Dunavant Takes a Bow
September 16, 2009 When news broke in early August of a transaction between Allenberg Cotton Company and Dunavant Enterprises – a deal that many are calling an outright buyout — I was hundreds of miles away from the Cotton International offices near Memphis, Tennessee.
Memphis is home to both companies, previously two of the largest cotton traders in the world. It’s also the base of our Cotton Media Group, and generally where I operate our website, Cotton247.com. In short, Memphis was where I needed to be when such monumental news broke. When a story as big as that breaks, most media outlets require all hands on deck to cover each angle. Cotton International Group Editor Henry Gantz dove head first into the story that day, and compiled some of his research in a story on page 29 of this issue.
But the news of Dunavant’s exit from the cotton industry was unfortunately not a complete surprise. The two companies confirmed they were in talks to merge their global cotton businesses, although Dunavant representatives acknowledged that the new company would either retain Allenberg’s name or take on the name of Allenberg’s parent company, Louis Dreyfus Commodities. The company’s merger with Allenberg marks what I would consider the third major U.S. business in our industry to sink in the past calendar year.
In October, Paul Reinhart Inc. announced it was filing for bankruptcy, citing a major liquidity crisis tied to losses on their futures contracts. The following month, Weil Bros. Cotton announced that it too would exit our industry after 130 years of admirable operations. Both companies cited industry hardships as major reasons for their respective exits from the cotton trade.
The effects of the price spikes in the futures market in March of last year served as a setup punch for what would turn into months of depressed demand and market volatility for cotton. The hangover affect of that one-two punch is what ultimately knocked Dunavant out of the industry.
Still, there is a sense of shock at the loss of the Dunavant name from the cotton world. For decades Dunavant has been a name synonymous with the cotton trade here in Memphis and around the world. At one time, Dunavant Enterprises was the world’s largest cotton merchant. Just this last spring, at the American Cotton Shippers Association’s annual meeting in Chicago, past ACSA President William B. Dunavant Jr. was on hand to watch as his son, John Dunavant, assumed the role of ACSA President himself.
Earlier this year, a merchant told the staff of Cotton International that in order to survive our current economic climate, cotton traders would have to be large enough to diversify but small enough to make changes efficiently. After seeing some of the largest and most well respected names in the industry fall under the current recession, we are starting to take heed of those words.
Without a doubt, the merchants who remain here in Memphis understand the significance of Dunavant’s exit. With this move comes the harsh reality that, even among those businesses who have managed to survive this far, no one is immune to this market’s conditions. As fewer and fewer merchants populate the offices of Front Street in downtown Memphis, the city itself begins to take on a different feel. Perhaps that reality will be most palpable when the merger of Dunavant and Allenberg — set to be finalized within this quarter — leaves our industry without the Dunavant name for the first time in decades.
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