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Calcot board surprises by hiring Australian to replace Tom Smith

In a surprising move, Australian David Farley, 45, described as aggressive, energetic, smooth, ambitious with a centrist management style, has been hired by Calcot Ltd., Bakersfield, Calif., to succeed Tom W. Smith as the chief executive office of the 1,700-member cooperative that markets roughly half the cotton produced annually in California and Arizona with sales about $500 million.

The full Calcot board voted unanimously to hire Farley over four other candidates chosen by a search firm and interviewed a committee of Calcot grower members. The candidates included two current Calcot vice presidents and two others from outside Calcot. Farley was the unanimous recommendation of the screening committee.

Farley’s hiring signaled a new direction for the cooperative and sent shock waves through the organization.

"Fasten your seat belts…Calcot is in for a helluva ride," said one longtime Western cotton industry observer.

It was startling decision because of the fierce competitive between Australia and Western cotton producers in world markets. Australian cotton industry leaders have been very critical of America’s federal farm policy and its subsidizing of U.S. cotton producers. Farley is being hired when Congress in the throes of coming up with a new federal farm policy, one that will likely offer for the next five years similar support levels Australians have criticized.

Counter criticism

Americans have countered the acrimony from Down Under with the fact that the strong American dollar gives Australians a far greater economic advantage in world markets than U.S. federal farm supports do for American producers.

The Australian cotton industry is recognized as aggressive, long-term marketers of cotton. Where Americans market cotton weeks and months ahead, Australians market cotton as far as two and three years ahead of when it will be produced.

The differences in management styles and demeanor between Farley and Smith is expected to be even more striking. Smith is quiet and reserved. He is recognized as a tenacious cotton marketer whose entire career has been spent at Calcot. And, Smith was the third Texas A&M graduate in a row to head Calcot, preceded by Russell Kennedy and later Sam Seitz. Farley does not have a college degree.

Those who know Farley and Smith say Farley is just the opposite of Smith. He is very competitive, ambitious and self-promoting.

"He is not a Tom Smith at all," said one person who knows both.

Calcot board chairman Bruce Heiden of Buckeye, Ariz., acknowledged that Farley’s selection marks a change in direction of Calcot.

"He brings a different perspective to Calcot — an outsider’s perspective — a new approach," said Heiden. "The board was convinced he was the man for the job." Heiden used the word "energetic" to describe Farley as did others.

New business ways

Heiden said the reason for the "change" is the current economic malaise facing not only cotton, but all of American agriculture. "These are tough times, and we need to look for new ways to improve the situation, new visions. David has extensive international business experience and hopefully can bring new ways of doing business to Calcot."

Search committee member and former Calcot board chairman John Pucheu of Tranquility, Calif., said all five candidates were "excellent," but Farley’s business experience with many of the textile mills Calcot markets and his energy level set him apart from the others.

Heiden acknowledged that bringing in someone from another country to run a 75-year-old American marketing cooperative could raise member concerns, especially someone from Australia where American federal farm policy is roundly criticized.

Heiden said Farley "understands how important farm policy is not only in this country, but understands how it affects the rest of world and the competitiveness American cotton farmers face in the world. He may have a little different take on American farm policy" than others in Australia.

"The U.S. program affects cotton worldwide, in terms of markets and production," Farley said. "We had to come to a full understanding of the U.S. farm program and how it works because of the influence it has on the cotton industry worldwide. Marketing California and Texas and Southeastern cotton from the U.S. also gave me firsthand knowledge and experience with the program and its complexities."

Overpayment debacle

The change at the top at Calcot comes on the heels of an overpayment debacle with the 2000-2001 crop where Calcot’s producer members are told to pay back $30 in overpayments brought on by a unparalleled tumble in cotton prices. It was the only the second time in the cooperative’s history that producer had been asked to pay back over-advances.

"Some people may perceive that the two are connected (Farley’s hiring and the overpayments), but the two are not connected directly," said Heiden. "We are working through the overpayment situation and that should be resolved by the end of this year."

"Tom has been preparing for retirement and has stayed beyond 65 at our request. This replacement process has been ongoing for the past six to eight months and has had nothing to do with the overpayments," said Heiden.

Farley is the cooperative’s fifth CEO in its 75 years history and the first to come from outside the ranks since C.C. Sheldon was appointed Calcot’s first general manager in the late 1920s.

Smith agreed to stay on beyond 65 to be involved in development of the new federal farm bill. Calcot has spent the last six months searching for his replacement.

Farley, the father of three daughters, will officially take over Oct. 1. Smith will stay on another year after that as a consultant.

Farley is former CEO of Colly Farms in Australia-the largest vertically integrated cotton grower, ginner and marketer in the country. He began his cotton career with Colly in 1983 as a farm manager and eventually became managing director (the Australian equivalent of president) in 1988. His background is irrigation development.

When Farley first began at Colly Farms, the organization was farming 200 acres of cotton. During the next two decades of Farley's career, operations expanded production to 75,000 acres, and dollar volume grew from $30 million to $860 million. Along with developing cotton acreage, Farley was credited with spearheading a very successful ginning and marketing arm at Colly.

Colly marketed as much as 28 percent of the Australian crop, selling 220,000 bales of its own production and marketing another 500,000 through pools of other growers' production

Exited cotton

According to sources in Australia, he ended up with equity in Colly when it was bought out and was instrumental in organizing the financing for the new owners. As part of that buyout, Farley agreed to stay out of the cotton business for two years. Most recently, he was general manager for industrial packaging of Visypak Industries, the world's largest privately-owned paper recycling and packaging company. Nevertheless, he was called "probably still one of the best connected people in the Australian cotton industry."

While with Colly, Farley oversaw the formation of a partnership between Colly Farms and California's Houchin family, forming the Colly Houchin Trading Co., which merchandises San Joaquin Valley and Texas cottons. That partnership markets worldwide in total about 1.2 million bales.

Farley said he is excited about his new post and is eager to start work.

"I'll be spending the next four months getting out to meet the members who produce cotton, the gin managers who gin it, and the buyers of that cotton," he said.

He also recognizes the challenges facing the cotton industry.

"The entire world cotton industry is being challenged at the moment, and the real trick will be to work out what the best fix is," he said. "We'll have to look at ways to return the grower to profitability, and that will benefit the co-op and the cotton industry in general. These are challenging times and conditions, but in those challenges there is opportunity.

"California and Arizona growers compete against the rest of the world, and with my background and experience, I bring the intimate understanding from a producer's standpoint as well as that of a world cotton marketer. "Wherever they grow or consume cotton, I've been there."

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