Optimal Structure of the Ginning Industry in the Southern High Plains of Texas

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This study addresses the optimal structure of the cotton ginning industry in the Southern High Plains of Texas, assuming a monopolistically competitive market structure. Employing survey, regression, simulation, and mathematical programming techniques, the study determines the optimal structure of the ginning industry. Results indicate that a restructuring of the ginning industry in the Southern High Plains of Texas could save the industry about $15 million per season. T he ginning industry in a sixteen-county region of the Southern High Plains of Texas (SHPT) has gone through changes in both structure and the level of sophistication of ginning machinery. The number of active gins in Texas has decreased from 783 in 1980 to 406 in 1994. This reduction has occurred in conjunction with an increase in average gin size (Texas Cotton Ginners' Association). Some of this reduction in the number of gins has been due to mergers and the creation of cooperatives among gins. However, many of the smaller gins have either become inactive or have shut down. These structural changes may also have been the result of technological changes that have taken place in the cotton ginning industry during the last decade. Rapid technological changes in cotton harvesting, seed cotton storage and handling, gin feeding, and bale packaging and handling systems have virtually eliminated many of the menial tasks that were traditional to farming and ginning, while reducing cost and increasing the efficiency of production (Texas Almanac). These technological advancements have led to intense competition among gins for seed cotton, which has forced gin managers to reduce costs through the attainment of higher gin volumes.