Not having any clear theme for this column it seemed appropriate to title it “Odds and Ends” and just update you on several items of interest. First, the difference between the kind of year we closed out on June 30 and the upcoming year we are facing could not be much broader.
It appears that when the audit is finally completed on last year’s business, it will show record margins for the company. All divisions had strong profits. We handled a record number of bales through our system with total coop receipts of over 2.9 million bales. Combined with the receipts of TELMARK, our non-coop subsidiary, we had receipts in excess of 3.3 million bales; a total which is something over 18 percent of the U.S. upland crop. Obviously, this record volume contributed to our successful year.
We were also aided through the utilization of the competitiveness provisions of the 1996 Farm Bill. While the debate rages about what the impact will be when the Step 2 money is all spent, the fact remains that at current payout levels, the budgeted amount will be gone by the end of this calendar year. When that occurs, somehow the lower prices around the world and the higher prices in the U.S. are going to have to come together.
Whether that means our prices are going down or world prices are coming up is something no one can predict with certainty. However, it is safe to say that we are going to experience a different marketing scenario next year than we had this past season. How much different remains to be seen.
Obviously, the crop we will handle next year will be one of the smallest in some time. It could be as small as half of what we handled a year ago, and no part of our trade territory is exempt. Our warehouse division in Sweetwater, TX, received a record volume of over 397,000 bales last year. This coming season they will likely get less than 100,000 bales. That kind of says it all from a volume standpoint.
Our record mill option participation last year totaled over 2,064,000 bales, which was about 470,000 bales over our previous record. Even though we will record an outstanding year in the textile division, with that kind of volume, we probably will not be able to meet our $20 per bale cash payout target under our 20/20 Vision Equity Plan.
In contrast, that will certainly turn around next year. We are anticipating a very good start profit-wise in our mill division this year and fewer bales certainly will be delivered under this program, thus the per-bale earnings will be higher, which should help us get back on track with our earnings and cash payout target levels.
You might also be interested to know that in June, our first month of operation, our new Mission Valley Fabrics Division posted a nice margin. While we may not do that every month, it was nice to get off to a profitable start in this new venture.
Unquestionably, this new year will present tremendous challenges for us as it already has for many of you. For our part, we intend to keep our eye on the ball and not lose sight of our goal “to add significant value” to your crop. In a tough year like this, please know that we are going to do our absolute best to accomplish that mission on your behalf.
Van May
