra expense and reduced potential for profit.
Poteet says TCA is working with other associations and government agencies to find solutions to the transportation and storage dilemma.
“Long-term,” she says, “increased warehouse space would help. But that's also an expensive investment.”
“And we don't have a big crop like this every year,” Wyley says.
Storing cotton away from the area also sets a risky precedent, warehousemen say. Tampering with the infrastructure in rural areas jeopardizes economies that may already be on shaky ground.
Non-compliance could mean losing license and having CCC cotton disqualified for the loan.
“That's not a permanent loss,” Poteet says. “Once a warehouse is back in compliance the license is restored.”