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Surviving Low Prices

Kelli Merritt

Kelli Merritt

By Kelli Merritt
merrittkelli@gmail.com

Perhaps the most unwieldy element I encounter as a producer is the market. It might feel like it’s the lack of rain, or the heat or even the surprise hailstorms, but really the most dynamic and unpredictable part of growing cotton is the buying and trading, selling and hedging, marketing and promoting. Very few of these concepts were a part of the culture of farming in which I grew up, and most of what I’ve learned has been through the rigorous school of hard knocks

A free market society and even capitalism are often presented as ideals. That’s because free market economics are not practiced like they once were – at least not in a pure form. Taxes and tariffs, subsides and government regulation are a way of life – both nationally and internationally. For our ancestors, the free market was reality. It was simple. When there were no subsidies, farmers grew cotton if they could afford to do so and got whatever price someone was willing to pay. This system can be viable when everyone plays by the same rules. That’s not the world we live in today.

So, I say, let’s all play by the same rules. As a WTO member, I would like to see China be compliant with WTO requirements concerning the amount of subsidies provided to its farmers. It needs to be clear and transparent in its reporting. If we are really after freer markets, global trade and equitable enforcement of regulations, now is a good time to begin.

Cotton has a story, and the consumer would love to hear it.”
-Kelli Merritt

Since we are talking about basic economics in the context of China, let’s look at pure supply and demand. China has announced that in 2015 it will not import more than 894,000 tons. However, in China, and other spinning countries, there is demand for high-quality, long-staple cotton where there is not much demand for ordinary cotton.

Sure, China leaves us guessing what the markets will do in 2015, but do not become overly optimistic about higher prices. We have a price struggle ahead of us, so let’s look at actions we can take that best position us for success. First, we can grow the longest staple, best grade possible while finding new ways to raise yields with fewer inputs. This practice will always remain supremely advantageous. Next, make it a goal to become better marketers by managing risk through options – beginning early in the year.

Finally, create demand for the fiber we produce by telling our story and inspiring consumer interest. Cotton has a story, and the consumer would love to hear it. He wants to know the story of how that cotton was grown, but, more importantly, he wants to know you, the people involved in producing that cotton.

Consumers want to feel warm and fuzzy when they make a purchase. Polyester does not have that story. Who wants to hear the story of putting manmade materials together into a fabric? B-O-R-I-N-G. Where is the humanity in that? Farming has become so much more than coaxing a seedling out of the ground. Those of us who have spent our lives working the dirt have become proficient at the skills of growing. We understand about pest control, irrigation and variables it takes to produce a crop. But farming in a post-modern society has increasingly become a business.

To compete on a global level, we must discipline ourselves in every facet of our operation. Our competitors have already made this change. China is proficient in long-range planning to a level we have difficulty comprehending.

I still believe that understanding the markets is the most daunting part of farming, but I do know there are deliberate steps we can take such as strategically selecting seed varieties, working a plan using futures, options and branding that not only will help but are essential to our survival.

Kelli Merritt is a Texas farmer, licensed commodity broker and link between farmers and mills. Contact her at merrittkelli@gmail.com.

Cotton Farming’s back page is devoted to telling unusual “farm tales” or timely stories from across the Belt. Now it’s your turn. If you’ve got an interesting story to tell, send a short summary to thorton@onegrower.com or fax to (901) 767-4026. We look forward to hearing from you.