A COTTON-PICKIN' MESS IN CALIFORNIA
To outsiders, Corcoran, Calif., is known mainly for the maximum-security prison where Charles Manson is serving time. But to locals, this city of 7,775 in the San Joaquin Valley is the town that J. G. Boswell Co. built. Now headed by 68-year-old J. G. Boswell II, the founder's nephew, Boswell Co. farms 160,000 rich acres--roughly twice the size of New York's five boroughs. Most of Corcoran's townsfolk owe their livelihood to Boswell, directly or indirectly. When the city needed a $1 million baseball field or a fancy new YMCA, Boswell picked up the tab.
And when Boswell needed a favor, it always had the political muscle--and money--to get it. In 1982, when a proposed water project threatened to block its access to water from the north, Boswell spent more than $1.2 million to defeat the project. Says Steve Hall, head of the California Farm Water Coalition: "J. G. Boswell is not someone you want for an enemy."
Now, the secretive Boswell Co., the nation's top cotton producer, has met an enemy it can't beat: California's five-year-old drought. After nearly seven decades of wheeling and dealing for the water it needed to grow from a small cotton-and-produce farm, the $200 million-a-year concern is nearly powerless, as many of its usual water sources are severely depleted or dried up altogether.
The company didn't respond to queries from BUSINESS WEEK. But even after a wetter-than-usual March, other farmers and water officials in the region say that Boswell has been forced to begin retrenching--a process that could ultimately mean the cutback of a third of the area's work force. As many as 55,000 of Boswell's acres may lie fallow this year. And the cotton that is planted is likely to yield a disappointing crop. Even March rainclouds had a dark lining: They flooded already irrigated lands, pushing back the planting season by three weeks and probably stunting crops' growth.
For Boswell, which has traditionally wrung large profits out of its highly automated operations and cheap water, that means lean times. In recent years, estimates the California Institute for Rural Studies, Boswell could rely on nearly $20 million in annual profits. That figure could drop by a third this year. And the prospect of another dry year ahead could mean tougher times in 1992. "You can have all the water rights in the world," says Barrie Boyett, a Corcoran farmer with 6,000 acres of cotton land nearby. "But they don't mean a thing if the river is dry."
Boswell's iron grip on the region's water supply was the source of its power. After arriving in California from Georgia, the Boswell family went into business in 1924 and shrewdly began purchasing water rights to local lakes and rivers. In the 1940s, the family, a branch of Los Angeles' powerful Chandler clan, allied itself with the U. S. Army Corps of Engineers to dam the Kern and Kings Rivers. That drained a lake bottom, creating most of Boswell's acreage. And it ensured access to cheap water for decades to come.
After taking over in 1952, J. G. Boswell II zealously guarded those water rights, sprinkling political contributions where necessary to insure them. "Water rights are like democracy," he once told a reporter. "Once you have them, you spend a lifetime protecting them." That often meant shelling out huge amounts. In 1990 alone, the Boswell family contributed $236,000 to support statewide candidates and ballot initiatives, a vast sum for state races. The resulting political muscle was really flexed in 1982, when the family took on then-Governor Jerry Brown by contributing $1.2 million to environmentalists who were waging a campaign against construction of a state-sponsored, $11.6 billion Peripheral Canal. That water system would have blocked Boswell's access to a Northern California river it coveted and would also have provided cheap water to rival cotton farmers.
Boswell wasn't content with simply defeating the initiative, however. When cotton farmers Jeff and Jack Thomson took out ads criticizing Boswell in local newspapers, the agriculture giant spent close to $1 million on a libel suit against the Thomsons and other family farmers who backed the ads. Boswell also pulled its $500,000-a-year business from a local fertilizer distributor whose parent company supported the Peripheral project. That put the distributor out of business, according to testimony in the libel suit given by James Fisher, then-president of Boswell.
'LITTLE LOOPHOLE.' Eventually, the Thomsons won the lawsuit and countersued, winning $10.2 million. Boswell is appealing the Thomson award. "Boswell has a long tradition of using its deep pockets to threaten people out of the political debate," says Ralph B. Wegis, a Bakersfield lawyer who represented the Thomsons.
The Thomson tussle was followed by another fight Boswell has picked with the Interior Dept. In January, 1991, an audit for the federal agency criticized Boswell for setting up a large trust to maintain subsidized water rights by selling 23,000 acres to its employees at artificially low prices and then operating the farms for them. By dividing up the land in parcels of 960 acres, Boswell was able to get federally subsidized water intended to help small farmers. It paid just $13 per acre-foot (an acre-foot represents 326,000 gallons) of water, far less than the $46 a large farm would be charged for federal water. "You open a little loophole and people drive a truck through it," fumes Interior Secretary Manuel Lujan Jr. Lujan has ordered Interior Dept. lawyers to review federal water subsidy practices. It appears that Boswell has run out of options. On Feb. 4, when Governor Pete Wilson ordered that water shipments to California farms must end, he took away nearly one-third of the approximately 60 billion gallons a year that Boswell typically needs for cotton. On top of that, the Kern, Kings, and Kaweah Rivers are still too low to supply another one-third of Boswell's water needs they have traditionally provided. While the March rains provided some relief, Boswell spent much of the winter hustling to increase groundwater supplies. It has already drilled new wells throughout its property--an expensive process that could nearly double the $45 an acre-foot that Boswell was paying for much of its water in 1989.
The company hardly has a choice. Even with income from a farm loan business and real estate development, Boswell depends mainly on steady cotton production. For years, the longer-fiber cotton it grows has made Boswell a favorite among such brands as Jockey underwear and Fieldcrest towels. Now, with California drying up, Boswell faces the possibility of losing market share to cotton producers in Mississippi and Louisiana. "For years, we've been using nothing but San Joaquin Valley cotton," says Jockey International President Howard D. Cooley. Cooley says he is looking elsewhere for supplies "just in case" Boswell can't deliver. And for the mighty J. G. Boswell, no amount of muscle or money can change that.Eric Schine in Corcoran, Calif., with bureau reports