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The vulnerability of the cotton economy of the Llano Estacado

The economic risks in cotton production

During the late 1980s, the margin of profit decreased in cotton and only the good managers and operators have survived (Underwood, personal communication, May 1991). Many factors influence the returns on cotton production: selection of cotton seed varieties, planting dates, rainfall and availability of irrigation, accumulated heat units, fertilization and management systems, soil type, insects, weeds, hail and wind damage, first freeze date, cotton lint prices, machinery efficiency, processing costs, and agricultural support programmes (Segarra, Keeling, and Abernathy 1990). The climate is just barely suitable for cotton. The growing season is from 185 to 225 days long, which is considered comparatively short as growing seasons in some cotton areas around the world extend to nine months. Rainfall averages about 460 mm per year, also comparatively low (cotton is a monsoon crop in India), but, fortunately, approximately 75 per cent falls during the growing season from early May to mid-October. Nevertheless, rainfall is highly erratic temporally and spatially (the latter referring to the intensely local nature of storms). Irrigation relieves some of the risk of rainfall deficit, but it is expensive and the groundwater resource is non-renewable and depleting. In general, in years when precipitation is ample and timely, most producers do fairly well. When several years of bad weather occur, growers go under and lose their farms.

In addition to the weather and insects, growers are at the mercy of the international cotton market. Cotton has been traded internationally for over a century. In 1850, nearly 90 per cent of US cotton was exported, with earnings offsetting the costs of about two-thirds of all goods imported into the United States (Sanford 1990). In 1988, almost 40 per cent of US cotton was exported, with earnings offsetting the costs of less than 0.5 per cent of all goods imported into the United States. And yet, while the United States amassed a US$150 billion trade deficit, the US cotton trade generated a surplus of nearly US$2 billion. The profits of growers, once they have brought the cotton to market, depend upon the dollar exchange rate, cotton production in other countries, the import and export policies of other countries, existing surpluses or stocks worldwide, and the demand for cotton. When synthetic fibres are in fashion, demand for cotton declines, and farmers lose their market to big chemical fibre companies (e.g. Eastman Kodak and Fiber Industries). These are huge, well-financed, sophisticated, public and private corporations that develop, market, and technically support the products they produce. Demand is also age and income related, and is thus governed by changing demographics. Figure 6.3 illustrates the fluctuation of world cotton supply and demand during a recent 10-year period.

The United States produces over one-fourth of the world cotton crop. US cotton exports to Asia and Far Eastern countries have increased substantially during the past 10-15 years, whereas sales to Europe have declined (during the early 1960s Europe imported one-half of all US cotton exports). Most of the Llano cotton is grown for export. The international market trades in inferior-grade cotton more so than the domestic market. The US textile industry uses highly mechanized mills, which require superior-quality cotton, whereas most foreign mills, because they are more labour intensive, are able to use lower-quality fibre.

The industry has experienced several major market swings in the past decade, and the bottom fell out of the local agricultural economy in the early to mid-1980s. Sluggish regional and world economic growth, the heavy debt burden of many countries, the high value of the dollar, and the success of agricultural programmes elsewhere reduced domestic and export demand. Yields hit record levels and surpluses quickly accumulated despite planting-reduction programmes. Increased stocks depressed commodity prices and lowered farm income. Locally, irrigation costs continued to escalate and interest rates were phenomenally high. Costs of production in the south-west region (including the study area, Arizona, California, and the rest of Texas) cotton industry rose from US$200 per planted hectare in 1974 to US$603 in 1985 (Bednarz and Ethridge 1990, 375). For the United States in general, production costs increased from US$164 to US$400 for the same period. On the Texas High Plains, variable costs of production per kilogram in 1985 were 12 per cent above the national average, and total costs of production per kilogram of cotton were 24 per cent above the national average (Bednarz and Ethridge 1990, 391). In other words, the study area went from being a relatively low-cost production area in the 1970s to a relatively high-cost area by 1985.

Fig. 6.3 World cotton supply and demand (Source: Brown, 1990, 344)

Increasing costs of production are a result of decreases in yields, not simply the increases in input costs. Cotton yields in the area declined at a rate of about 11 kg per hectare per year between 1965 and 1985, although increases were recorded in 1987 and 1988. Yield declines appear to be due to long-range soil fertility and management problems as well as increased input costs (and thereby lower use of inputs) (Bednarz and Ethridge 1990).

