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It's No Picnic In This Cotton Patch

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These are dog days in Corcoran, Calif., population 8,313. Shopkeepers say business has slowed to a crawl at R&M Drug on Whitley Avenue, the town's main drag. And down the block, the hamlet's only movie house has just shut down.

It is Corcoran's bad luck that its fortunes are tied to the 160,000 acres of adjoining cotton fields farmed by the nation's largest cotton grower, J. G. Boswell Co. And after six years of drought, a worldwide glut in the cotton market, and depressed real estate values, times are tough for the closely held Boswell.

In a July 27 letter to shareholders, Chief Executive Officer James W. Boswell announced that the company will slash its dividend by 50%, to $25 a share. "California is in the midst of its worst economic recession in over 60 years," wrote Boswell, who declined to be interviewed by BUSINESS WEEK.

Boswell's biggest problem is soaring water prices. Cut back to only 45% of its normal allotment of state water, the company has been forced to drill ever deeper for groundwater. That has doubled its water costs during the past 18 months. And that, in turn, has added $10 million to its operating costs this year, the letter says. Making matters even worse, cotton prices, depressed by bumper crops in China and Pakistan, are down to 57 cents a pound, the lowest level since 1985. Boswell had hoped to bolster its balance sheet by selling some of its vast San Joaquin Valley holdings. Potential buyers, however, have not been able to get financing.

Back in Corcoran, Boswell has stopped buying new tractors and other equipment, depressing city sales-tax revenues to just $300,000 this year, down from more than $500,000 in 1991. And unemployment in the area is 25%. City Manager Donald Pauley says rumors are swirling that Boswell will soon slash management jobs. That's bad news for the managers and more bad luck for Corcoran.Eric Schine in Los Angeles

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