Reaping the Harvest

Times have never been better for Mississippi-based Staplcotn, America’s oldest cotton marketing cooperative

They like to talk about Oscar Bledsoe down in Mississippi cotton circles.
        Bledsoe was a local cotton grower who grew so irate after overhearing cotton merchants gloat over the easy profits taken from Delta farmers that he decided to form his own cotton marketing organization.
        Seventy-seven years later, Bledsoe's organization is the second-largest privately held company in Mississippi. It's the largest, oldest cotton marketing cooperative in the United States, owned by 2,500 Mid-South cotton growers.
        It's Staple Cotton Cooperative Association, or Staplcotn, the Greenwood-based company that expects to handles 15 percent of the U.S. cotton crop this year.

Autumn's hectic harvest will supply Staplcotn with two million bales of Mid-South cotton to market this year.
(Photos courtesy of Delta Design Group)

        Since its birth in 1921, Staplcotn has been committed to helping cotton growers across the Mid-South get a bigger share of their crop's profits through cost-effective marketing, warehousing, and financing.
        Today, Staplcotn stands particularly tall in Mississippi, where agriculture is the state's No. 1 industry. Every year, fanning employs more than 30 percent of Mississippi's workforce, either directly or indirectly.
        Cotton and Staplcotn are major players in Mississippi's economy . This year, Staplcotn will market 57 percent of Mississippi's expected 1.5 bales of cotton, grown on 930,000 acres. Across the Mid-South and Southeast, the co-op will handle 24 percent of the 8.5-million-bale crop. In all, Staplcotn will market 2 million bales from eight states, and sales will likely reach $700 million.
        That's an incredible amount," says Billy Percy, a Mississippi cotton grower who has served as Staplcotn's chairman of the board since 1993. "Our share of the acreage we handle is growing, and that says a lot about Staplcotn."
        Staplcotn's increasing market share is particularly impressive, since overall cotton acreage across the Mid-South and Southeast has fallen some 15 percent this year. Across the United States, cotton acreage has dropped about 1 million acres this year, due to weather problems, poor cotton prices and the switch to more attractive crops like corn and soybeans in the South.
        But the co-op's growth is no surprise to Percy. "Staplcotn offers services that no private cotton merchant in this area offers," he says. "What's important to us is that we do a good job with the cotton we're handling. That's the best way for a company to grow, because then farmers will be the best advertisers we can have."
        To those farmers, Staplcotn has more than proved its worth.
        "Having a marketing cooperative keeps the whole cotton marketing system honest," asserts Jack Hamilton, a Louisiana cotton farmer who has served on Staplcotn's board of directors for 20 years. "Farmers getting together and marketing as a group with experts to handle the business - it's a wonderful way to do business."
        The cooperative now counts members not just from Mississippi but also from Arkansas, Louisiana, Tennessee, Missouri, Alabama, Florida, and Georgia. Its 33-member board of directors (including one woman) represents growers in these eight states.
        Their "Memphis/Eastern" cotton and proximity to the majority of U.S. textile mills enables Staplcotn to be a major domestic market supplier. In fact, 80 percent of the co-op's cotton is sold to U.S. textile mills, who look to Staplcotn for "bread and butter" varieties of medium grade and staple (or fiber length). In cotton talk, that's Memphis Territory, strict low middling, 1½-inch upland cotton.
        "Mills know they can come to us with an order and it will be filled," says Percy. "They've wanted stronger fiber and cleaner cotton and we've grown it."
        Textile mills spin, weave, cut and sew Staplcotn's lint into T-shirts and underwear, sheets, towels, denim clothing, and more. Major Staplcotn customers include Fruit of the Loom, Sara Lee, Springs, Fieldcrest-Cannon, Parkdale Yarns, and Burlington Cotton Co.
        "We've benefited a great deal by the tremendous increase in use of our Memphis Territory cotton by the U.S. textile industry," says Woods Eastland, Staplcotn's president and CEO since 1986.
        Since the advent of the North American Free Trade Agreement (NAFTA) in 1996, Staplcotn also has sold a significant amount of cotton to Mexico.