A major factor in maintaining the farming economy of the Llano has been, and still is, the US government's involvement in financial support and planting area controls. Under the Commodity Credit Corporation Charter Act (15 U.S.C. 714), the US Department of Agriculture (USDA) administers various farm price support programmes to stabilize agricultural commodity markets and to control agricultural surpluses. These programmes, administered through the Agricultural Stabilization and Conservation Service, provide for commodity loans and purchases as well as price support and production adjustment payments to farmers. Participation in these programmes is voluntary and available to producers of programme crops - wheat, feed grains (barley, corn, grain sorghum, and oats), rice, and cotton. Only producers who participate are eligible for the income and price supports offered by USDA. Through the early 1970s, producers were guaranteed a good income from these programmes if the market or the weather were to fail them.

Since the 1970s, the United States has moved closer to a deregulated and unrestricted cotton industry, but continues to provide these essential income supports. The 1985 Food Security Act was designed to enhance international competition, reduce stocks, provide safety-net protection of farm income, control budget costs, and protect land resources. Although direct government payments remained substantial from 1985 to 1990, they did decline. The 1990 Farm Bill continues to deregulate the industry, while attempting to maintain the competitiveness of US crops. For example, a quota on imported cotton goes into effect if US cotton is uncompetitive in world markets for 10 consecutive weeks.

Other requirements of the 1990 Act include paid land diversions (planting crops other than cotton), land idling, and various resource conservation programmes to protect highly credible land (the Conservation Reserve Program or CRP), wetlands, and lands susceptible to water pollution caused by farming. The CRP was inaugurated in the 1985 legislation and continued in the 1990 Act. Nationwide, some 526,000 ha of cotton land were put into the reserve by the 1989/90 crop year (Chen and Anderson 1990). This elimination of land from production not only contributed to an increase in the price of cotton, but also had ecological effects. The Llano has experienced the highest sign-up rates in the country for the CRP, owing, at least in part, to the low margin of profit in agriculture in the area and the high susceptibility of much of the land to wind erosion.

Federal government support has continued to play an important stabilizing role. From 1980 to 1986 the farm value of cotton was insufficient to cover production costs. With government payments, however, cotton producers were able to earn a profit, after paying all costs, including returns to land and unpaid family labour. In fact, solvency of cotton farmers improved slightly during the late 1980s. On the other hand, income and cash flow deteriorated and a sizeable group of cotton farmers are facing negative net incomes (Chen and Anderson 1990).

The effects of changes in production costs (including higher irrigation outlays), greater competition in the global market, and government deregulation are a decline in the number of farms in the study area as well as declining farm income. Table 6.2 shows that the number of irrigated acres and the number of farms have declined since the 1960s. Figures 6.4 and 6.5 indicate the decline in value of crops sold in the study area after the mid-1970s.

Effects on the cities and towns

The declining agricultural base affects people in the cities and towns of the region in diverse ways. As farming families sink into poverty, multiplier effects spread throughout their communities. Substance abuse, crime, teenage pregnancy, and homelessness exist at rates frequently higher than national rates in the greater Lubbock, the largest city in the study area (Alliance for the Nineties 1989). According to an extensive survey of the general public and civic leaders of Lubbock, nearly one-half of the help and support agencies of the greater Lubbock area reported an increase in need for their services (Alliance for the Nineties 1989). Moreover, nearly 55 per cent of those help and support agencies believed that the services they do provide are not meeting the full extent of need in the Lubbock area, clearly a result of inadequate financial resources (Alliance for the Nineties 1989). Survey respondents noted the sharp difference in the need for and the availability of alcohol and substance-abuse treatment and rehabilitation facilities as the major problem. Most frequently cited was the lack of funding to provide these essential services (Alliance for the Nineties 1989).

Fig. 6.4 Dollar value of all crops sold (Source: based on data from US Bureau of the Census, Census of Agriculture)

Fig. 6.5 Dollar value of cotton sold (Source: based on data from US Bureau of the Census, Census of Agriculture)

Homelessness and hunger, once considered the province of urban America and never the heartland-farmbelt's problem (at least not since the Dust Bowl era), are increasing at rates that alarm the service providers of the Southern High Plains. The perception that hunger is not an issue in the parts of the United States that provide food for people all over the world prevents many people in the farm communities themselves from understanding the depth and breadth of the problem in their midst. The director of the South Plains Regional Food Bank, which serves an area approximating the study area, reports ever-increasing numbers of farm families requesting daily meals (C. Lanier, personal communication, May 1991). In one episode, a farm couple came into the Food Bank, reluctant but determined to seek food assistance. Their family had survived as long as it could on turnips. Farmers seldom set aside any land for family gardens; all land, essentially up to the doorstep, is intensively mono-cropped.

