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MISSISSIPPI 100 — Staplcotn revenue benefiting from combination of more acerage and better yield

HANK REICHLE

HANK REICHLE

By BECKY GILLETTE

Greenwood’s Staple Cotton Cooperative Association (Staplcotn), the oldest and one of the largest cotton marketing cooperatives in the U.S., has gone up from the seventh largest private company in 2015 to fourth largest in 2016 in the Mississippi Business Journal list of the top 100 private companies based in Mississippi. Revenue jumped from $844 million to $967 million.

Because of the timing of Staplcotn’s fiscal year, the figures are actually for the 2014 crop year compared to the 2013 crop year, said Staplcotn’s Executive Vice President Hank Reichle. He said the rise in revenues for fiscal year ending Aug. 31, 2015 — the most recent figures submitted to Mississippi Business Journal — over the prior year are primarily attributed to more acreage and better yield.

“In several cases, Southeastern states set all-time records in terms of yield,” Reichle said. “In 2014, Mississippi, for example, produced 1,232 pounds per acre. That eclipsed the previous record of 1,203 pounds per acre set in 2013. The 2014 crop year was really a good one.”

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Of course, cotton is a cyclical business and things can change quickly. Reichle said the revenues for the 2015 year (fiscal year ending Aug. 31, 2016) are off from the 2014 crop year due to a combination of lower prices, lower acreage, average yields and adverse harvest weather in some of their producer areas, which all led to lower revenues.

“When you turn attention to the 2016 crop (the one being harvested now), we expect revenues will increase again,” he said. “However, those revenues will not be available for reporting until the fall of 2017.”

Reichle said the 2016 growing season started off wet, but quickly turned dry in May and June. Fortunately, July, which is a critical period during fruiting, was good.

“Too many consecutive days of rain and cloudy weather in August were not exactly what we wanted, but rarely does the weather act just right,” he said. “Had we not had too much rain in August, we believe we would have once again seen a record in Mississippi. Unfortunately, some areas such as the Carolinas and across the region in Louisiana have received too much rain during the harvest season, so yields in those states will be less than farmers were hoping to attain.”

templateSo far, 2016 harvest yields are better on balance than 2015.

“When you look at the situation as a whole, yields for the Memphis/Eastern region are average or slightly better than average,” Reichle said. “As you recall, we had a lot of rainfall and cloudy days in August that had a negative impact on yield potential. Plants shed some of their fruit or bolls at the bottom which were lost due to rot or hard lock. However, as Mother Nature often does, things changed quickly. Just before it became catastrophic for most farmers, the weather turned and improved into one of the most remarkable harvest seasons on record. High temperatures, lower humidity and sunny days helped aid the harvest get back some of that lost yield potential in August. Also, the great harvest weather has helped improve the quality and thereby the premiums growers will receive for their crop.”

Cotton acreage rebounded in 2016, which was mainly attributable to alternative crops’ returns not being as attractive in previous years. Reichle said growers who have not grown cotton in recent years are hearing that cotton yields have improved and they want to diversify back into cotton.

“It is early, but we expect you could see more cotton acreage in the Memphis/Eastern territory next year,” he said. “Some areas in our trade territory might not change much, but we are likely to see an increase in cotton acres in the Mid-South.”

Reichle said Staplcotn continues to be positioned very well to compete in the worldwide cotton markets.

“We have an excellent membership who is loyal to the cooperative concept,” he said. “It is also a membership that is looking to add back some cotton acres in the face of better yield prospects in cotton and lower returns on competing crops. At the same time, we are seeing good demand from both U.S. textile mills and mills abroad. So, we have good homes for the larger crop this year and prospects look good going forward with China growing much less cotton than they are consuming. Once the Chinese stockpile is worked down to a less burdensome level, we believe China’s importance as a major customer of U.S. cotton will be restored.”

Reichle said it is already starting to see a healthier Chinese cotton industry and more demand from China. U.S. cotton exports are projected to increase by nearly one third more than this past year and exports to China will certainly increase.

“Staplcotn will be participating in those increased sales to the export market,” he said. “The excellent quality of cotton produced this year will be attractive to buyers globally.”

The U.S. Department of Agriculture projects that the world cotton stockpile will decline about 10 percent in 2017 from 2016. The USDA says global cotton stocks could drop to their lowest level since 2011-12 as China continues to reduce its surplus supplies.

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