An Analysis of Plains Ginning Costs

This study analyzes average ginning incomes and costs based upon income statement data obtained for gins within the Texas High Plains and Rolling Plains for 2005 through 2007. The study evaluated trends in cost and returns by region and annual ginning volume. The results across all volume classifications indicate that approximately 79% of operating income came from three sources - ginning margins, compress fees, and cottonseed margins. Variable labor expense and energy related cost accounted for 27% and 31% of total cash operating expenses, respectively. The two major contributors to operating income, ginning margins and compress fees, have not increased over the three years of this study, however; these income sources have covered 95% of the total cash operating expenses. Cottonseed margins have risen in the past two years and have been a strong contributor to the bottom line.  The increased energy costs and mandated increases in the federal minimum wage will put upward pressure on costs. With increasing labor and energy costs gins may need to increase ginning margins to maintain profitability.