No segment of California and Arizona agriculture today is free of serious financial struggles, except maybe dairymen. A bookie could do well making the rounds of coffee stop taking bets on who will be the first to go down and the last operation standing when 2001 is over.
Travel the Far West and ask farmers how they are faring and they’ll say not well. More than likely you also will hear the name of a Kings County, Calif., farm mentioned with a sense of admiration as farmers talk about their plights. Westlake is its name and besides being one of the largest farms in California, the Howe family made a decision early last spring that continues to reverberate through the West.
Westlake decided NOT to grow one acre of cotton this season. The Stratford, Calif., farm went from 15,000 acres of cotton averaging the highest yield in the farm’s history last season to zero — nada — zilch — not one acre of cotton and people continue to talk about it.
More than a few other cotton producers wish they had made the same decision — and rice growers, and corn growers, and sugar beet growers, and tomato growers — and —
No one forced Westlake to mothball its gin and stop growing cotton. There was no government bailout, no flood, no looming insect horde — just no profit in cotton.
It has proven to be a profoundly prophetic decision.
Westlake’s managing partner Ceil Howe Jr. has become the Smith-Barney of California cotton farmers — all row crop farmers for that matter.
The Howe family decision spoke volumes early last spring when the expansive Kings County, Calif., operation went from being one of the state’s largest cotton producers to a non-cotton farmer.
Ceil; brother David; son Ceil Howe III; cousin John felt anything but wise late on a Monday afternoon last February when they stood before the family farm’s 80 employees — some with three decades of employment at Westlake -- and told them 65 would be picking up their last paychecks the following Wednesday because Westlake was ending a cotton-growing tradition dating back a half century.
It was a decision that tore at the hearts of the family farming operation. “I could not sleep before that meeting, and I still can’t sleep now when I get to thinking about it,” admits Ceil Jr.
The Howes’ decision roared through the Western cotton industry like a prairie wildfire. It was a blast furnace of reality most everyone was facing. Westlake was one of the first and few to face it head-on by dropping cotton completely as a summer crop. Most others planted hoping for a profit.
It also was admittedly a curious decision. After all cotton was 50 cents a pound then. Planting season was a month away and everyone knows a wet spring could reduce acreage and bolster price.
Experts were predicting a cotton price rally, and a government emergency bailout was almost certain.
Regardless, Howe said there was too much uncertainty ahead. Energy prices were very high, and no one knew which way they’d go from there. Westlands Water District was being promised only 15 percent of its allocated water supply; the state water project only 30 percent. Westlake was faced with running wells all summer, and no clue what the energy costs would be to do it.
Howe said the numbers for 2001 cotton were all red, and the bankers were not happy about cotton. It took the Howes three days to decide not to grow cotton, something that has not happened at Westlake in more than five decades.
“What made it even worse was that we were coming off our best crop ever—a 1,344-pound average yield on 15,000 acres,” said Howe.
“We might have found financing elsewhere…we might have been able to grow a little cotton and go somewhere else to gin it.
“But, why grow it to lose money,” he said. “It makes more sense to buy cotton futures and options than to produce it — buy a call at 40 and run it to 65, sell it and make 15 cents per pound.
“Makes better sense than to plant cotton in a 40-cent market and hope it will get to 65 so you can break even,” said Howe.
Grow to lose?
“We got out of the cotton business because it does not make sense to grow something to lose money,” said Howe Jr., the third generation of the Howe family to farm on the West Side of the San Joaquin Valley.
Fast forward to July. Cotton prices since February dipped below 40 cents per pound on New York Futures. They’ve rebounded, but are still below February levels. California’s energy crisis has become a full-blown nightmare. Water allocations were only imperceptibly bumped up since February.
And the Howe family has become the smartest cotton farmers in California. The 56-year-old Ceil is the most visible of the Howe family and is constantly reminded of his family’s reputation when he is around his peers. When a fellow producer shakes hands with Ceil these days, it’s almost always accompanied with a smile of envy.
