San Joaquin Valley cotton fields ready for harvest.
When a Co-op Dies
Long-time gin closes doors, one more casualty
of California’s shrinking cotton industry
By Catherine Merlo
Editor’s note: Merlo is a Bakersfield,
Calif.-based writer/editor with extensive
experience writing about cooperatives and
the issues that impact them.
arry Gallian grew up
with Visalia
Cooperative Cotton
Gin in his blood.
Gallian’s father served
as gin superintendent of the California
operation from 1951 until 1982,
helping build it into one of the bestknown
cotton businesses in the San
Joaquin Valley.
At its peak, the gin annually
produced 30,000 bales of cotton and
returned about $1 million to members
after ginning costs. Every July, up to
1,500 people from the surrounding
community flocked to the gin for the
“Tennessee Bologna Feed” put on by
Gallian’s father.
The younger Gallian continued the
gin’s prominence after he took over as
Visalia Co-op’s manager in 1964. He
would go on to serve as president of
each of the state’s two ginners’
organizations and was named ginner of
the year by the California Cotton
Ginners Association in 1991.
But today, Visalia Co-op is a thing of
the past, its membership disbanded, its
doors closed, its ginning equipment
shuttered and silent. The sandy parking
lot, once filled with the pickup trucks of
farmers who stopped by early each
morning for coffee and news, is empty.
The very bones of the business – the
gin stands, the bale presses, the seed
storage site – have been sold. Only
Gallian, 63, stops by now, unable to
resist looking at the place where he
spent most of his life, a site many
consider a north Visalia landmark.
Fifty-six years after it began, Visalia
Co-op formally ceased operations on
Dec. 31, 2006, victim not to bankruptcy
or merger but to the same forces that
have overtaken California’s oncethriving
cotton industry. High costs,
urban sprawl and a shift to more
profitable permanent crops are
dethroning King Cotton in the Golden
State.
California’s cotton production has
been declining for 25 years, and today is
only about a third of what it was in its
benchmark 1981 season. That year, the
state turned out 3.53 million bales, a far
cry from the 1.28 million bales
California will likely produce in 2007.
Estimates put the state’s 2007 cotton
acreage at about 460,000, down from
560,000 last year and a dramatic drop
from the 1 million acres planted in the
early 1990s.
As cotton acreage has waned, so too
has California’s cotton ginning industry.
Once dotted with 299 cotton gins,
California is now home to only 61
surviving gins, according to the
California Cotton Growers and
Ginners Associations (CCGGA). Of the
remaining gins, 19 are co-ops.
Fighting to survive
For a while, Gallian thought he
could keep Visalia Co-op from suffering
the fate of other gin casualties. “We
fought it for years,” he says.
After all, the gin sat in the heart of
Tulare County, one of the top three
agricultural counties in the nation.
Visalia, located about 45 miles south of
Fresno, had always depended on
farming. And the co-op had weathered
more profit in selling land for
development to accommodate the
valley’s booming population growth.
Visalia alone saw its population jump by
almost 18,000 people in just five years,
climbing to 110,000 by 2005.
Equally daunting, perhaps, were
increasing air-quality regulations
required by the San Joaquin Valley air
pollution control district. In 2002,
Visalia Co-op spent $350,000 for air
emissions mitigation equipment, “just
to stay in business,” Gallian says.
By 2005, Visalia Co-op’s membership
had dwindled to 15, down from a high
of 166 when the gin formed in 1950. In
2006, the co-op counted just nine
members. Only Gallian and the plant
superintendent were employed fulltime,
compared to 11 employees a
decade before. The gin’s returns to
members had eroded as well, dropping
to $15-$20 per bale from $45 in better
days. Moreover, Visalia Co-op’s returns
lagged behind the $30-$40 per bale that
larger co-op gins were paying.
Gallian and the gin’s board of
directors realized the co-op had reached
its end. “We rationalized we would lose
too much of the growers’ equity if we
continued,” Gallian says. “You didn’t
have to be a brain scientist to see where
cotton was going.”
To operate for the 2006 season, the
gin would have had to borrow
$700,000. As one possible survival
strategy, the co-op considered installing
a roller gin, used to process longfibered
cotton such as Pima.
Traditionally, most California gins have
used saw gins to process shorter-fibered
upland or Acala cottons.
But roller gins have increased in
popularity as California cotton growers
have turned to Pima production. The
long-staple cotton is enjoying huge
demand and good prices. At the same
time, some growers have found a
profitable niche by roller-ginning,
rather than saw-ginning, upland cotton.
The production costs are higher, but it
has proven worthwhile for some
growers.
Yet, without the necessary cotton
volume in the Visalia area to bring in
adequate revenue, the gin could hardly
afford a $3 million roller gin. A few
attempts at merging with other co-ops
went nowhere. There was little point in
trying to continue attempts at merging with other co-ops
went nowhere. There was little point in
trying to continue.
