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Dr. Carl Anderson retires - Texas Cooperative Extension cotton marketing economist predicts strong markets
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."

Texas A&M University news release

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