Howe doesn’t profess to the gift of prophecy. “It was dumb luck. If cotton had gone to 80 cents, we would have been the dumbest cotton farmers in California.”
Others are trying to figure how to get out of their 2001 Acala or upland cotton crop without seeing their farms sold on the courthouse steps. They can only wish they were in Ceil’s boots.
Farming is like any business. There are successful producers and there are those who go broke. And usually both happen with little fanfare or notice.
Westlake is not your run-of-the mill farm — even by California standards. The Howe family farms more than 60,000 acres in the Tulare Lake Basin. Westlake has grown as much as 25,000 acres of cotton and is one of Calcot’s largest growers. One year Westlake delivered 57,000 bales of cotton to the cooperative.
Westlake has been an innovator for decades. It developed its own varieties; was an early day adapter of 30-inch cotton and harvested it with a stripper; was one of the first to grow Pima cotton in the San Joaquin Valley; successfully implemented wetlands programs to mitigate the impact of drainage water on waterfowl; quadrupled cotton yields on some of the toughest, saline SJV farmland through drainage and reclamation, and operated one of the most modern gins on the West Coast.
And, Westlake was the 1995 Far West Cotton Foundation/Western Farm Press High Cotton Award winner for its leadership and stewardship.
Wheat and alfalfa
“This year we are farming only 11,000 acres of winter wheat and 2,000 acres of alfalfa hay,” said Howe.
Most of the remainder is fallow, although, Westlake has leased a small acreage to others to produce cotton and is working with a Lemoore food processor to dispose of processing tomato wastewater, using it to grow silage corn.
“We also are working on selling some water and are looking at selling some land to southern California municipalities for composting biosolids and green waste and spreading it on our land,” Howe added.
Westlake is also working on placing dairies on its land or getting into the dairy business itself and growing silage corn. Howe’s also dealing to sell land and lease it back.
“I have not quit. When you quit, you die. There are ways to survive, and we are identifying them — it is just a matter of going forward.”
His goal is to reduce debt incurred by Westlake in the 1980s followed by several low-yielding years. “You can survive if you can reduce debt, and that is what we are trying to do right now. It is no secret that debt is what will bring you down today.”
In the meantime, the “For Sale” sign continues to be on Westlake where it has been for four years, admits Howe.
“We have just quit farming cotton and I don’t see us getting back into cotton next year either. It is going to be tough for cotton to survive here. Row crop farming in California is going to change dramatically over the next five years,” said Howe. Go down the list of row crops and none offers a profit today.
It will take a 70-cent cotton futures market in January to get an appointment with a banker to talk about financing in 2002. And, Howe says the banker will only see the smaller grower not faced with severe government payment limitations or without a heavy debt load.
“You can survive on 2.75-ton wheat at the ugly price of $120 per ton. But, you are going to have to keep your input costs real low and not carry much debt,” he said.
Of course, alfalfa hay can be profitable as it is right now and as long as dairymen remain profitable.
However, for cotton Howe said it would take either a change in the U.S. monetary policy or some heavyweight government support without payments limitations for it to survive on the vast West Side of the San Joaquin Valley.
America’s strong dollar has shut the export door for American cotton, and he does not expect that to change. “The administration is committed to the strong dollar, which is Bush’s veiled way of subsidizing foreign governments,” Howe said.
Dollar most hurtful
American agriculture has been hurt most by the strong dollar. Unlike American manufacturers who can go overseas to make products, U.S. farmers cannot move their operations.
“However, from what I have been reading, a lot of American businesses are starting to realize what farmers have for several years — you cannot sell overseas with a strong dollar,” he said.
Howe is as candid about the plight of Westlake as he is with most subjects. Howe believes unless the federal government realizes that American agriculture is a matter of national security, farmers will continue go to out of business.
He is puzzled why the government allows banks, food companies and just about any business other than farming to grow by mergers.
“Why does a farmer have to remain small in the government’s eyes? Farmers should be allowed to become national and international like other businesses,” he said. Government payment limitations are only making farmers struggle.