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Lower crops, fewer imports require CI, NCC budget cuts

Reduced acreage, lower production and fewer imports mean a significant decline in Cotton Incorporated operating funds and a $14 million budget cut for 2010.

But crucial aspects of the cotton promotion and research organization, including agricultural research and international markets, will remain fully funded, says Cotton Incorporated President Berrye Worsham.

Worsham explained how Cotton Incorporated will restructure from an $81 million budget to just $67 million at the American Cotton Producers/Cotton Foundation joint meeting in Nashville.

Worsham said the recession has reduced overall demand for textile products. The effect on fiber has been “more severe than in the general economy. Cotton use expectation in the United States is as low as 20 million bales (annually), down from 24 million a few years ago.”

Worsham laid out key issues that affect the CI budget and explained how the company will restructure to meet the challenges.

Lower crop production and reduced imports affect income, he said. “We are reducing overhead and cutting staff. We look for programs (to suspend) with the greatest potential for a quick restart.”

He said the pension fund has taken a hit from the recession. “We’ve frozen the pension plan, but will be prepared to fund it aggressively to return it to full funding.”

U.S. cotton acreage has declined significantly over the past few years, leaving fewer bales from which to acquire the funds that help sustain Cotton Incorporated. “But we will protect agricultural research and will find reductions in other areas.”

Worsham said the worldwide recession has hurt international cotton markets, but that continuation of international presence is too important to ignore. “We are not reducing international personnel in the 2010 budget,” he said. “We see some enhancement.”

He said no cuts are expected in research and market development. “We will continue an aggressive emphasis on research and market promotion of cotton performance.”

A celebrity marketing campaign will also continue for 2010, but Worsham said print advertising will be cut.

“Sustainability research is a key throughout the global supply chain,” Worsham said. “We will make no budget cuts in sustainability emphasis.”

He said personnel cuts will be made from attrition first. Some vacant positions will not be filled. “But we also will have some layoffs in 2009. In 2010 we will have 140 fulltime people.”

About half of CI’s employees are involved in the global product supply chain. “It’s a people intense sector.” About 7 percent of the CI workforce is involved in agricultural research.

Worsham said the company operates with four main segments — consumer, product, fiber and administration. The consumer side gets a significant hit from budget cuts.

Worsham said CI “has evolved as markets changed. Just 15 or 16 years ago, we were promoting markets in the United States. Today, we promote global demand and that requires more efforts in the international arena.”

“Agricultural research remains a strong point for CI. “We’re looking for ways to shorten the payback time of research,” Worsham said. “We intend no major changes for ag research. We’ve worked with a broad base for the last few years to clarify priorities.” The budget has increased from $2.7 million in 2001 to more than $5 million in 2009.

Worsham said no major EFS conferences will be held in 2010.

Product research and development will be cut 13.5 percent for 2010. Global strategy and implementation faces a 13.6 percent cut. CI will conduct several sustainability events in 2009 and 2010, including Hong Kong, Turkey, Budapest, Mexico City, Lima and Bogota. “We’ll have more mini-events, more targeted presentations,” Worsham said.

Consumer marketing takes the biggest hit, a 29 percent budget cut. Promotions will focus on television with print ads eliminated. “TV is still the best place for CI,” Worsham said. TV will include new celebrity messengers. “Our strategy is to get people talking about cotton.”

He said CI may broaden its audience to a more general population in 2010. The “Fabric of Our Lives” effort also will include a national mall campaign with promotions planned for some of the nation’s busiest shopping venues.

“Our budget reduction is severe. But we have a plan to deal with it.”

Mark Lange, National Cotton Council president and CEO, said the Council staff has worked on a 2010 budget for the past 6 weeks. “We’ve been working with a budget based on a 17 million bale cotton crop,” Lange said. “We simply don’t have that much cotton. It’s closer to 13 million bales.”

He said NCC would reduce its budget to bring it in line with the crop size. “The Council will make adjustments to be fiscally responsible."

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TAGS: Cotton
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