PCCA - Plains Cotton Cooperative Association Logo PCCA Commentator Magazine Masthead. Vol. 39, No. 2 | Winter 2006-2007

Texas Tech University Conducts Valuable Research for the Cotton Industry

Economists TTU

L-R: Dr. Ethridge and Dr. Mohanty in front of the Agricultural and Applied Economics building.

Cotton Economics Research Institute

Cotton producers and the cotton industry throughout PCCA’s three-state region have found an important resource at Texas Tech University. Findings of studies by the Cotton Economics Research Institute (CERI) are providing information and gaining significant recognition for the university at a critical time for the cotton industry.

CERI’s objectives, according to its Web site, are to facilitate economic research on all aspects of cotton, particularly in Texas, coordinate economic research at Texas Tech with other research efforts within the university, and to foster the dissemination of research results. Located in the Department of Agricultural and Applied Economics in the university’s College of Agricultural Sciences and Natural Resources, CERI was founded in 1997.

Earlier in 2006, the U.S. Trade Representative offered a proposal to cut major farm income and commodity price support provisions of current U.S. farm programs by 60 percent in exchange for greater market access for U.S. agricultural commodities. The offer was made to jump-start the stalled Doha Round negotiations of the World Trade Organization (WTO). However, a CERI study of the proposal’s impact on cotton producers indicated unintended results.

Dr. Samarendu Mohanty, associate director of CERI, said his colleagues watched the debate in Washington, D.C. and decided to conduct a study.

“Our goal of this study was to see what the farmers would be getting out of the proposaL,” Mohanty said.

The study revealed increased market access for U.S. cotton would not compensate U.S. producers for revenue lost under reduced price support programs. CERI researchers reviewed a worst case scenario in which the U.S. acts alone to cut domestic support and a best case scenario in which U.S. cuts are reciprocated with full market access.

According to their report, net farm income would decline a devastating 26 percent for U.S. cotton producers if the United States acts unilaterally to cut domestic support. The scenario in which the U.S. would have full market access resulted in a 19 percent reduction of cotton producers net farm income. Steve Verett, executive vice president of Plains Cotton Growers, took the study to Congress to review the results.

“When the executive summary was presented to the congressional staffers, they were surprised to learn that more market access would not make up for a 60 percent reduction in program supporT,” Verett said.

Another recent finding by CERI predicts annual worldwide cotton production and consumption will increase by 20 million bales during the next 10 years with China’s dominance of the textile industry continuing to grow. The U.S. is expected to continue as the world’s leading exporter of cotton, but its market share is expected to decrease, according to CERI.

CERI also found the removal of all domestic support and trade barriers globally for cotton would cause the world cotton price to increase by an average of 11 percent or approximately eight cents per pound. Currently, CERI is comparing the different levels of subsidies cotton producers receive around the world and production costs of the world’s leading cotton producing countries.

Dr. Don Ethridge, professor for the Department of Agricultural and Applied Economics and director of CERI, explained why Texas Tech is an ideal location for a cotton research program.

“This is the ideal spot for a cotton economics research institute,” Ethridge said. “Within a hundred miles of the university we have production, marketing and a textile mill. CERI has helped the cotton industry, and it has elevated Texas Tech’s reputation as a research university,” he continued.

“The Cotton Economics Research Institute is the model for how a university can operate with limited financial resourceS,” said Ethridge. Faculty members work together with help from graduate students and undergraduate students.

“The Cotton Economics Research Institute will continue to do high quality research,” Ethridge continued. “We have built our reputation on research work and the distribution of the results.”

For more information, please view the CERI web site at www.aaec.ttu.edu/ceri/.