Operational costs for cotton ginners continued to move upward in 2004, although many gins managed to offset some of the increases by ginning more bales.

In a survey conducted by Thomas Valco, USDA Agricultural Research Service, Stoneville, Miss., the average per bale variable costs for participating gins was $20.22 per bale.

That compares to $18.64 in a similar study he did for the 2001 ginning season.

Valco, who spoke at the Southern Cotton Ginners Association's summer conference at Biloxi, Miss., said average variable costs for the 2004 crop ranged from a high of $36.25 per bale to a low of $11.06.

“The highest cost increase from the 2001 survey was 15 percent for electricity and 45 percent for dryer fuel,” he said. “Labor cost per bale was slightly less, while costs for bagging and ties were slightly more.”

Electricity use averaged 42-44 kilowatt hours per bale, at an average cost of 8.1 cents per kWh.

Variable costs include labor, both seasonal and full-time, bagging and ties, repairs and maintenance, drying, and electrical costs.

While variable costs represent only about half the cost of ginning a bale — fixed costs add about that much more — they represent the area over which ginners have opportunity to try and achieve reductions.

Gins with increased annual volume were able to reduce their variable costs, Valco said.

“Those with an annual volume of 40,000 bales or more per year had an average variable cost of $14.77 per bale, while gins averaging less than 15,000 bales per year had an average cost of $24.14.”

In the Mid-South states, 270 gins produced 6.9 million bales from the 2004 crop.

The average number of bales ginned for survey participants was 32,206, an increase of 11 percent from Valco's 2001 study.

The 2004 U.S. cotton crop was the largest on record, producing 22.6 million running bales, an increase of 27 percent from 2003.

“The crop was ginned by 896 operating gins over a nine-month period,” Valco said. “The season provided many challenges to ginners — an extended ginning season, high moisture cotton, high energy costs, and low seed prices.”

Cottonseed production was a record high 8.24 million tons, up 24 percent from 2003. Sales to oil mills accounted for 55 percent of the cottonseed, with the remainder going for seed, feed, and other uses.

Valco said ginners are encouraged to use the data from his survey in evaluating their own costs. “If you're under the averages, that's good; if you're over, you need to ask why.”

A ginning cost worksheet is available on the USDA/ARS Office of Cotton Technology Transfer and Education Web site: http://msa.ars.usda.gov/gintech, or just do a Google search for “Gintech” and the link will appear. Other information related to ginning can be found on the Web site.

“Gins are looking for every opportunity to increase their bottom line,” Valco said. “Many are doing it by increasing capacity and volume, or offering additional services such as warehousing and marketing.”

And, he said, they're doing it through reductions in operating costs attained from automatic tie systems and other labor-saving equipment.

Valco said he will continue periodic surveys of ginning costs in order to document trends over the years.

Members of the Louisiana, Mississippi, Tennessee, and Arkansas-Missouri Ginner Associations participated in the conference.


hbrandon@primediabusiness.com