Lubbock-based Plains Cotton Cooperative Association (PCCA) today announced total net margins of $25.8 million during fiscal 2014-15. The announcement was made during the cooperative’s 62nd annual meeting of members in Lubbock. Further cash distributions to PCCA members in Texas, Oklahoma, Kansas, and New Mexico that will be completed this month are comprised of $12.2 million in cash dividends and stock retirements of $5.2 million.
“Added value is the driver for everything we do,” said PCCA President and CEO Kevin Brinkley. “We strive to add significant value to our members’ cotton every day by creating and providing a full portfolio of marketing-related services to cotton producers in Texas, Oklahoma, Kansas, and New Mexico, and every division of PCCA contributes to this goal,” Brinkley said. “Our marketing team once again faced a very challenging year as world markets began to exact a toll on cotton prices that made managing the marketing of our pools a minute-by-minute job.”
The challenges noted by Brinkley included the unprecedented huge stockpile of cotton in China, Turkey’s unfounded anti-dumping investigation of U.S. cotton suppliers, and the emergence of India as the world’s largest cotton producer.
In early May 2014, the December futures contract at the Intercontinental Exchange (ICE) was trading in the low 80-cent range on continued drought concerns in much of PCCA’s trade territory, but significant rainfall returned to the region and boosted the crop outlook. By September, cotton futures prices had fallen more than 20 cents per pound and would continue to trade in a narrow range of 65 to 70 cents per pound for much of the remaining fiscal year. Also in September, the adjusted world price (AWP) for cotton fell below USDA’s base loan rate of 52 cents per pound for the first time since November 2009. Marketing decisions became more complex as the lower AWP created a marketing loan gain (MLG) or loan deficiency payment (LDP), and PCCA had to adjust its marketing strategies.
“Our marketing team successfully navigated these and other challenges on behalf of our members to generate added value for their cotton this year,” Brinkley reported. “One of the critical elements of this success was to be the supplier of choice, and I can report that 83 percent of our cotton was marketed to customers who view PCCA as a long-term strategic sourcing partner. Consequently, our pool members received more than $124 million above the Commodity Credit Corporation (CCC) loan.” PCCA staff also monitored the cooperative’s cotton inventory to take advantage of the LDP in order to put more money in members’ pockets, and the Marketing Division’s merchandising efforts added $380,000 to the bottom line.
A significant amount of time also was invested by PCCA’s administration and grower services staff to monitor payment limits and adjusted gross income provisions of the 2014 farm bill when MLGs and LDPs came into play to help members avoid potential problems. PCCA’s Warehouse Division received the fourth largest volume in its history and required adjustments to storage techniques and flow practices to handle the crop.
“Each time we were asked, we met or exceeded USDA’s shipping standards this past season,” said Brinkley, “and we will continue to look at new inventory methods to help enhance revenue and improve performance to our business partners.”
Another revenue source for PCCA is the gin bookkeeping services it provides to local cooperative gins. During fiscal 2014-15, these services added more than $800,000 to PCCA’s bottom line.
“We will continue to stay true to who we are and to our mission, and we will reach out to the next generation of producers, and with their help, continue this uniquely successful business model,” Brinkley continued. “We will continue to be innovative in marketing and services to ensure that we are the preferred supplier of cotton around the world. ‘Grounded in tradition, invested in your future’ is more than a slogan. It captures the ideals of how we operate this company.”
In other business during the annual meeting, PCCA members re-elected the following directors: Lexie Fennell, District 3; Eddie Smith, District 4; and Charles Macha, District 5.