The coton gin co-op's membership had dwindled to nine by the time it closed, down from 166 when it formed in 1950.
Closure ‘very emotional’
All the same, the discussions to close
Visalia Co-op were “very, very
emotional,” says Gallian. “For a while,
no one wanted to bring up the word,
‘closure.’ And there was the matter of
pride. No one wanted to be the board
or manager who had closed the gin.”
But, on Sept. 11, 2006, the fivemember
board voted unanimously to
end the business. Among those voting
that day was Gerald Steiner, 85, who
had helped put up the money to start
the co-op gin in 1950. “We invited him
to the meeting and gave him an
honorary vote,” Gallian remembers.
“He had tears in his eyes and his hand
was shaking as he voted for the
closure.”
Over the next few months, the gin
liquidated its assets, selling vehicles,
module trucks and other rolling
equipment. The co-op sold 15 acres of
nearby property for $225,000. The 30-acre gin site, where the office and gin
buildings sit, sold for $1.15 million this
spring.
Final distribution dilemma
Gallian and the board are determined
that every grower will “get back
every dime he invested in the co-op,”
he says. That includes 37 growers who
still have revolving funds due them.
By late April of this year, the co-op
had $380,000 in revolving funds to
distribute. Beyond that, the gin also was
awaiting $225,000 from the sale of air
pollution credits. Combined with the
proceeds from selling its property and
existing money in its bank account,
Visalia Co-op has $1 million to return
to former members after its last
revolving fund payout.
The final distribution of the co-op’s
assets has been a bit of a sticking point.
“How far back do you go to determine
who is paid?” Gallian asks. “As far as
practical,” the bylaws of Visalia Cotton
Co-op stipulate. Going back to the coop’s
start isn’t feasible, Gallian says, since
75 percent of the membership from
those days is deceased. A 6- to 10-year
period may be more realistic, but
discussions are still underway with the
gin’s attorney and auditors.
“Distribution of excess money is key
to closing a co-op, but there’s nothing
out there to show us how to do it,”
Gallian says. “Most co-ops close broke.
We still have money.”
The board will have to decide by
June 30 this year when the co-op once
and for all closes out its books.
More closures ahead
More San Joaquin Valley cotton gins
will close in the coming year, leaving
only a handful of large cooperative gins
to handle the bale-making and cotton
seed business. Recent higher prices for
cotton seed will allow a few gins to
hang on a bit longer. But the clock is
ticking for many.
“It’s a heck of a transition period,”
says Earl Williams, president and CEO
of CCGGA, two linked trade
organizations that represent cotton
growers and ginners in legal, legislative
and regulatory affairs. “It’s survival of
the fittest now.”
Like Gallian, Williams grew up in
the cotton ginning business. But while
Gallian came from the cooperative side,
Williams emerged from independent
gins.
“Growing up, the co-op gins were
the enemy,” Williams remembers. “But
one thing I was always envious of was
how well the co-op gins were
organized.”
As California’s cotton ginning
industry has dwindled, however,
Williams has seen increasing dissension
and disagreements. He’s seen it, for
example, among co-op gins that have
met to discuss merging as a way to
survive.
“Then the arguments would start,”
Williams says. “‘Which gin do we keep,
which do we close down? Which
manager, which board members do we
keep?’ It went downhill from there.”
Changing landscape
Despite the industry contraction, few
are writing off cotton just yet. The
bright spot is Pima cotton. “We can’t
grow enough Pima to meet worldwide
demand,” Williams says.
The state now produces 90 percent
of the nation’s Pima crop. The longfibered
variety has surpassed upland
cottons in planted acreage, a complete
about-face from past years.
Further, thanks to a long, dry
growing season and variety
improvements, California cotton
growers continue to produce highyielding,
high-quality cottons that are
among the world’s best. Nearly 100
percent of the state’s cotton is exported,
heading to China, Korea, Thailand,
Japan, India and Pakistan.
Even so, the state’s once-familiar
cotton landscape has a different feel. In
December 2006, one long-time cotton
cooperative, California Planting Cotton
Seed Distributors, was acquired by
Bayer CropScience. At least three more
cooperative gins and perhaps as many
independents will close soon, Williams
predicts. Some gins that are holding on
are not re-hiring managers when the
former ones retire or leave. Instead,
they’re counting on office managers to
do the job.
Gallian has found work as an ag
chemical salesman. “I was offered four
or five jobs, but I chose the one that
gave me close contact with growers,” he
says.
Although Visalia Co-op is history
now, it’s still near and dear to Gallian.
Having come through the gin’s painful
demise, he offers clear-cut advice for
co-ops that may be contemplating
whether it’s time to close their doors.
“Don’t keep going out of pride,” says
Gallian. “We could have kept going.
We would have made money for our
members, but not as much as they could
have received ginning somewhere else.
That’s not fair to farmers. A co-op is
supposed to be there for the farmer,” he
adds. “When the co-op can’t do the
farmer justice, it’s time to go.”