		Woods Eastland, Staplcotn's president since 1986, is the son of a former U.S. Senator from Mississippi. (Photo courtesy of Staplcotn)
Staplcotn uses sophisticated computer software to scan its immense cotton inventory to come up with the exact load a mill customer wants. This Engineered Fiber System was developed by Cotton Inc., the research and promotion organization funded by America's cotton growers. "We're one of the few using that computer system," Percy says. "It makes it so easy for a mill to order 100,000 bales from us, and get that 8,000 bales a month of a very even running quality with prompt service."	Samples of cotton are rolled and tagged to send to textile mill customers. (USDA photos by Ken Hammond)

        Cotton's journey to the textile mill from the farm is, of course, Staplcotn's forte. With 12 regional offices, the co-op can offer its cotton services directly to growers.
        Through a carefully developed program, growers deliver their cotton to the warehouse of their choice. Warehousing cotton bales protects them from rain, wind and other fiber-damaging elements.
        During the short but hectic harvest season that runs from September through November, cotton pours into the warehouses from area cotton gins. The bales are stored over a period of months while Staplcotn's staff markets them. When the customer is ready for the cotton, the co-op ships the bales directly to the mill.
        Staplcotn began its own warehousing operations in 1965.
        "We could see all the profits from warehousing going into someone else's pockets, and we wanted it in ours," says Hamilton. "Plus, you can get a better handle on shipping when you're warehousing the cotton yourself."
        Over the years, Staplcotn has expanded its original warehousing plant in Rising Sun, Miss. It now owns additional warehouse facilities in Itta Bena, West Memphis, Hollandale, Rolling Fork, and Greenville. Combined, these warehouse facilities give Staplcotn the capability to store more than 900,000 bales of cotton under roof at any one time.

The co-op's extensive storage facilities include this warehousing complex at Rising Sun, south of Greenwood. (Photos courtesy of Delta Design Group)

        The warehousing division operates independently of Staplcotn's marketing operations. Growers may store with Staplcotn but not market through the co-op, or vice versa. Each division must compete for market share independently.
        While Staplcotn is storing cotton bales, it's also making it possible for members to sell them. Under the co-op's Mill Sales Program, members market their cotton through two basic options. Most members choose the Seasonal Option, where Staplcotn's staff makes the pricing (futures and basis) decisions of members' cotton. Its goal is to obtain the best average price over the crop's marketing period.
        For those grower-members who want to make their own pricing decisions, there's the Call Option. Here, the grower makes the futures market decision while Staplcotn markets the basis, the other major component of cotton's pricing.
        Participants in both options receive a cash advance on delivery of cotton to a warehouse. Additionally, progress payments are made throughout the marketing year, with a final settlement payment at season's end.
        "Normally, I put all of my cotton in the Seasonal pool," says Percy. "But this year I've got several hundred bales in the Call Option. My son is just starting in our farming business and I want him to learn about marketing and pricing cotton himself."

        Staplcotn also offers growers another valuable service. Since 1923, the co-op has provided production financing through Staple Cotton Discount Corp., or Stapldiscount, a separate division from the marketing and warehousing operations.
        "In the 1920s and '30s, many farmers were unable to get financing," says Hamilton, who's also serving this year as president of the National Cotton Council. "Staplcotn saw a need - and that need is still there."
        Stapldiscount not only provides low-interest loans for cotton production, but also for raising other farm commodities including catfish. It also finances farm equipment, cotton gins and warehouses, grain bins, seed processors, and land purchases.
        For the past several years, Stapldiscount's average daily balance of loans outstanding has totaled $55 million. Most of that is in row crop production financing. A selective lender, Stapldiscount only has about 300 accounts in its portfolio.
        "Stapldiscount has had a remarkable record," says Hamilton. "That's because it's always been very conservative in its lending, and it has financed a lot of the larger operators who can show a good cash flow and are a better risk."
        Stapldiscount is a wholly-owned subsidiary of Staplcotn. The two cooperatives share common boards of directors and officers and a common home office in Greenwood. Cotton producers don't need to be a member of the marketing co-op to take advantage of Staplcotn's warehousing or financial services.

        Over the years, Staplcotn has survived attacks by threatened Memphis cotton merchants, Mississippi River flooding, the boll weevil, the Great Depression, and the industry-changing conversion from hand picking to mechanical harvesting in the 1950s.
        The last couple of years also have brought tough times to the cotton business. A dramatic increase in cotton acreage in the Mid-South and Southeast, starting in the early 1990s, led to huge crops that helped drive down prices. In the last two years, cotton prices have dropped to 70 cents a pound. That's well below the breakeven point for cotton farmers.
        At the same time, production costs are rising for farm equipment, fuel, fertilizer and chemicals. Under the provisions of the 1996 Farm Bill, government subsidies for cotton are declining. And there's always the concern that synthetic fibers may captivate the fashion and textile industry once more.
        But many expect a turnaround for cotton growers soon. "The cotton market is making a comeback," says Hamilton. "And cotton acreage is coming back too. The Boll Weevil Eradication Program is going to help bring cotton back. In fact, this year, I have my best crop ever. I have no great concerns about the future."
        That turnaround can only mean even better times for Staplcotn. But in a business driven as much by global competition as by Mother Nature, Staplcotn knows better than to take its success for granted.
        "Over the years, we've had our ups and downs," says Eastland. "We've been doing extremely well but we don't want to get complacent."

