VOL. 125 | NO. 241 | Monday, December 13, 2010
A story from The Memphis News
On newsstands throughout the city
By Andy Meek
Carol Perel points from her office to the other side of the ground-floor lobby at 65 Union Ave.
Keith Elzie, left, and Matt Bradd class cotton samples at ECOM USA Inc. on Front Street in Downtown Memphis. (Photos: Lance Murphey)
“That trading floor,” she says, “is the Graceland of cotton.”
Perel, director of operations for The Cotton Museum at the Memphis Cotton Exchange, was referring to what’s now the monument to a bygone era, when Memphis’ Front Street afforded a veritable front row seat to the frenzied pace of cotton commerce.
It was a trade that began in Memphis before there even was a Memphis. And in the years since The Cotton Museum’s creation in 2005, traders, farmers and other visitors from around the world prove Perel right by stopping in to see firsthand the relics of and the story behind the white gold that helped put Memphis on the map.
It’s the story of a product and an industry that’s still evolving, with some major chapters currently in progress.
Following the trend of some of its fellow hot commodities like gold, cotton saw prices go on an historic run this year, approaching Civil War-era highs. Cotton prices rose 93 percent between mid-July and early November, according to FTN Financial chief economist Chris Low.
That’s attributable to a host of factors. There’s been a ramp-up in demand from economies like China’s. India recently moved to restrict cotton exports. And flooding in Pakistan damaged that nation’s crop and dealt a larger hit to the world’s cotton supply.
Cotton prices have come back down to earth in recent days, but at press time, they were still roughly double what they were at this time last year.
Investor’s Business Daily reported two weeks ago that higher cotton prices, along with higher labor and shipping costs, are harbingers of “apparel inflation” in 2011.
“We were seeing some steady increases in price in 2009,” said Gary Adams, economist for the National Cotton Council of America. “Cotton demand on a global basis was recovering after the dip it took in the recession. So we had a situation where demand was building at the same time the crop harvested in the fall of 2009 was the smallest harvested on a global basis since 2003.”
Demand recovered – surged, in fact – and going into the summer and fall of 2010 the market was tighter than anticipated, Adams said, a trend that has local ramifications.
Mike Demster, vice president of international business development for the Greater Memphis Chamber, said the cotton industry and agricultural sector in general are still key components of Memphis commerce.
“The agricultural sector in general is one of our top four sectors each year in terms of exports,” Demster said. “It also has a big influence on our logistics sector here.”
Elisa Redmond of Dublin, Ireland, left, speaks with Carol Perel, director of operations, inside The Cotton Museum of Memphis, where the old trading floor of the Memphis Cotton Exchange is recreated.
For Exhibit A of what the recent volatility and industry changes have meant for the marketplace, look no further than Memphis-based Dunavant Enterprises Inc., long regarded as one of the kings of world cotton.
The Dunavant family made a strategic decision to pursue other ventures and exit the cotton business after working in it for more than 50 years.
The company officially shifted gears this year, finalizing the sale of its global cotton operations in the spring to Allenberg Cotton Co. Dunavant is putting a new emphasis on the know-how it developed to move cotton from Point A to Point B and has announced the expansion of its global logistics division as the company’s new focus.
Demster said the influence of cotton and agricultural commerce on the local logistics industry is natural – you can’t sell stuff if you don’t efficiently move stuff, which helps explain Dunavant’s dramatic transformation.
The shift was cemented in April when Allenberg bought Dunavant’s headquarters at 3797 New Getwell Road, paying $1 million for the 63,662-square-foot facility.
“What we have discovered is that one of the biggest reasons for our success has been the process in which we are able to deliver product in a timely manner throughout the globe down to the most remote areas,” said William Dunavant III, CEO and president of Dunavant.
“It was apparent to us that we should continue to capitalize on our resources and experience in global logistics and replicate our best business practices for other industries and commodities.”
The changing tide of cotton signals another chapter for the industry, whose deep roots include the more than 100-year span that ended a few decades ago, when Memphis’ famed Cotton Row was the stretch of Downtown where speculators and traders made and lost fortunes buying and selling cotton.
It was the business surrounding the planting, harvesting and sale of cotton that gave Downtown its own version of a bustling Wall Street trading floor. It also gave the city the colorful, celebratory series of parties and events once known as the Cotton Carnival – Memphis’ version of Mardi Gras.
Visitors to The Cotton Museum today can walk outside and read a poem engraved on a plaque that is almost an homage to the heyday of Cotton Row, with the poet inspired by “memories of the past” and wanting “to stay until the very last, on Front Street.”
Layton Daglish of Queensland Cotton checks cotton bales inside a new 252,000 square-foot cotton warehouse for Anderson Clayton Corp., a division of global cotton distributor Queensland Cotton. The warehouse is the company's first one in Memphis.
Inside the museum, an audio recording broadcasts traders taking care of business.
High up in the museum’s main room, there’s a large chalkboard showing cotton prices from 1939. A life-sized and lifelike mannequin holding chalk gives the exhibit the feel of being frozen in time.
The museum recently opened a 1,600-square-foot addition that includes an interactive exhibit covering the processes of cotton picking, ginning, weaving and production. A classroom is part of that new area. It seats about 30 students and has a flat-screen TV.
Visitors learn a lot about cotton and its connection to Memphis history, like how the city evolved into one of the largest cotton markets in the world, producing industry giants like the Dunavant, Hohenberg and Allenberg companies.
Mementos of the past swirl around the city like cotton lint dancing in the air at harvest time. Those reminders are big and small, from the now one-man trading operations here to the National Cotton Council, now based in Cordova.
Before Regions Financial Corp. took it over, the Memphis bank known as Union Planters sported a cotton plant as its logo.
A plaque outside the Cotton Exchange building extols Memphis as the largest spot cotton market in the world from 1880 to 1930.
A group of about a dozen businessmen once met around the “cotton table” every day for lunch Downtown at The Little Tea Shop. Owner Suhair Lauck said patrons there at one time were given cotton bolls as souvenirs.
Today, the cotton industry is heaving in the wake of the technological advances and price volatility that has reshaped so many large swaths of the American and world economies.
Memphis offers a good snapshot of why that’s the case. At one time, Front Street buzzed with activity from the several dozen cotton firms that operated in and around there.
Technological advances, consolidation, general business pressure and other forces cleared out most of them. For today’s cotton trader, some of the key tools of the trade include a computer and a telephone.
“There’s not that many still in Memphis, which doesn’t really mean anything, because everybody’s in cyberspace anyway,” said cotton merchant and cotton museum founder Calvin Turley. “It’s not the same kind of question that it was at one time.”
Cotton price spikes have been getting a lot of ink in the financial press lately. But Adams said data tracked by the National Cotton Council isn’t showing an impact yet at the retail level, and he doesn’t necessarily foresee any kind of big increase in prices coming within the next couple of months for clothing.
“I would think we’d see cotton fabric prices increase a little bit,” Adams said. “But you’ve got to keep it in perspective. The amount of cotton in a pair of jeans is probably less than two pounds of cotton.”
In a T-shirt, he said it’s less than half that amount.
The cotton calendar usually involves planting in the spring months like April. It’s normally harvested around October then processed into bales that are marketed. Merchants and co-ops market that cotton to textile mills.
Adams said marketing cotton is a year-round activity. And the ebbs and flows of the cycle give an idea why major price developments today may not fully trickle through the system until well beyond tomorrow.
“The cotton being processed by textile mills right now may have been processed several months ago, and it may not work its way through the system for several more months until out in 2011,” Adams said.
“With the market stronger now, that also can factor into what farmers will do in 2011.”