Pepper Farm & Cotton Plus
by Keith Richards 
(This article is excerpted from Making It On the Farm: Increasing Sustainability Through Value-Added Processing and Marketing, published in 1996 by the Southern SAWG.) 
 
O'DONNELL, Texas--From La Rhea and Terry Pepper's yard, you can turn in any direction and the view is the same--rows and rows of cotton plants in flat fields as far as you can see. Step inside their house, into the office of Cotton Plus, and you'll see cotton in another incarnation, as bolts of cloth, batting, T-shirts, caps, and tote bags.

The Peppers farm 1400 acres of cotton and corn on the southern edge of the Texas High Plains. About half of the land, including the 640 acres that they own, is farmed organically. Terry manages the other half conventionally, primarily because their landlords feel an organic crop would be too risky.

LaRhea runs their other business, Cotton Plus, that turns those rows of cotton plants into marketable, value-added products. The latest are lines of organic facial pads, cotton balls, and tampons under their "Organic Essentials" division. 

Why Are Farmers Making Tampons? 

In the early 1990s, several cotton growers on the High Plains began converting to organic production. Terry and LaRhea grew their first organic crop in 1991.

The Peppers contracted with a single buyer to take all of their crop that year. When the buyer backed out on the deal, they couldn't find anyone else willing to buy raw organic cotton. Luckily, La Rhea (who studied fashion merchandising at Abilene Christian University) had made several contacts with buyers interested in a finished product, so they contracted with Mission Valley Industries in New Braunfels, TX to mill some of their bales into denim. Even though this was costly and very risky, they decided that adding value to their crop was the best way to get it sold. As La Rhea says, "You can't wear a 500-pound bale of cotton."

The risk paid off. LaRhea sold all of the first batch of denim and contracted with Mission Valley to make more. As their relationship developed, Mission Valley agreed to buy additional batches of the Peppers' raw cotton. Once it was milled into fabric, the Peppers bought the denim back and sold it to organic buyers. LaRhea and Terry realized that if they wanted to sell their cotton for what it was worth, they could no longer produce a crop and let someone else take responsibility for processing and marketing. They had to create products and develop markets themselves. 

Formed a Cooperative 

Other organic cotton producers were having similar problems in the marketplace in the early '90s. Before switching to organics, most had specialized in production. Marketing consisted of selling raw bales to the local mill at the going government supported price. Now they had to find a mill willing to work with the organic fiber, negotiate a price in this new volatile market, and arrange for delivery. Farmers were calling the few mills who were buying organic cotton and undercutting each other due to marketing inexperience. Additionally, buyers at the mills didn't like dealing with so many farmers.

Meanwhile, an organic cotton growers association had been started to provide an educational network on the High Plains. In the Fall of 1991 at a meeting in the Peppers' home, members of the association decided to market their organic and transitional cotton cooperatively. The Texas Organic Cotton Marketing Cooperative (TOCMC) was formed with about 40 farm families.

Terry says, "At that point most people didn't have much to lose. They thought, 'we might as well try this.'" The Peppers felt more vulnerable than others since they had started developing markets, but realized they couldn't deliver a consistent supply as the only producer. So they joined in, with their new company, Cotton Plus, designated as the marketing arm of the co-op.

At first, most of the other growers hoped to simply sell raw cotton and not get involved in the rest of the industry, according to Terry. But as more and more members of the co-op were drawn into marketing decisions, they also saw the need to create products, develop markets, and promote what they were doing. Not only was it a necessity, but it also offered opportunity for greater profit.  

Helping To Create an Industry 

It hasn't been easy to pioneer a new product. La Rhea says, "It takes a lot to start a virgin market. We might as well have been selling baby elephant eggs. In fact, selling baby elephant eggs would have been easier... than working around the existing conventional cotton market."

At each stage of development, Cotton Plus has built relationships with mills by initially assuming most of the financial risk while La Rhea aggressively developed markets for their products. The research and development work has taken a tremendous sacrifice of time and energy with no reward for LaRhea--she still hasn't drawn a paycheck--other than to see her organic cotton sold.

