RACK SAMPLE SURVEY

1
RACK SAMPLESURVEY

• Commissioned by
• NCC's Rack Sample Study Committee
• William E. Bowen Jr., Chairman

2
Rack Sample SurveyResolution

• 10 h. encourage the National Cotton Council to
  study the practice of maintaining rack samples
  and determine if this practice can be altered or
  eventually eliminated while achieving industry
  cost reductions and new efficiencies, at the same
  time recognizing the need for samples to be
  readily provided

3
Rack Sample SurveyScope of Survey

• Define Current Warehouse Sample-Handling
  Practices and Associated Costs
• Define How and Why Buyers Samples Are Used
• Survey NOT Designed to Decide If Buyers Samples
  Should Be Eliminated.
• THIS WAS NOT A VOTE!

4
Rack Sample Survey Response Rate

• Warehouse
• 86 Responses
• 7,465,244 Bales (41 of 2003 Production)
• Merchant
• 14 Responses
• 5,600,000 Bales (31 of 2003 Production)
• Mill
• 16 Responses
• 5,034,219 Bales (80 of 2003 Mill Consumption)

5
Warehouse Handling Methods
6
Warehouse Regional Buyer's Samples Requested
7
Warehouse Net Cost
Average Cost per Buyers Sample Provided Average Cost per Buyers Sample Provided Average Cost per Buyers Sample Provided Average Cost per Buyers Sample Provided Average Cost per Buyers Sample Provided
Variable Costs Fixed Costs Revenue Total Costs
Traditional Racking 4.37 0.37 0.51 4.23
On-Demand Cut Pull 4.17 0.00 0.00 4.17
Store in Bag 1.50 0.13 0.51 1.12
Store in Bale Head 1.67 0.00 0.11 1.56

• Traditional Racking Costs/Sample Provided ? as
  Number of Samples Requested ?
• Cut Pull Costs/Sample Provided Unchanged as
  Number of Samples Requested ?
• Store in Bag Market Structure/Merchandizing
  Effects
• Store in Bale Head Very Limited Number of
  Observations

8
Warehouse Net Cost of Buyers Samples
Respondents Segments
Mid-South 2,385,922 5,235,835
Southeast 995,829 4,649,546
Southwest 547,466 758,644
West 31,772 153,579

Total 3,960,989 10,797,604
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Warehouse Summary

• Significant Regional Differences in Handling
  Practices and the Number of Samples Requested.
• Costs Vary Significantly by Handling Practice and
  Region.
• Warehouse Segment Net Cost 10.8 million.

10
Merchants Ordered and Provided Buyer's Samples
11
Merchants Buyer's Samples Provided to Customers
12
Merchant Summary

• Merchants reported ordering samples on 1/3 of
  volume traded.
• Most Samples Are Passed to Mills
• Their domestic customers are more likely to
  request samples than their intl customers.

13
Mills Buyers Samples Providedand Cut at Mill
14
Mills Distribution of Buyer's Samples Ordered
15
Mills Samples Reviewed

• Of Total Bales Consumed in 2003,
• 25 Had Sample Provided
• 22 Had Sample Reviewed
• 3.2 Had Bale Rejected Due to Sample Review
• 0.3 Had Price Adjusted Due to Sample Review

16
Mills Samples Reviewed

• Of the 25 of Total Bales Consumed That Had a
  Sampled Provided in 2003,
• 90 of the Sample Were Reviewed
• 15 of Reviews Resulted in Bale Rejected
• 1.4 of Reviews Resulted in Price Adjustment

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In Closing.
18
Producers
Cooperatives