Barry Evans is a Texas cotton farmer facing a
severe drought.
This year from August of 21 to August of 2022 we
had about an inch and a half of rainfall.
Extreme heat and lack of precipitation forced the
fourth generation farmer to walk away from 75% of
his cotton crop.
And Evans is not alone.
Across Texas, farmers are expected to abandon
roughly 69% of cotton acres that they planted
earlier this year.
The Lone Star State accounts for about 40% of
U.S. cotton production.
It's been one of the harshest growing years
that we have ever seen historically, all the way
back to the 1950s.
And it's not just cotton farmers who are impacted
by the drought. Cotton gins where the cotton is
processed may be facing an even tougher time.
It's a tough year for the infrastructure of the
cotton industry, and we've got a product that
unfortunately, if we don't gin, we don't make a
lot of money. So we're we're at the mercy of of
the weather, as it were.
America's cotton production is expected to
be about 14 million bales in 2022, down 21% from the
previous year. Cotton prices, which surged in
the spring of 2022 following growing Chinese
demand, have since fallen amid economic uncertainty
and a strong U.S. dollar.
The cotton industry is facing other headwinds,
too, as consumers shift towards clothes made from
synthetic fibers like polyester and nylon.
Before the arrival of manmade fibers, cotton
really was king.
Cotton was widely accessible in terms of it
was affordable.
It was available all over the world.
The U.S. is the world's largest exporter of
cotton, sending the vast majority of the cotton it
grows abroad.
China and India, the top two cotton producers
account for about half of the globe's harvested
cotton. So what impact will the drought in
consumer preferences for synthetic fibers have on
America's cotton producers? Cnbc traveled
to Texas, the US's largest cotton producing
state, to find out.
Barry Evans is a cotton farmer in West, Texas with
three decades of experience. The
60-year-old says cotton is an ideal crop for this
region because of its drought tolerant qualities
and its ability to bring in a healthy return.
For our money, it's our best cash crop.
It returns us the most dollars for what we grow.
But an almost complete lack of rainfall meant
Evans was forced to walk away from a significant
portion of his 4,000 acre farm.
The drought could cost cotton farmers and related
industries in Texas $3.2 billion in 2022.
This drought has been one of the hardest.
We've had tough years before.
Crop insurance, which acts like car insurance,
provides some relief to farmers impacted by
natural disasters like drought or a loss of
revenue due to a decline in price.
But the insurance is costly.
A recent study found climate change had
triggered an increase in crop insurance payouts to
the tune of $27 billion between 1991 and 2017.
In a drought like this, crop insurance is a
lifesaver for us as farmers.
Rising input costs are impacting farmers as well.
This past year, our chemicals went up 2 to
300%. Our fertilizer more than doubled in price.
It is not just the lack of rainwater and rising costs
that are hurting cotton farmers. The Ogallala
Aquifer, one of the world's largest fresh
groundwater resources and a major source of water
for the state of Texas is being depleted.
The underground lake, which stretches across
eight states, could be exhausted in the next 80
years, due in part to farmers pumping
groundwater for irrigation.
The Ogallala Aquifer is running out of water.
We understand that we are every year progressing
more and more closely to to 100% rain fed cotton
production in this part of the world.
Declining water levels have forced cotton farmers
to convert much of their irrigated fields back to
dry land. In 2022, Evans grew 2,000 acres of cotton
on his farm, including 500 acres that were
irrigated and 1,500 acres that were not irrigated.
All of his non-irrigated cotton crops failed.
30 years ago.
I was 80% irrigated.
Today, I'm 15% irrigated.
So that's because the decline in the aquifer.
The Ogallala Aquifer, has become depleted to the
point that those acres have to be transitioned
into rain, fed or dry land.
But at that same time, new technologies, whether
it be in reading, irrigation technology,
crop production technologies, have allowed
us to maintain our ability to grow cotton in
this part of the world.
The U.S. is the world's top cotton exporter,
providing roughly 35% of the global market in
recent years.
However, like its farmers, Texas cotton gins
where cotton is processed are facing a substantially
lower output this year.
Last year's crop, the 2021 crop.
We for instance, our facility here gin 51,630
bales. It was a great year, second biggest year
that we've ever had. This year we're going to
struggle to get 10% of that.
Dan Jackson is the manager of Meadow Farmers Co-op
Gin in Meadow, Texas.
The Gin got its start in 1934.
Fewer bales harvested this year means less
cotton entering and leaving the gin.
Cotton exports are forecast to reach a seven
year low of just 12.5 million bales in 2022, on
almost 23% decline from 2017.
I had a crew here for right at three and a half
months last year.
We ginned that whole crop with one crew because we
couldn't find enough for a night crew.
This year we'll run 10 to 12 days.
And in addition to idle equipment and fewer
workers, gins have also seen other obstacles,
including higher input costs for items like
diesel for trucks and electricity to run
machines.
You have a year like this where you you know, you're
anticipating 60 to 70% loss of production.
