Staple Cotton Cooperative Association (Staplcotn)

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Staple Cotton Cooperative Association (Staplcotn)

214 West Market Street
Greenwood, Mississippi 38930-4622
U.S.A.
Telephone: (662) 453-6231
Fax: (662) 453-4622
Web site: http://www.staplecotn.com

Cooperative
Incorporated: 1921
Employees: 250
Sales: $235 million (2005 est.)
NAIC: 424590 Other Farm Products Raw Material Merchant Wholesalers; 493110 General Warehousing and Storage Facilities

Based in Greenwood, Mississippi, Staple Cotton Cooperative Association (abbreviated Staplcotn) is the United States’ largest producer-owned cotton marketing cooperative as well as the oldest. Each year Staplcotn markets more than four million bales of Memphis/ Eastern cotton, sold mostly to domestic manufacturers of men’s knit underwear and T-shirts, knit casual wear, denim, fleece wear, sheets, and towels.

Serving more than 4,500 members in ten southern states, the association maintains 14 regional offices as well as 16 warehouses in Mississippi, Arkansas, and Louisiana. The warehousing division is kept separate from the marketing arm, allowing growers to choose whether they want to market or store their cotton through Staplcotn or take advantage of both services. Moreover, the association also owns Stapldiscount, a nonprofit subsidiary that provides low-interest financing to members as well as nonmembers to help them purchase and improve land, acquire farm equipment, and procure other agriculture-related services. Staplcotn also publishes StaplReview, a quarterly publication covering matters of concern to Southern cotton farmers.

SEEDS OF STAPLCOTN PLANTED IN 1919

The man behind the founding of Staple Cotton Cooperative was Oscar E. Bledsoe, Jr., who farmed several thousand acres of long staple cotton in Mississippi. After World War I ended in November 1918, the world economy went into recession and inflation soared. As a result, cotton prices were unstable during the 1919 harvest, and cotton growers found themselves, more than ever, at the mercy of the cotton merchants who set the price. Already disgruntled with the situation, Bledsoe was spurred to action by a train ride to Memphis in the fall of 1919 that has taken on legendary status in cotton circles. He listened in on the conversation of a pair of Memphis cotton merchants bragging about the sharp deals they had just concluded. In a single deal, one of them claimed, he had earned his entire salary for the year. Bledsoe soon realized that his crop was among the spoils being discussed.

Incensed, Bledsoe decided to find a fairer way for growers to market their cotton, and was soon exploring the idea of forming a grower’s cooperative, hiring Californian Aaron Shapiro to help him. The California citrus growers had set the standard for agricultural cooperatives in the late 1800s when a number of associations banded together to form the Southern California Fruit Exchange and gained leverage over the middlemen that had been gouging growers. Soon they were selling their highest-grade oranges and lemons under a brand name coined by the Exchange’s ad agency: Sunkist. The brand became so successful that the Exchange changed its name to Sunkist Growers.

Bledsoe began to share his plans with other Mississippi Delta growers. In the spring of 1920 ten planters agreed to contribute $1,000 each to establish a cooperative, and their backing prompted others to at least attend one of the general meetings the organizers held that summer. At the same time a formal committee of organizing directors was established. Growers were recruited to join the association, and they signed a contract and marketing agreement. Should the association fail to reach a goal of 200,000 bales for representation by September 15, 1921, the growers could opt out. Should the amount fall below 100,000 bales, all contracts would be void. In May 1921 the membership campaign closed, and the nascent cooperative had a commitment of 216,000 bales from 1,800 members.

Bledsoe’s group was ready to form a legal selling cooperative, something that was not permitted under Mississippi law. Rather than wait for the legislature to accommodate them, the organizers simply filed papers in neighboring Tennessee where the laws were more favorable. Although the Staple Cotton Cooperative Association was incorporated in the state of Tennessee on May 23, 1921, its operational headquarters would be Greenwood, Mississippi, where two days later the first meeting of the organizing directors was conducted and plans were made to hold a general meeting at which time officers of the association were to be elected. It took place on June 14, 1921, in the Gayoso Hotel in Memphis. Hardly a surprise, Bledsoe was elected Staplcotn’s first president and chairman.

Many of the association’s members failed to live up to their commitments. The first crop marketed in 1921 totaled little more than 156,000 bales, provided by fewer than 1,500 members. Staplcotn did well enough after the first season to refund almost $300,000 to the growers, the money coming from fees that had been charged to cover marketing expenses and contribute to a reserve fund, but the officers believed the association would have to significantly increase its baleage or it was destined to fail. Baleage continued to slip, however, due in large measure to a boll weevil infestation that especially hurt some long staple cotton varieties that took longer to mature. At its nadir during the 1923–24 season, Staplcotn received just 107,000 bales to market. Nevertheless, the association managed to hang on.

