When cotton quality and yield takes a dive as it did because of weather problems in 2002, integrity may be the best card to play in marketing the crop.
“You must communicate to your customer as soon as possible of the potential of a problem with deliveries,” says Mike Quinn, president and general manager of the Carolinas Cotton Grower Cooperative. Quinn discussed marketing cotton when it does not meet your customer's profile at the 2003 Beltwide Cotton Conferences in Nashville, Tenn. “Last minute notifications of potential problems are simply not in the best interest of you or your customer when trying to resolve this issue.”
Communication, past performance, high ethical standards, relationships and proper calculation of advance sales will help smooth out the rough spots of a difficult production and marketing year.
“Once these issues are in place, then you can begin to discuss a solution to a bad crop year with your customer,” Quinn says.
Bad weather hit cotton hard across the Belt this year, but especially hard in the Virginia-Carolina area. Monsoon-type rains created by an El Niño-weather pattern at harvest followed a hot, dry summer. “I know many producers from across the Cotton Belt experienced adverse conditions, but I truly believe the Carolinas were hit the hardest.”
Weather hit both yield and quality. “Yield loss is a difficult issue and quality loss is a difficult issue, but when you have both at the same time, it's extremely difficult,” Quinn told the group.
When things go from bad to worse in the field, it's important to have already established a track record with a customer. “I have found that the best solution for dealing with adverse situations does not necessarily begin when the problems arise,” Quinn says. “Having a track record of delivering the quantity and quality sold on time establishes the fact that your customer is important to you.”
Practicing an ethical standard beyond the basic requirement also becomes important. Quinn says every business transaction involves three major aspects: price, service and relationship. Concentrate on one aspect exclusively to the detriment of all. “Your price must be fair… your service must strive to be the best… and the relationship you establish with your customer should be one of respect and honesty. Ethical business practices… are the intentional acts of people of integrity.”
Understanding your customer's operations will also help you adapt to the dynamic, ever-changing marketplace, Quinn says. “In this world of just-in-time deliveries and low inventories throughout the supply chain, it can be a stop-and-start affair.”
Cotton marketing is all about risk management. One way to reduce risk is to calculate pre-harvest sales. Accurate calculations of pre-harvest sales “should result in being close to the standard deviation around the mean in terms of yield and quality,” Quinn says. This is a good risk management because U.S. supply exceeds demand to the tune of 7 million bales. “If you don't sell when the mill customer wants to buy, a large portion of your inventory will be counted in the category of carryover stocks.” To further reduce risk, sales off this unknown, predetermined quality should be spread out over several customers.
In some cases there simply may not be a good solution to marketing cotton in a bad year, Quinn says. “As a supplier, you may be faced with delivery or breach of contract. Fortunately, most sales agreements are made subject to the Southern Mill Rules, which were written for the benefit of both the buyer and the seller.
“We are all in this together: Producers, ginners, warehousemen, merchants, crushers, cooperatives and manufacturers,” Quinn says.
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