People who have spent a lifetime in the farm business have tales of “way back when.” My own story involves me as a nine-year-old girl driving my father’s pickup down the highway three miles to the long-since-closed community grocery store/parts store to purchase a much-needed part.
Daddy didn’t give me a lot of instruction. He just said, “Be really careful and look both ways at the intersection.” So I’d sit on top of the year’s worth of dirt on the seat, reach down where I could barely touch the pedals, strain over the steering column and cautiously navigate the family pickup along the shoulder of the highway.
Of course, in those days, there were fewer vehicles on the highway, and I probably only saw about two or three cars on my entire trip, but as folks sped past at 70 mph, I wondered about being out there with them.
I loved my newfound responsibility and this chore was one of my favorites, so I just tottered along making my own rules, following my own judgment, navigating the uncertain highways the best I could. Things seemed to work out.
Surely, I’m still stretching to keep up with new challenges. Change, as a topic, has been a consistent element in recent columns and news articles.
With unprecedented prices for cotton and seemingly insatiable demand, we’re all driving proverbial pickups that challenge our capabilities. As a farmer, commodity broker and merchant, I hope to offer a few ideas that could be helpful in the coming year.
• Prepare for new pricing paradigms. Pricing by the bale rather than by the acre is a trend that is coming. Increased prices have complicated the traditional profit equations. Stakeholders are calling for a simpler and more transparent way to contract cotton.
• Anticipate increased input costs. Traditionally, fertilizer and fuel costs have increased as cotton sales have soared. Consider a risk management program by either fertilizing early or hedging your risks on the cost of inputs.
• Consider a flexible approach to hedging. Some combination of option strategy and forward pricing will be necessary as we enter this new paradigm. Neither one alone will provide the complete safety net.
• Strategically plan to meet the needs of specific mills. There is room for growth in niche markets – such as the market for premium quality, long staple upland cotton or organic cotton. Not every mill spins these niche market cottons, but the ones that do typically want a closer relationship with producers.
• Research farming techniques that impact cotton quality. Texas A&M has devoted years to study true cost comparisons be-tween picked and stripped cotton. An individual farmer will choose between these two operations based on the specific market for which he is growing cotton.
• Expect the cost of new equipment and technology to go up along with land prices. Proactively ask yourself questions. Do you want longer lease agreements or to purchase more land? Is now the time to get that next new piece of equipment?
Looking back at my early experiences driving a pickup to the community store for parts, I wish I’d gotten just a few more tips for my journey. The fact that I’m here today indicates that the simple advice to be extra careful when I crossed the highway to come back home really was enough information. But in today’s markets we are all looking for a bit more because it’s the simplest changes that have the potential for the biggest impact.
I hope I’ve offered just a tiny bit of navigation to my fellow farmers from the perspective of someone involved in the supply chain from seed to shirt, and I look forward to an exciting year of change and growth in our industry.
– Kelli Merritt, Lamesa, Texas
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