What is in this article?:
• Finding a place to store and efficiently transport cotton bales to waiting ships bound for overseas ports may not be as easy this year as it has been in recent years and likely not as economical for growers and ginners.
When cotton is shipped from a gin to warehouse, there is a freight fee, which is most usually paid by the gin. In years in which there is competition among warehouses for cotton bales, the warehouse sometimes pays some or all of the freight.
There is also a receiving fee also typically paid by the gin. Again, in years in which there is competition for cotton bales, some or all of the receiving fee is often paid by the warehouse.
Needless to say, if Mother Nature provides needed late season rains, there will be plenty of cotton in the Upper Southeast this year. Most, if not all of the freight and receiving fees will be paid by the gin and at least in some part passed along to the grower.
Cotton warehouses are required by law to have at least 4.5 percent of their warehouse inventory available to ship each week. In the Upper Southeast ginners or growers pay from $1 to $5 per bale per month for storage.
From the warehouse owner’s perspective, if he has a 100,000 bale capacity filled on day one at an average cost of $3 per bale per month, keeping those bales on the floor can make him a lot of money.
If he has to ship 4.5 percent per week, he can keep about 80 percent an extra month, making roughly $240,000 more than he would have made had he shipped 100 percent of his inventory in a month.
Warehouse operators say it doesn’t work exactly like that, and rightly so. Most recognize their livelihood relies heavily on keeping overseas buyers happy and delaying cotton shipment isn’t going to make either domestic or foreign buyers happy.
Not being able to trade on its long-standing reputation of providing high quality on a timely basis is likewise a threat to the future success of the entire U.S. cotton industry.
The longer a bale of cotton sits in a warehouse, the more money a warehouse owner makes from that particular bale.
However, if a warehouse gets the reputation of being a ‘bad’ warehouse, buyers are going to look to ‘good’ warehouses to buy their cotton.
In the long-run, making extra money from a bale of cotton could put the warehouse out of business as ginners, growers, and buyers all look for other places to house their cotton.
The cotton buyer, often called the merchant, has a commitment to an end-user. He needs to be able to tell that end-user with confidence precisely when cotton will be delivered to a particular textile plant.
The large quantity of cotton that will be moving through gins in the Upper Southeast this fall concerns ginners, warehouse managers and buyers. A common concern is that cotton will be stored in facilities that don’t have the capability and/or the desire to get cotton out quickly.