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Texas Business Report: In Low Cotton

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Cotton Scanty

Despite a relative uptick in rainfall this year, Texas cotton growers are still recovering from three years of steady drought—and nationwide cotton inventories are expected to reach a 23-year low by July, according to a report released this week by the U.S. Department of Agriculture. The shortfall is especially pronounced in Texas, the country’s number-one cotton grower, where “extreme-to-exceptional drought” is still afflicting more than 25 percent of the state, Businessweek reports. Severe weather such as the recent polar vortex in the Midwest has also contributed to the sub-par growing season.

The shortage has boosted the price of cotton by about seven percent so far this year, and commodities futures on Wall Street indicate it could increase by another twelve percent through the rest of the year, according to Bloomberg’s analysis. Apparel retailers including Hanes have already begun raising clothing prices to keep up with “inflationary pressures,” the company’s CEO said. 

The Bottom Line: Cotton growers appear to be optimistic that the benefits from the higher prices will outweigh drought-related risks for the next planting season, which begins in August. Businessweek reports that U.S. farmers are projected to increase cotton planting acreage by 6.7 percent compared to last year’s total.

And consumers have no need to panic about the American shortfall having an impact on their ironic t-shirt collections. Global cotton production is still booming, and by the end of the 2014 harvest, there should be enough on hand to make sixteen tees for everyone on Earth.

East Meets Cuervo

Since China lifted its ban on tequila last June, several American manufacturers and distributors have been moving quickly to line up shots in bars throughout the world’s largest alcohol market. A feature in the Texas Tribune this week spotlighted Austin-based Dulce Vida Spirits as Texas’ first agave-bearing representative in the country. The company’s ten employees are preparing for its official Chinese debut in July, but Dulce Vida has already begun marketing its products there and has distribution operations set up in Beijing, Hong Kong and Shanghai, according to the Tribune. 

The Bottom Line: The tequila industry is putting out some bold predictions about the product’s future, which will likely be closely tied to its anticipated success in China. Mexican officials have estimated that China “will become the second-largest market for tequila—ahead of Mexico and just below the U.S.” within four years, the Tribune reports. One industry group projects that Mexico will export as much as $100 million worth of tequila by 2018, compared to roughly $5 million in 2013. And by that time, “Chinese consumers will drink about ten million liters of tequila, the equivalent of five Olympic swimming pools.”

Bayou Buyouts

Houston-based Texas Brine Co. agreed this week to pay a $48.1 million settlement to residents of ninety Louisiana properties that were evacuated in 2012 when one of the salt-mining company’s underground caverns collapsed, creating a thirty-acre sinkhole in the adjacent swampland. According to the Baton Rouge Advocate, if the settlement is approved, “the payments would be split up into buyouts of plaintiffs’ properties and a separate damages component for emotional distress and other factors.” The case was scheduled to go to trial in U.S. District Court next week.

The collapse—which also triggered several small earthquakes and released explosive methane gas underneath homes—has apparently “confounded geologists and state regulators,” according to Mother Jones. Many Gulf Coast energy companies use similar caverns for underground natural gas storage. 

The Bottom Line: Other residents of the Bayou Corne community, which was home to about three hundred people before the cave-in, have already accepted buyout offers from Texas Brine. The Advocate reports the company is still facing several other pending lawsuits from landowners, pipeline companies, and the parish and state governments.

Winner of the Week: Port of Corpus Christi

A major construction boom is underway in the port of Corpus Christi as NuStar Energy and other oil companies expand their shipping operations in “America’s newest energy hub,” Businessweek reports. Intensifying oil production in the nearby Eagle Ford shale has led to a dramatic increase in exports from Corpus docks: Ships hauled about 350,000 barrels of crude oil per day from the port in late 2013, compared to 10,000 barrels each day in early 2012. NuStar opened its third petroleum dock in Corpus this week, and several other companies are now “building docks, storage tanks and other facilities” worth a combined total of about $22 billion, according to Businessweek.

Loser of the Week: Lacrosse-a Nostra

Dallas attorney William Munck made headlines this week for suing a youth lacrosse company under the Racketeer Influenced and Corrupt Organizations (RICO) Act—a law typically used to bring down mobsters and organized crime syndicates. Munck claims that Dallas Lacrosse Academy, a for-profit outfit that offers practice clinics and other programs, conspired with coaches throughout North Texas to punish his son Billy and other lacrosse players who chose not to enroll in the academy, Texas Lawyer reports.

In the complaint he filed with the U.S. District Court in East Texas, Munck refers to the academy as a “criminal enterprise” that uses “fraud, threats and other illegal activities” to dissuade teen athletes from playing for competing nonprofit leagues. Among the “schemes” listed in the suit is a claim that Billy’s high school coach retaliated against him for joining a rival program by cutting his playing time and busting him down to junior varsity.

Dallas Lacrosse Academy has filed a motion to dismiss the lawsuit, which it described as a spiteful crusade against coaches “whose only sin was failing to recognize and appreciate the athletic talents of Munck’s son.”

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