In 1992 Cotton Plus started to offer other fabrics--chambray, flannel, twill. Mission Valley agreed to keep the inventory it was producing from the TOCMC cotton as long as Cotton Plus would buy it back if it didn't sell by a certain date. Cotton Plus never had to buy any back.

Soon La Rhea was selling the Cotton Plus fabric and other organic fabrics produced by Mission Valley on commission. The relationship has worked so well that Cotton Plus now represents and distributes organic cotton products for Mission Valley Industries.

One type of product wasn't enough to sell all the growers' organic cotton, though. Since Mission Valley could only produce woven fabrics, LaRhea started working with Doran Textiles in Shelby, NC to produce knit yarns. Once again Cotton Plus and the mill had to build trust and work through some initial issues, like who would be responsible when problems came up in the spinning. Personal contact helped to pave the way for a healthy business relationship. Terry says, "When you go to visit a mill, the interchange of people creates a situation where you're no longer adversaries, where you're not butting heads anymore." Then you can start solving problems and working together.

Doran did commission spinning for TOCMC through their 1992 crop before they started to buy their cotton outright in 1993. Cotton Plus now acts as a converter for Doran Textiles. 

Adding Value to Every Last Fiber 

In the past year, Cotton Plus has put an emphasis on developing products that use lower grade, shorter staple, and left-over cotton not suited to clothing. LaRhea and the TOCMC board of directors felt it was important to close this gap for their farmers. Blankets were their first product.

La Rhea says, "We needed a project that could take lower quality cotton year in and year out. Our new line of Legacy blankets fits that bill. It has a lot of potential because it moves volume year-round." Cotton Plus started producing twin-size blankets and throws, but found that customers wanted either a queen size or a smaller baby blanket, so they are adjusting their production to the market.

The new "Organic Essentials" division will focus on developing value-added products for the health industry. Currently Cotton Plus is negotiating with some large-scale companies to carry its lines of facial pads, cotton balls, and tampons. Cotton Plus will contract to have the products manufactured and then wholesale them to other companies, who in turn, would sell them under their own brand names. This is creating quite a stir in the industry since these will be the first organic products of this type on the market.

While the product side is exciting, the employees of Cotton Plus never loose sight of their purpose. Mary Catherine Furlow, a marketing assistant to LaRhea, says, "The whole point of making these products is to serve the farmers, to use all of their organic cotton while still paying them a higher price."

Meanwhile the board of directors of the marketing cooperative is looking over several proposals from companies for other value-added products. After sacrificing so much initially, they would like to find partners in the industry who will consider bales of cotton equal to cash as an investment. Now, these farmers want to be treated as business partners, not only as producers of raw materials.  

Despite Sacrifice, Commitment is Paying Off 

Cooperatively adding value to their crops has allowed the farmers of TOCMC to sell more organic cotton at a higher return, but the co-op has lost some members along the way. The co-op is down to 27 members from the initial 40 families. Since mills that work with organic cotton can't afford to buy all the crop at once, farmers initially only get the loan value for their cotton after harvest. The co-op makes progress payments to individual members as bales are sold. Some farmers couldn't afford to wait several months or even a year before receiving full payment--or their bankers wouldn't let them wait--so they dropped out of the co-op.

Also, it's extremely difficult for farmers who have been independent all their lives to cooperatively make decisions. La Rhea says, "When a group decides to work together, these people need to be willing to sacrifice their individual rights. The people we are involved with are deeply committed."

Terry adds, "Those who are left are the diehards, the ones who are really committed. We feel lucky to be with this group of people."

As the staff of Cotton Plus and TOCMC have grown, with several people still working out of the Peppers' house, some days it can be pretty hectic. Their work and dedication are beginning to reap dividends, though. Cotton Plus now has relationships with two mills to produce woven fabrics and knit yarns. They represent and distribute organic cotton products for one mill and act as a converter for the other. The farmers' own line of 30 different woven fabrics, marketed through Cotton Plus, is carrying its own weight financially. And their blankets and health care products look like they have a bright future.

The Peppers, along with several of their neighboring farmers, are now more than just producers of raw fiber. They are partners in an industry where risk and hard work can pay off in higher economic rewards.