College Station, Texas
August 4, 2004
For years, Dr. Carl Anderson has
been telling Texas cotton producers to "work smarter, not
harder." In fact, as a youth working on the family farm in
Taylor, he was thinking along those same lines.
"I had to hoe Johnson grass and pick cotton. That was hot, hard
work," recalled Anderson, Texas Cooperative Extension cotton
marketing economist. "I said to myself, ‘this thinking part is
pretty easy.'"
Saving farmers financial headaches has been Anderson's job for
35 years. Considered by his peers as the state's leading cotton
marketing authority and one of the nation's leading cotton
analysts – having served for six years on the New York Cotton
Exchange Board of Managers – Anderson will retire Aug. 31.
He's going out on a high note. Not only is the 2004 Texas cotton
crop "the best I've seen since 1981," Anderson said, this year's
crop could approach the record 6 million bales harvested in
1949.
Anderson also predicts a bright future for domestic cotton and
its producers.
"I can say that cotton has overcome the challenge of man-made
fibers," he said. "The greatest challenge right now for U.S.
cotton is learning how to live in an international market. You
have to have efficiency."
That's an important consideration, with the glut of world
production and with China posing as the largest international
threat, he said. But the good news is how research has led to
improved cotton varieties and new marketing strategies, Anderson
said.
"We've turned the corner on growing a much better fiber for
world textile spinners," he said. "We've made vast improvements
on the quality of cotton and in yields. Electronic marketing is
going international, so folks all over the world will have a
system in place where they can select cotton to buy."
Back on the family farm in Taylor, Anderson saw a need for
better marketing strategies for agricultural commodities –
particularly cotton.
"I thought one of the weaknesses was marketing," said Anderson,
who credits the GI Bill for allowing him to attend college. "You
can work hard, and a farm takes hard work, but you've got to
handle your operation as a business."
In 1978, interest was building on better ways to market cotton,
especially in Texas. So much, in fact, Anderson was hired as
Extension's cotton marketing economist, ending his eight-year
stint as a senior economist with the Federal Reserve Bank in
Dallas.
In the early 1970s while Anderson was at the Federal Reserve
Bank, Texas' cattle feeding industry was also in the beginning
stages. State officials were concerned about how much money it
would take to set up the infrastructure and financing.
"We did analysis on interest rates and price-risk management,"
Anderson recalled. "We didn't have commodity options back then.
I got really involved with bank lenders. There was deep concern
that the banks would go broke. On the other hand, there was a
25-cent per 100 pounds discount for shipping grain sorghum to
Houston. Back then, cattle were shipped and fattened in the
Midwest.
"Cattle feeding in Texas would later open up a lot of
opportunity for farmers in the Panhandle. It's one of the
largest value-added industries in agriculture when you include
the processing plants, the transportation and the other segments
it supports.
"That's the economic glue to the Panhandle that goes all the way
to Hereford. And to my knowledge, there weren't any banks that
got into trouble."
Meanwhile, the state's cotton industry continued to gain
momentum as the New York Cotton Exchange ramped up trading
options on cotton futures through the next decade. Anderson led
the effort to form cotton marketing clubs in the mid-1980s and
implementing risk management programs using options to hedge
prices for producers.
"Those marketing clubs were kicked off so they could teach each
other about futures and options hedging and other trading
activities," Anderson said.
The marketing clubs served as good preperation for producers
with the coming of the 2002 Farm Bill. "It's totally dependent
on market pricing," Anderson said.
In a commentary paper prepared for the New York Board of Trade,
he noted, "producers will need to become skillful market
observers and rely heavily on pricing and ‘hedging' strategies
to enhance income."
Anderson said many producers "wanted to take a break from
cotton" after the 2002 Farm Bill was introduced, switching focus
on hedging strategies to add to government payments.
"We had them go out and they bought 58-cent call option
contracts on a December 2003 futures. They went over 80 cents
and I was telling them to get out at 70 cents," Anderson said
with a smile.
Perhaps the 2002 Farm Bill re-emphasized Anderson's motto of
working smarter, not harder to farmers. "You can't survive in
agriculture just because you are a hard worker," he said.
"Individuals can't control commodity prices, but they can
control how they market it." |