Economics and marketing: Is the cotton checkoff program worth the cost?
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The U.S. cotton industry operates a government- established program to enhance the profitability of U.S. cotton production through generic advertising and promotional activities intended to expand the demand for cotton. Operated by the Cotton Board, the so-called cotton checkoff program is financed by an assessment on domestic cotton sales and imports that amounted to nearly $75 million in 2007. How effective is the cotton checkoff program in expanding cotton demand? Are cotton producers and importers better off as a result of the program? That is, are the benefits to those who pay for the program greater than the costs? We analyze the answers to these questions using a modified version of the Texas Tech University World Fiber Model. We report the key average annual impacts of the checkoff program on U.S. and foreign cotton and man-made fiber and associated textile markets. Using those results we calculate the benefit-cost ratio (BCR) to producers and importers from their payments into the checkoff program. The annual return to producers averaged $5.7 in benefit per dollar of cost and $14.4 per dollar of cost to importers over the 1986/87 to 2004/05 period of analysis. The higher importer BCR reflects gains not only from additional sales of cotton fiber textiles but also from the "spillover" effects on sales of man-made fiber textiles prompted by the cotton checkoff program. The results also show that U.S. taxpayers are better off because the cotton checkoff program tends to reduce government outlays directed to cotton farmers. © The Cotton Foundation 2011.
author list (cited authors)
Capps, O., & Williams, G. W.