STAPLE COTTON DISCOUNT CORPORATION FORMED: 1923

Staplcotn also added to what it offered to its members. In 1923 it began publishing a twice-monthly member newsletter, the Staple Cotton Review. In November of that same year Staple Cotton Discount Corporation was formed to provide financing to growers, made possible by the Federal Rural Credits Act of 1923. Incorporated in Mississippi, Stapldiscount was a stock cooperative, the shares of which were owned by Staplcotn. Borrowers were not required to be Staplcotn members.

When the Great Depression descended upon the country following the stock market crash of 1929, Stapl-discount played an even more important role for cotton growers. By the end of 1930, 15 Delta banks closed their doors, giving growers limited options in securing financing. Stapldiscount was able to obtain a $1 million loan from the Federal Farm Board, providing much needed capital to Delta growers at a time when cotton prices plummeted to just five cents per pound. To help improve productivity, in 1934 Staplcotn formed the Fertilizer and Insecticide Department, which introduced manmade fertilizer to Mississippi and in 1938 began making weed-control chemicals available.

COMPANY PERSPECTIVES

Staplcotn is the largest producer owned cotton cooperative in the United States. Along with Stapldis-count we provide a range of services to our members including domestic and export marketing, cotton warehousing and agricultural financing.

The United States’ entry into World War II in late 1941, and the resulting buildup of the military that stimulated the economy, finally brought an end to the Depression. Because cotton was deemed a vital war material, needed to produce uniforms as well as blankets, tents, and other gear, it was strictly controlled by the government. Nevertheless, Staplcotn had a place to sell its commodity. After war broke out in September 1939, European and Japanese mills ceased buying cotton. Cotton prices were capped, but at least the government factored in a reasonable profit and increased the price to account for rising production costs. The government also urged growers to produce even more cotton, and to help harvest the crop at a time when most able-bodied men were serving in the military, the government made German and Italian prisoners of war available during harvest time.

After the war, the nature of the cotton industry changed with the introduction of viable cotton harvesting machinery. While it had previously cost $40 to handpick a bale of cotton, the same amount of work could now be done for $7.50 by one of the new mechanical pickers. There was one significant drawback, however. Leaves and other debris were gathered along with the cotton, resulting in a lower grade of cotton and a comparable drop in the price it could command.

Bledsoe died in 1954. The association he was so instrumental in organizing was doing so well by this point that it had outgrown its space. A new administrative building was named after him, while a new sales building bore the name of Will Garrard, who had run the association on a day-to-day basis as general manager and was chiefly responsible for its growth, and who remained very much in charge of Staplcotn. However, his health began to fail in 1956 and two years later he died. Succeeding him as president on a permanent basis in January 1959 was Harvard-educated Dr. Charles R. Sayre, who implemented a training program to add young talent to the organization’s staff.

Sayre was also ready to meet the new challenges presented by manmade fibers. Introduced shortly before World War I, materials such as rayon received a boost from wartime shortages during World War II to become a major rival for cotton in a number of uses. Moreover, during the 1950s Staplcotn had to contend with increasing competition from overseas sources of cotton. The association reached a high-water mark in 1953–54 when it marketed nearly 590,000 bales, but by 1957–58 that number had tumbled to less than 320,000. Staplcotn bounced back in the early 1960s, and in 1962 the association received more than 600,000 bales, a new record. Staplcotn was also able to find international markets for its cotton, selling more than 100,000 bales to overseas’ spinners in 1964.

U.S. cotton growers had clearly benefited from the lowering of production costs, due in large part to improved yields, as well as from improved quality in the cotton they brought to market, but synthetic materials continued to make inroads, so that by 1965 synthetics and cotton were equally used by American mills. Sayre’s response was to place more emphasis on research and development, and he was not alone. In 1961 the Cotton Producers Institute was formed and growers contributed $1.00 per bale to fund research and development efforts. In addition, Sayre looked to add services to help members compete better. In 1965 Staple Cotton Services Association, Staplservices, was established to allow Staplcotn to become involved in warehousing. A modern warehouse and a cotton compress were then built south of Greenwood and a new, more cost effective way of warehousing cotton was developed. For many years bales had been compressed after they were received from the gin to save on storage space, but now they were received flat from the gin and stored that way, being compressed only when they were outbound. As a result, expensive receiving time was reduced.

In the 1960s and early 1970s Staplcotn also began selling farm chemicals and fertilizer to members, and became involved in grain elevators, leading to the organization of a livestock division to enter the cattle business, which was enjoying a boom period. The division raised some cattle for sale, but the prices dropped and the association soon pulled out of this noncore sideline in 1976. A more important endeavor contributing to the future of the association came in 1971 with the creation of AMCOT, a joint sales operation of Staplcotn and three other major U.S. cotton cooperatives, each of which handled a different kind of cotton, to market American cotton to textile mills around the world.