Those gins don't have that flow through to
provide that service and generate revenue.
It forces them to be fairly creative in trying
to stay alive.
Advancements in transportation in recent
years and larger facilities have led to
consolidation among cotton gins.
There were 510 active cotton gins in the U.S.
in 2021, compared with 682 active cotton gins a
decade earlier.
Texas at the time, in 1907, that era had over
4,000 gins.
Today, we're in the two to probably 250 range, I
would think.
Cotton exports were valued at $5.7 billion in 2021,
compared with soybeans.
America's top agricultural export, which
was valued at $27 billion that year.
But how does Cotton make its way from the field to
the retailer? Harvested cotton is pressed into
round bales or modules in the field and transported
to a gin.
At the gin the bale is loaded onto a module
feeder where it is dismantled before passing
through a dryer to reduce moisture.
Cotton fibers are then separated from the seeds,
cleaned and pressed into bales of lint.
Lint bales are then sent to a warehouse where they
are stored before being transported by ship
overseas and then to a mill where they will be
processed into textiles and apparel.
Cotton seed is made into cooking oil or sold as
feed for dairy cows.
Nothing goes to waste out of the ginning process out
of this part of the cotton industry.
Cotton is then shipped back to the US, where it
is sold as shirts, jeans or towels.
One bale of cotton can produce more than 200
pairs of jeans or about 1,200 T-shirts.
The top export markets for US cotton include
China, Vietnam and Pakistan.
We're kind of unique in the fact that cotton as a
whole is exported overseas, 90% roughly of
raw fiber is exported to a market via Pakistan or
Bangladesh or Vietnam and China are some of our
largest markets.
Because we export now about 85% the tariff
policy in China has probably a bigger role to
play in US prices than even some of the
production factors that happen here in the US.
While drier conditions and a lack of water are a
concern for farmers, new varieties of cotton could
help future producers to maintain their yields.
Genetic improvements for cotton are going to be key
to maintaining our ability to produce cotton
in this region.
At BASF's breeding program in Lubbock, Texas
scientists and breeders work to create new
varieties of cotton that have better fiber quality,
produce bigger yields and are drought resistant.
Cotton is a perfect flower.
So what does that mean? It has male and female
parts in the flower itself.
So what we do, it's called emasculation, where
we will take off the male parts on one flower and
then we'll take the male from another one and
basically cross it.
And when you cross it, we then save that bowl.
And that bowl could make 20 seeds.
We then take that seed and we plant it out the
next year.
New variety development efforts have not only
maintained yields in this area, but they have
increased yields in this area.
From start to finish it takes breeders at BASF
roughly a decade to develop new varieties of
cotton. Seed development starts in the greenhouse
and moves to the fields where plants are mass
produced. The company works with roughly 200
growers to produce seed for commercial sale.
They'll go and blow it up.
They'll put it on hundreds of acres to get
enough seed to bag up and then to sell to the
growers.
BASF's Agricultural Division had revenue of
$8.4 billion in 2021, 6.5% higher than a year
earlier.
You know, 30 or 40 years ago, the quality of our
cotton was not that good in West Texas.
And today we grow some of the best quality cotton of
anywhere in the world.
We've just seen massive improvements through the
years and what A crops able to do with limited
irrigation and limited rainfall.
But the cotton industry's biggest threat might not
be from the lack of water. Consumer
preferences for synthetic fibers like lycra and
nylon are also impacting the sector.
Our biggest competition is synthetic fibers.
Polyester is our biggest competition.
In 2002, polyester overtook cotton as the
world's most commonly used fiber.
The synthetic fiber derived from petroleum
dries quicker is more stain resistant and
wrinkles less. The global synthetic fiber market is
expected to reach $98 billion by 2030.
The game really changed around the time of the
Second World War, when chemists from major
corporations, including DuPont, Monsanto, really
had started to perfect manmade fibers, also known
as synthetic fibers.
And that really totally changed the game in terms
of the role cotton played in the American wardrobe.
We've sort of hit the bottom and turned that
around in the sense that what we see now is a
little more retail demand for at least blended
products. And that certainly is bode well for
US producers in terms of net price.
We also have to remember that the rest of the world
is growing, too. Even though China produces a
lot of synthetic fiber, there retail consumers
have really started pushing for more cotton
based.
But while athleisure and yoga pants may have taken
over American fashion, cotton might be on the
cusp of a resurgence as younger consumers
gravitate to more eco-friendly fibers and
are more aware of the environmental impact
associated with synthetic fibers.
The U.S. is forecast to remain the world's top
exporter of cotton in 2032 with a 30% market
share.
What's really interesting is that while the
dominance of synthetic fibers simply cannot be
ignored, cotton really refuses to give up its
place as an important fiber in the American
wardrobe.
We'll continue to grow cotton here because it is
such a good crop for our environment. Every area is
limited in what they can grow and you grow what you
can wherever you're at.
And cotton is a good fit for us.