Findings from an economic effectiveness study of the Cotton Research & Promotion Program (CR&PP) show that the Program, administered by the Cotton Board and conducted by Cotton Incorporated, continues to be very effective in its activities executed on behalf of U.S. Upland cotton producers and importers.
Conducted by two economics professors at Texas A&M University – Dr. Oral Capps, Jr. and Dr. Gary Williams – in part with Forecasting and Business Analytics (FABA), LLC, the evaluation sought to answer two key questions – first, how effective has the Program been at increasing the demand for cotton and cotton products and improving cotton’s competitive market position and second, what was the overall return on investment (ROI) for U.S. cotton producers and importers who fund the CR&PP.
The study confirmed the Program’s overall effectiveness by analyzing consumer, production and trade data collected between 1986-2004. In addition, the study showed a return on investment (called benefit-cost ratio by the authors) of 5.7 to 1 for U.S. producers and 14.4 to 1 for U.S. importers.
“These results explain how the higher benefit-cost ratio for importers reflects revenue gains not only from additional sales of 100-percent cotton textiles but from ‘spillover’ sales of man-made textiles comprised of other fibers in addition to cotton,” explains Capps.
The positive impact of the Program’s promotional activities is apparent in the study’s findings. Results show that between 1992-2004, cumulative retail sales revenues for cotton textiles attributed to the check-off program reached nearly $140 billion – averaging about $11 billion annually. The study also found that average U.S. consumption of cotton textiles was about 10 percent higher than would have been the case without the Program.
“To summarize the findings of the study, this analysis clearly demonstrates that importers, just like producers, benefit from the cotton check-off,” comments the Cotton Board’s Chair, Nancy Marino.
Conducted every five years, this independent study is part of a requirement established in the 1996 Farm Bill for all check-off programs. The results of this evaluation were consistent with the findings from the two past similar studies of the Program, which were conducted in 1996 and 2001.
About FABA: Authors Capps and Williams are part of Forecasting and Business Analytics (FABA), LLC – a limited liability company formed in Texas in 2001 to provide complete forecasting and business analytic solutions that improve business decision making. For more information about FABA, visit www.faba-llc.com.
About the Cotton Board: The Cotton Board administers and oversees the Cotton Research & Promotion Program conducted by Cotton Incorporated and funded by America’s cotton producers and importers. The Program works to increase the demand for and improve the market position of cotton. For more information about the Cotton Board, visit www.cottonboard.org.