KEY DATES

1921:: Staple Cotton Cooperative Association is founded in Tennessee.
1923:: Staple Cotton Discount Corporation established.
1954:: Cofounder Oscar Bledsoe dies.
1965:: Staple Cotton Services Association formed.
1985:: Farm Bill spurs association’s growth.
1999:: Warehouse volume tops one million bales.
2001:: Staplcotn becomes largest U.S. warehouser.

While the move into warehousing succeeded, many of the activities of Staplservices failed to pay off. In 1977 Staplservices was merged into Staplcotn and a year later Sayre was asked to resign after 19 years at the helm. The association was losing money and the board believed that someone else should lead a turnaround. Hank Hodges, a protégé of Oscar Bledsoe, was named CEO, but the situation continued to worsen for the association, which began to lose market share and members who no longer believed that Staplcotn was offering the kind of services that were worth the price per bale it charged. At that pace, the association, some feared, would be out of business within four or five years.

Staplcotn changed its marketing approach, dropping the risky practice of forward contracting and introducing a Mill Sales Program which essentially allowed growers to turn over marketing and pricing decisions to Staplcotn, whose personnel had the time and expertise to call the prices. The 1981 crop served as a pilot project and the Staplcotn staff scored a major success, realizing a price of more than 80 cents per pound, far higher than what had been achieved under the Call Option, which required growers to call their own prices based on the futures market.

One of the chief advocates of the Mills Sales Program was 36-year-old Woods Eastland, who in 1981 became the association’s chairman. A Mississippi native, Eastland received an undergraduate degree from Vanderbilt University, then earned a juris doctorate from the University of Mississippi School of Law. After five years as chairman, in 1986 Eastland gave up the post to replace Hodges, who was retiring as the association’s chief executive. In Hodges’ final years he sold the chemical and fertilizer divisions, canceling out the diversity efforts of his predecessor and setting the stage for focus and growth.

BENEFITS OF 1985 FARM BILL

Because of the changes made during Hodges’ tenure, Eastland and Staplcotn were well positioned to take advantage of the 1985 Farm Bill, which went into effect a year later and introduced the concept of the marketing loan. Essentially the government guaranteed that U.S. cotton would maintain price competitiveness with cotton from foreign sources. Because a coalition of American cotton producers, which included Staplcotn, had launched a marketing program under the banner of “Crafted with Pride in the USA,” consumers were predisposed to favor U.S. products, leading to increased demand for domestic cotton.

For Staplcotn it meant a significant increase in marketing volume. To keep pace the association expanded its warehouse capacity. In 1988 the Rising Sun warehouse increased its capacity from 155,000 bales to 375,000 bales, making it the South’s largest cotton warehousing facility. The association added another 79,000 bales of space through the 1990 purchase of Itta Bena Cooperative Compress. Two years later a 70,000-bale warehouse was acquired in Tunica, Mississippi. In 1993 the association repurchased a 75,000-bale West Memphis warehouse that it had sold 15 years earlier and began expanding its capacity to more than 180,000 bales. The 1985 Farm Bill, plus the 1990 Farm Bill, eliminated much of the financial risk in cotton farming, a situation that favored Stapldiscount, which had less fear of unpaid loans.

In keeping with its prosperity, Staplcotn expanded beyond the Delta in the mid-1990s, qualifying to do business in Florida, Georgia, North Carolina, South Carolina, and Virginia. At the same time, the association continued to add warehouses in Mississippi and Arkansas, allowing it to better accommodate American mills, which were adopting a “just in time” inventory approach. By the end of the 1990s Staplcotn’s warehouse division was able to accommodate more than one million bales. Also in the mid-1990s, the association opened several regional field offices in Mississippi, Louisiana, Arkansas, Tennessee, and Georgia. In 1999 it moved onto the Internet, launching a web site to provide growers with instant account information.

After enjoying a 50 percent increase in membership in the final years of the 20th century, Staplcotn recorded more than $1 billion in sales for the first time in its history in 2000. A year later it became the country’s largest cotton warehouser, accommodating more than 1.7 billion bales. The association continued to grow in the early 2000s. By 2003 it boasted a membership of nearly 12,000, located in 43 states. To keep pace, Staplcotn launched a $4.68 million expansion program to remodel and add new space its it headquarters.

The days of operating as a regional concern were long past. Staplcotn was very much a player in the global economy whether it wanted to be or not. In the United States the export of cotton increased from seven million bales in 1997 to 17 million bales in 2005, while domestic consumption during this time fell from 11 million to 5.5 million bales. Although profit margins were slim and competition fierce, Staplcotn was well positioned to benefit from this shift. While the vast majority of U.S. mills relied on open-end spinning equipment, about 80 percent of foreign mills used ring spinning equipment, which required the long staple cotton that Staplcotn marketed.

Ed Dinger