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PCCA celebrates another year of new record results in many areasTexas Plains Cotton Cooperative Association announced recently during its 55th annual stockholders meeting in Lubbock that it will make additional cash payments to members totaling $31.3 million. These payments consist of $15.2 million in cash dividends, $5.8 million in stock retirements and $10.3 million in retirement of per-unit capital retains. Aided by near-record cotton production, PCCA's net margins totaled $32.8 million, making fiscal 2008 the third best year in the cooperative's history. However, the size of the crop was in doubt even as harvest approached. With spring rains and cool weather continuing through the early summer, uncertainty about finishing the 2007 cotton crop was a major concern. "Everyone agreed we were going to need a perfect fall in order to realize the potential of what was beginning to look like another warehouse-buster," said PCCA President and CEO Wally Darneille. "Perfect fall weather was exactly what we did get, and Texas, Oklahoma, and Kansas produced almost 8.6 million bales, the second largest crop in the region's history. Throughout the season, PCCA's marketing efforts remained on a steady pace." Despite an unprecedented upheaval in the cotton futures market beginning in March, PCCA was unaffected by the sudden rise and fall of futures prices. "Fortunately, our marketing department weathered the storm without any problems whatsoever, and we actually made large sales at the best equity prices of the year during that upheaval," Darneille said. "We did not have significant short futures position in place at that time and, therefore, did not face the huge margin calls others had to cover," he added. "Our banks tell us that the cotton trade as a whole lost at least several hundred million dollars in equity in the first half of 2008. Some did fail, and others drastically changed their business models to limit their risks." PCCA employees were actively involved in industry efforts to enact changes which should help prevent the recurrence of an uncontrolled futures market. Meanwhile, PCCA maintained the goodwill of its customers by leading the effort to protect bale condition by storing the entire crop inside. "We purchased and leased additional warehouse space to handle the huge crop," Darneille said. "This entailed significant expense, but it paid dividends in protecting our members' cotton from weather. Our warehousing staff did a commendable job of working together with the marketing staff to coordinate the flow of cotton among so many locations with minimal disruption or additional expense." PCCA's Pool Divisions' combined receipts set a new record in fiscal 2008, exceeding the previous record set in 2005 by almost 20 percent. "The marketing staff not only rose to the challenge of selling their biggest pools in history in the face of a 10-million-bale U.S. carryover, but they also sold every bale before the end of the fiscal year," Darneille continued. "While competing pools suffered greatly from the market upheaval during the past season, PCCA avoided the huge margin calls others faced and continued to make progress payments throughout the year, while most did not. We also enter the 2008/2009 season with good initial cotton sales on the books which have effectively covered our overhead for the year," Darneille said. "Thus, each new sale will add to future progress payments." The Cooperative's Information Systems Department's continuous technical improvements also made it possible for PCCA to process a record 6.62 million individual bales of cotton with less than nine minutes of down-time. "Innovative services offered by cooperation among our IS Department, Marketing, and Warehouse Divisions bore significant fruit," Darneille said. "TELMARK also set new records for margins and volume, handling more than one million bales for its gin customers while providing important benefits to individual cotton producers. In spite of a $2.9 million loss due to a soft denim market, PCCA's Textile Division (ACG) produced positive cash flow by operating at over 90.5 percent weaving efficiency for the entire year. Most U.S. denim makers took significant down-time during the year, and some permanently reduced operations and employment. ACG was not immune to the economic fallout from the sub-prime mortgage crisis. "However, aggressive marketing and successful product development helped maintain relatively good sales volume," Darneille added. In fiscal 2008, sales of value-added fabrics represented 64 percent of ACG's total sales. This product mix resulted in an average price increase of 15 cents per yard compared to the previous year. In addition, the Textile Division launched an exciting new effort entitled SAFEDenim, (Sustainable, American and Friendly to the Environment), to simultaneously set the record straight about environmental stewardship and expand denim sales opportunities. This effort provides insight into the environmentally sustainable practices and technologies utilized by cotton producers and ACG. "Reaction among the industry has been positive, and this effort has added to the understanding of the 'total value proposition' offered by ACG," Darneille said. "We have made significant outreach efforts with our customers who produce jeans in this hemisphere. These efforts have helped increase ACG's market share, and we look forward to further growth in the upcoming year as response time and innovation in product development will help us put American denim back in fashion," he continued. In other business during the annual meeting, PCCA members elected Billy Eggemeyer as director from District Nine replacing the retiring Wendell Jones. Members also re-elected the following directors to the board: Larry Williams, District Eight; Curtis Jensen, District 10; and Steve Bauer, District 11. 10/20/08 Date: 10/16/08
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