In all, the Food Bank distributed over 3 million kg of food throughout the Southern High Plains in 1990 (see table 6.4). By March of 1991, over 725,760 kg of food had been distributed (South Plains Regional Food Bank 1991).

Table 6.4 Food distribution by the South Plains Food Bank

Source: South Plains Regional Food Bank (1991).
a Food Bank director estimates 1 lb of food per meal. Therefore, the figure for 1990, 7.2 million lb, represents 7.2 million meals.

Homelessness among the farm and non-farm population is also rising rapidly - some local experts suggest the rate is higher than that nationally (C. Lanier, personal communication, May 1991). Again, the problem is greatly undercounted, officially. This undercounting is attributed in part to the transient nature of the homeless, and the large number of so-called "couch people," those extended family members, friends, and acquaintances who take up residence in already overcrowded homes. Additionally, many homeless are squatters in abandoned farmhouses, making them very difficult to count. One measure of the magnitude, however, is the number of calls received by the Lubbock Information and Referral service: requests for rent assistance, emergency shelter, and long-term shelter were the second-highest category of calls (D. Neugebauer, personal communication, May 1991).

A major contributor to homelessness, along with divorce, is unemployment and underemployment, whether in the farm or non-farm sectors (Office of Community Development 1990). Median household incomes in most of the Southern High Plains average about 60-70 per cent lower than the national average (see table 6. 5).

Table 6.5 Income statistics

Source: South Plains Association of Governments (1991).
a. Does not include New Mexico.

Table 6. 6 Principal economic activities as of 1987

Source: South Plains Association of Governments (1991).

Economic activity in the region is weighted heavily in the traditionally low-paying service and light manufacturing sectors (see table 6.6). In terms of the non-agricultural wage base, retail/wholesale and services account for 53.6 per cent of earned income (Texas Employment Commission 1991). Further, the largest producers of income in the Lubbock area are health services and Texas Tech University. In terms of employment prospects, clearly the jobs increasingly are either in low-paying service positions or in highly skilled professional positions. This does not bode well for an increasingly displaced farming and agriculture-related workforce.

Research also indicates that, within the farming community, suicide is a growing response to the pressures of mounting debt, shrinking markets, and diminishing futures. A 1986 report chronicled the rise of suicide across the farm belt, focusing on the strong link between financial troubles and suicide among male farmers (Robbing 1986). A more detailed study, carried out over 10 years by the National Farm Medicine Center, found a suicide rate for farmers and ranchers 70 per cent higher than among adult white males in the general population (Gunderson 1991). Clearly there are far-reaching impacts of the shrinking agricultural community that are not captured by changes in yield data and market rates. The further impacts of the decline in agriculture also point to the increasing isolation of farm people, a troubling echo of the social concerns addressed by the Great Plains Drought Area Committee's Report of 1936. As the community shrinks, the support services available to a troubled family also shrink, and the growing loneliness and isolation can only exacerbate a difficult, and apparently more frequently overwhelming, situation.

Other data also point to the increasing need for social services in the farm communities. Records kept by an information and referral clearinghouse hotline reveal substantial increases in the number of calls seeking emergency income assistance, food, and housing information. This reflects a general increase in calls for all types of assistance (D. Neugebauer, personal communication, May 1991).

Members of racial and ethnic minorities, and women, have the most to lose with the erosion of the agricultural base. African-Americans, who represent less than 10 per cent of the Southern High Plains population, have traditionally been tenant farmers or field labourers if they are involved in agricultural activity at all. And unemployment rates for the non-farm populations hover at double the rates for Anglo men (Texas Employment Commission 1990). The likelihood that these people, already at the margins of society, will find a means of living in the area is small.

Southern High Plains communities were organized around a single activity, farming. With the diminishing importance of farming, a vacuum has developed in the regional economy. New capital to generate growth and employment is non-existent, since the banking crisis arrived in Texas and the Southwest several years prior to the rest of the nation. And so, as farming capital, both for investment and as profits, shrinks, the entire economy shrinks (see table 6.7). This means, in real terms, erosion of schools and hospitals, roads and public services, as well as greater isolation and increasing poverty. Some people have migrated, but most people cannot afford to leave the Southern High Plains at this time of national recession and local crisis.

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