Positive returns from Cotton Research and Promotion Program

19 Nov '11

4 min read

An in-depth, independent economic effectiveness study of the Cotton Research and Promotion Program (the Program) concluded that the Program generates a positive return for U.S. cotton producers and importers of cotton products. The study also concluded that the Program generates benefits for U.S. taxpayers as well.

According to the peer-reviewed economic analysis conducted by Forecasting and Business Analytics, LLC, the Cotton Research and Promotion Program has generated the following positive economic returns:
• U.S. cotton farm prices averaged 5.4 cents per pound higher;
• U.S. cotton production averaged 500,000 bales higher;
• Annual world consumer demand for cotton was higher by 2 million bales per year;
• U.S. mill consumption of cotton was 1.2 million bales higher than it would have been without the program; and
• U.S. importers of cotton products increased profits by an average of $900 million per year.

The study concluded that for the period 1986 to 2010, the Program had generated an $8.80 return for each dollar invested by producers ($4.2 for producers and $4.6 for the U.S. government) and, for the 1992 through 2010 period, a $10.7 return (after-taxes) for each dollar invested by U.S. importers of cotton products.

Additionally and just as important, the Program generates savings to the U.S. government even though it is exclusively funded by U.S. cotton producers and importers of cotton and cotton products.

William A. Gillon, President & CEO of The Cotton Board, which oversees the Program stated, "This detailed economic analysis of the Cotton Research and Promotion Program shows very clearly that producer/importer promotion programs can generate positive returns through coordinated, effective research and promotion of their products. A research and promotion effort of this size and scope cannot be carried out by individual cotton producers and that is the beauty and value of this Program.

Cotton producers benefit, users of cotton and cotton products benefit, and taxpayers benefit. Clearly, research and promotion programs can help create revenue and jobs for agriculture and closely related industries. This study indicates the Cotton Research and Promotion Program is a clear example of a government/private sector partnership that has generated huge dividends."

In December 2010, the Cotton Board contracted with Forecasting & Business Analytics, LLC, a firm that has significant experience in analyzing check-off programs. The researchers reported preliminary findings to the Cotton Board during its March 2011 meeting stating, "Unequivocally, cotton producers, importers and the government benefit from the check-off program." The findings were based on a series of integrated mathematical models that describe the U.S. and global fiber markets.

These models were based on more than 25 years of data, and include as variables Cotton Incorporated's marketing expenditures, agricultural research expenditures and non-agricultural research expenditures – all of which were shown to be significant in affecting either demand or profitability. The preliminary report was subjected to a peer-review process and review by the Department of Agriculture before it was considered to be final.

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