And, in keeping with a philosophy inherited straight from Oscar Bledsoe himself, Eastland adds, "At Staplcotn, we realize we've got to earn the farmers' business. As long as we keep that in front of us, well be okay."

The fluffy white bolls that emerge each fall on millions of acres across the South not only account for Staplcotn's strength, but help bolster the economy of Mississippi.
        Cotton is, after all, the most popular fiber in the world, worn by three out of four people around the globe. The fiber has also been part of the Mississippi landscape for almost two centuries.
        "Cotton is the greatest rural development tool of any crop in Mississippi," says Woods Eastland, Staplcotn's president and CEO. "A cotton grower here spends $500-$600 an acre to raise cotton and in doing so, supports the greatest infrastructure of all crops."
        Cotton's infrastructure - gins, cottonseeddelinters, oil mills, marketers, trucking firms, and other distributors amounts to some 4,000 cotton-related businesses that generate another 22,000 jobs for Mississippians.
        "Cotton adds more jobs in the rural economy than any other crop we can raise in the Southeast and Mid-South," Eastland says.
        'Today, Mississippi is one of the nation's leading cotton producers. In cotton acreage and the number of bales produced, Mississippi is usually among the top four states. The state's growers annually produce about 1.5 million bales from roughly 1 million acres. The cotton crop brings in some $625 million a year, making it Mississippi's third-largest agricultural commodity.

Yazoo Valley Oil Mill: Cottonseed processing co-op generates millions more dollars for cotton growers

        While Staplcotn is shipping 2 million cotton bales a year to textile mills, its "sister" co-op is quietly generating millions more dollars for Mid-South cotton growers.
        Yazoo Valley Oil Mill, a cottonseed processing cooperative headquartered in Greenwood, Miss., last year earned $80 million in sales with the cotton by-product that often takes a back seat to the better-known cotton fiber.
        But there are variety of lucrative uses for cottonseed, from cooking oil to cattle feed to cellulose used in foods and plastics. In fact, 10-15 percent of cotton's income comes from its seed.
        "Last year, we processed about 1,400 tons of cottonseed a day," says John Stewart, secretary-treasurer of Yazoo Valley Oil Mill. "We crushed more than 400,000 tons."
        With eight locations across Mississippi, Louisiana and Arkansas, Yazoo Valley is owned by 100 cotton gins and employs 200 people. It is among the top 100 privately owned companies in Mississippi. William G. Clark serves as Yazoo Valley's president.
        Profits from the cottonseed are returned to Yazoo's gin-members, who in turn pass on the money to their farmer-owners. Most of them are the same growers who own Staplcotn.
        "The strength of Yazoo Valley is the support of our member gins," says Stewart. "They supply us with the raw product we process. Without their support, we wouldn't be a viable business."
        Cottonseed oil and meal account for roughly 70 percent of Yazoo Valley's business. One major market is the catfish industry. With its high protein content, cottonseed makes a good meal supplement for catfish as well as cattle. Yazoo also sells whole cottonseed as a food supplement for dairy cattle.
        The co-op also processes cottonseed into oil, which finds its way into snack foods, shortening, cooking oil and salad dressing. Another product is created with the linters, or the short fuzzy lint left on the seed after ginning. Yazoo Valley sells the linters to "bleachers," who remove the cellulose from the fibers and sell it to makers of plastics, cosmetics, even pancake syrup.


Yazoo Valley Oil Mill processes cotton seed for use in cooking oil, cattle feed and as an ingredient in a number of snack foods. (Photos courtesy of National Cottonseed Products Association)

Recent cutbacks in cotton acreage have hurt the industry's infrastructure - the gins, the cottonseed processors like Yazoo Valley, and others. These businesses have been contending with reduced volumes and resulting higher per-unit production costs.
But Yazoo Valley has taken a pragmatic approach to the current cotton climate. "Even though there's not a lot we can do about the reduction in cotton acreage," says Stewart, "we can continue to try to reduce our costs to keep them in line with the reduced volume."