Project Summaries

09-601  Project Manager: J. M. Reeves

RISK MANAGEMENT AND MARKET VOLATILITY

John Michael Riley, Mississippi State University

Cotton producers face a volatile economic situation where cotton prices may change rapidly and offer them windows of opportunity to secure profitable margins. Marketing their cotton in these volatile markets requires constant monitoring and knowledge of the basic economics that drives the price discovery process. Thus, producers must be aware of a changing marketing environment and the tools that can assist them as they navigate their operation towards profitability. Cotton marketing specialists, serve a crucial function in evaluating and monitoring the global, domestic, and regional cotton markets and communicating these observations to cotton growers and marketers. The overall objective of this project was to obtain daily market and economic information in order to maintain, sustain, and increase the knowledge base used to prepare for targeted seminars and presentations, newsletters, and annual discussions that assist cotton growers and marketers in understanding and managing the global and local cotton market.

Over the course of 2012, market and farm management information were made available to producers, Extension agents, and crop consultants across a variety of platforms. These include county and statewide presentations, newsletters, the Mississippi State University Extension Service crop blog, podcast, and individual meetings. Market update/outlook and farm policy presentations were provided to producers and other interest groups. Each of these meetings hosted cotton industry participants and material related to cotton markets, cotton risk management, and the unique STAX policy proposal (crop insurance) were discussed. Finally, presentations were made regularly on the Farmweek television program, which provided an overview of current cotton market events and outlook commentary.

In the fourth quarter, a hands-on risk management program for cotton producers in Mississippi was initiated. This program will utilize the futures market simulation software available from the University of Florida. In this intensive training, individuals will be provided with detailed information on hedging with futures and options. Next, this knowledge will be applied in their own operation via the simulated futures market. This experience will allow these producers to get experience with various marketing strategies without the burden of margins or trading fees. This program continues into 2013, with heavy applications to the 2013 crop.

Also, weekly market podcasts were reinstated in the final quarter of 2012. These five to ten minute market commentaries recapped each week's market events. An average of 100 downloads per week was seen and listenership continues to grow. Furthermore, a more detailed podcast was made available on the day of major USDA report releases. This project will continue in 2013. 

 

Project Year: 2012
 

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CORE PROGRAM
▸ Cotton Incorporated Fellow
▸ Cottonseed
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▸ Production Efficiency
▸ Sustainable Cotton
▸ Variety Improvement

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