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Effective marketing could easily offset rising operational costs

What you don't know could cost you $30,000 at the end of this cotton growing season. If you're counting, that's enough to purchase around 6,500 gallons of diesel fuel and enough to fertilize 200 acres of cotton at today's prices. Looked at another way, it's enough to offset the increase in both fertilizer and fuel costs over last year on 788 acres of cotton.

According to a survey, $30,000 is a rough average of the additional profits growers achieve annually after graduating from the Texas A&M Master Marketer program, so it's not out of the realm of possibility.

The bottom line is that any extra money you can squeeze from the market today will not only offset some of your skyrocketing fuel and fertilizer costs, but could keep you in business on the eventuality that farm programs benefits are reduced.

Cotton Forum

Cotton producers and marketers can take an important step toward improving their marketing skills at the annual Cotton Forum, to be held July 6-7 at the New York Board of Trade in New York City.

The events begin with a mock trading session on July 6, a much tamer version of the real thing. Producers from all over the United States get into the pits with real traders in a simulated trading session.

The Cotton Forum concludes on July 7 with the Cotton Roundtable, where cotton market analysts provide outlooks on the cotton markets, and marketing strategies. Afterwards, attendees watch the opening of futures and options trading in the cotton pits.

Noted Pat McClatchy, executive director of the Ag Market Network, a sponsor of the Cotton Forum, “Dramatically higher energy costs have led to much higher farm production costs. This has squeezed profitability on individual farms and led to farmers seeking new ways to increase revenues. One way to do that is through better marketing of crops.

“This has led to greater interest among farmers for attending seminars and learning more about cotton, and the July Cotton Forum meeting is one way they can go to the Exchange, learn the function of the Exchange and become better marketers.”

McClatchy noted that on the typical farm, very little time is given to marketing. “The feeling is that government farm programs will provide the revenue they need, or that turning over all their marketing to a cooperative is the way to go.

“As we look at successful farm marketers around the country, what we're finding is that they take a diverse approach to marketing. The very best marketers might have part of their crop in a cooperative, part of their crop may be turned over to a professional marketer and another part may be handled by the farmer himself. They don't have it all in one source.

“But no matter what you do, improving your marketing skills is critical. Being able to improve those skills is still very important. There is a greater sense of urgency among farmers today to seek out ways to improve their profitability with much higher production costs.”

Learning experience

Larry Ward, a cotton and peanut producer from Atmore, Ala., was one of a dozen or so cotton producers attending the Cotton Forum in New York City last year. “The mock trading session was a great learning experience.”

As for real trading in NYBOT's cotton pit, which is open from 10:30 a.m. to 2:15 p.m., Monday through Friday, Ward said, “It gives you a feeling for where the market is heading that day. You instantly know what's going on in the market.”

Ward is no novice to marketing. He uses a software package which downloads complete two- and four-day moving-averages for commodity prices each night. “I also use a firm, Common Sense Commodities, which sends me charts and its picks each night.”

Ward “moved into spreads last year, either bull spreads or bear spreads, to let somebody else pay for the cost of them. I was very successful last year. Just about all my trades in cotton have been profitable.”

Coley Bailey Jr., who farms about 2,400 acres of cotton near Coffeeville, Miss., said the speakers at the Cotton Roundtable were a big draw for him.

Yazoo City, Miss., producer Rob Coker, who raises cotton, corn and soybeans, said the Cotton Roundtable “gave me a first-hand look at the market conditions and where prices were headed.”

The mock trading session “was very enjoyable and made me realize I'm glad I'm a producer and not a trader. It's amazing that they can think on their feet as quickly as they do. They know exactly what they are doing, when they're doing it and why they're doing it, but if you look at it from the outside, you don't think they have a clue, they're just yelling and screaming, buying and selling. But they are very sharp people.”

Bryan Bone and his son, Justin, who produce cotton near Bakersfield, Calif., were interested in the educational aspect of the Cotton Forum. “Justin is an ag business major, and I wanted to give him the opportunity to come here and be right in the pit to get an idea of what really happens,” Bryan said. “It's a lot different than sitting somewhere and watching the screens.”

When asked about Cotton Incorporated's sponsorship of the events, Jeanne Reeves, associate director of ag research for the organization, said, “Learning about futures and options is something producers can do now to add to their bottom line. It's important to see everything in person. Producers are removed from that experience because all these trades are executed without them knowing how it's done.”

The event is sponsored by NYBOT, Certified FiberMax, Cotton Incorporated, Ag Market Network and Farm Press Publications.

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