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This year’s struggling cotton crop − amid an unwavering drought and economic hardships with the rapid rise in production costs − could impact the regional economy in a major way, with estimated net losses of more than $1 billion.
Darren Hudson, who serves as the Combest Endowed Chair of Agricultural Competitiveness at the Texas Tech Department of Agricultural and Applied Economics, estimates that the High Plains and parts of West Texas will, at most, produce about 2 million acres of cotton this year − slightly less than half of last year’s 4.5 million acres − and that number continues to sink.
With the High Plains and Rolling Plains region producing between 5 and 8% of the global cotton crop, Hudson said this loss is roughly a 3% dip in total global production.
While many cotton farmers are unlikely to see the same paycheck they saw with last year’s crop, which landed above the 10-year average in total acreage, Hudson notes that farmers with crop insurance will fare far better than those without. Earlier this month, he co-published a study that details the regional economic benefits of crop insurance during drought.
“We’re probably approaching 65 to 70% of abandonment,” Hudson said. “Farmers with crop insurance will only experience about a 35% (financial) loss − that’s still pretty substantial.”
In May, the Agricultural and Food Policy Center with Texas A&M University released a report that focuses on the economic impact of higher crops and input prices on the agency’s representative farms around the nation. According to the report, the 13 representative cotton farms − seven of which are in Texas − faced an average reduction in net cash farm income of $716,000 from 2021 to 2022 due to this year’s high abandonment and substantial input costs.
Although fertilizer prices have gone down since AFPC published the report, and the projected commodity prices have increased from its estimate of 87.1 cents per pound to $1.13 per pound (the most recent December futures price on Aug. 18), Hudson said the general idea is still accurate, and most cotton farmers will still see a significant financial loss.
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“Looking back at those numbers, they’re sort of irrelevant,” Hudson said. “I think the general statement that (the report is) making is still true. People are looking at that rise in price and think that farmers are getting rich. But the reality is, the margin probably actually got tighter. In other words, production costs have risen very rapidly.
“Those that have managed to keep the crop through the year, and then into harvest this fall, are not going to make a ton of money. We had huge losses,” Hudson added.
With a regional production loss of about 65% − which he determined is the most-likely scenario − Hudson said the region could face a $2.1 billion loss in total economic activity and more than 17,100 job cuts across the region. Even with crop insurance, he estimates that the region will see a total loss of $1.2 billion and about 9,200 job cuts.
“We could be losing a billion dollars of regional economic activity across the High Plains,” Hudson said. “That (crop) failure is such an important component to the regional economic system. When we say $1 billion, we’re talking about its impact on restaurants, car dealerships; any place that money usually filters through system will disappear.
“That has an impact on employment — all kinds of things. So, it’s pretty, pretty significant,” Hudson added.
