Project Summaries

05-036IH  Project Manager: J. M. Reeves

RISK MANAGEMENT SEMINARS

Jeanne M. Reeves, Cotton Incorporated

The Risk Management initiative at Cotton Incorporated consists of five areas: weekly/monthly cotton articles, seminars, a weekly radio program, the monthly Ag Market Network conference call, and an annual roundtable event.

The overall objective of the cotton articles is to have several different perspectives about the market offered so that producers can have several different views and incorporate their own view. This can help them make more informed market decisions. Dr. O.A. Cleveland writes a weekly article (Cotton Weekly) that is very grower focused and discusses both U.S. and international issues. Market happenings determine the perspective from which the article is written and how that affects U.S. growers. Dr. Carl Anderson writes a monthly article (Cotton Market Comments) that is released after the USDA monthly supply/demand report and is focused from the grower level up to world happenings. The last weekly article is written by Dr. John Robinson (Cotton Marketing Planner) and includes everything from grower level to world level, but its focus is grower level. All of these are available on www.cottoninc.com.

The overall objective of the seminar project is to sponsor seminars with a marketing perspective. These are oriented toward producers. This "new cotton world" presents learning opportunities from those that are marketing cotton. With attacks on the cotton program from every angle, domestically by those who want to enforce payment limitations and internationally by Brazil and other countries, understanding how to market your cotton crop is becoming an increasingly important topic. With the changes that are part of the 2008 farm program, there is a greater need for producers to have educational opportunities for understanding futures and options. Also, it is likely that the "safety net" that has been provided by the Farm Bill will disappear in time, and it is more imperative than ever that producers learn to market their crop as the risk will shift more and more toward them. As of yet, a 2012 Farm Bill has not been passed ? only a 9-month extension of 2008 Farm Bill.

Four instructors, Drs. Carl Anderson, John Robinson, O.A. Cleveland, and Mr. Mike Stevens are hired jointly by Cotton Incorporated to teach the risk management seminars. The instructors are responsible for preparing the materials for conference attendees and for team teaching the attendees. The day-long seminar presentation combines fundamental and technical cotton market overviews with an options workshop placing specific emphasis on understanding the market's pricing mechanism and proper application of its risk management tools. The seminar begins with basic information and moves forward to intermediate and advanced. Also, a cotton marketing expert (one of those mentioned above) provides a market outlook during the lunch session and in some cases, a cotton expert in the trade area updates producers on trade issues.

In 2012, four seminars were held for producers in the following locations: Memphis, Tennessee; Maricopa, Arizona; SJV in California and Lubbock, Texas. Attendees found the seminars very informative with many strategies they could utilize to assist them in risk management of purchasing cotton. The seminars are very well received and our surveys, given out during the afternoon of the seminar, indicate what producers like and don't like and topics on which producers need more in-depth instruction. These changes are made before the next year's seminars begin. In 2010 and 2011, producers wanted to see an integration of crop insurance (according to the surveys attendees filled out) , a new component on crop insurance was added. This was very well received by the attendees. These seminars for producers will continue in 2013 with topics potentially added/changed based on market conditions.

The second part of the risk management program is a radio segment that began in spring 2006. In April of 2006, a joint effort between Cotton Incorporated and KFLP radio station (Lubbock, Texas area) began a radio program called "Ag Market Network's Weekly Cotton Commentary." This program is aired at 2:54 p.m. and 6:54 p.m. on Fridays and again on Mondays at 8:54 a.m. In addition, it is available live via the Internet at www.kflp.net and on-demand at www.AgMarketNetwork.net. Mike Stevens, cotton broker with Stevens Cotton, is uniquely qualified to be the host of this five-minute program. His knowledge of cotton marketing is keen, and he has the wisdom of experience in the industry for most of his career. Response to our five-minute program on KFLP 900 AM in the Lubbock area has been better than hoped for. There is no other program like this available for any other crop. (There are radio programs that cover things in general, but not specific to any crop.) The program is recorded shortly after the market closes on Friday and covers cotton market action for the prior week, which in turn directly affects the producer's AWP and Loan Deficiency Payment. All pertinent USDA and industry reports are covered including the market reaction to the reports. The report ends with a view of the following week and what producers should be looking for.

KFLP is the only 100% pure agricultural station. Their listening radius covers in excess of 3.5 million acres of cotton in West Texas. KFLP plans on syndicating the show to others later this summer, targeting stations from California to Virginia. In other words, the entire cotton belt is included. On average, when syndicating shows, it often takes as much as three years of hard work before launching it on other stations. However, KFLP feels that because of their past experience and the excellent response to the show so far, it will go much quicker, and they should be launching it as early as August to other stations.

Also, in 2009, Cotton Incorporated began sponsorship of the Monthly Ag Market Network and this remains so in 2012. This is a conference call with a repeated panel of market analysts (Carl Anderson, O.A. Cleveland, John Robinson and Mike Stevens) and a guest speaker. The Ag Market Network monthly conference call was created in 1998 as a joint venture of state extension services to furnish cotton producers an improved flow of marketing information following the monthly U.S. production reports and World Agricultural Supply/Demand Estimates. The conference call is usually one day after the monthly release of the supply/demand report from the USDA. Listeners have the option of participating at their marketing clubs, extension service offices or listening over the radio or Internet. An 800 number is always provided for listeners to ask questions concerning marketing strategies or market opinions. It is also available at www.AgMarketNetwork.net.

The last part of the risk management component of the economics program is the Agri Market Roundtable held every year in July in New York. This broadcast is carried live over the Internet and has listeners from all over the U.S., as well as the world. Very timely and pertinent information is given as well as some price forecasts by experts in cotton analysis/marketing.

 

Project Year: 2012
 

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