Memphis Commodity Exchange board members

OUTGOING MCE President Michael R. Farrish, regional purchasing manager for TJ Beall Company; Johnny Pitts, National Purchasing Manager, TJ Beall Company; MCE producer member Robert Royal, and MCE incoming president John Romines, senior trader at BTG Pactual Commodities, were all in attendance for the 2015 MCE Dinner and meeting held recently in Memphis, Tenn.

MCE: Advancing the business of cotton

The business of cotton has long played a central role in shaping the development of the Mid-South’s economic, political and social landscape. When the City of Memphis was incorporated in 1826, fewer than 500 bales of fiber could be found on Front Street, but by 1861, one trading season alone recorded over 400,000 bales being brought in via railroads and riverboats.

As the reach of Memphis’ cotton trading activities expanded, some of the more forward-thinking pliers of that trade recognized a need for an organization to help regulate activities. Thirty of those “cotton men” gathered in late 1873, eventually electing officers and adopting a constitution. By mid-April of the next year, unification was attained and a formal charter was granted to officially form the Memphis Cotton Exchange.

“The primary reason the organization was created was to provide Memphis cotton and quotations to all major world markets,” says Michael R. Farrish, who served as the organization’s 2013-15 president, his second term, after also serving a one-year term from 2006-07.

The Exchange became recognized across the world for timely cotton market information, crop reports, and improved telegraph facilities. It was an arbiter for improving cotton handling and protection from weather, while simultaneously working with railroads to improve cotton handling/shipping.

“We have a long history of being involved in civic and civic-related endeavors like charity drives, and the strong stand taken in support of quarantine regulations during the yellow fever epidemics in 1878-79,” says Danny Lyons, Lyons Cotton Company. Lyon’s also serves as a director on the MCE board.

The MCE influence also played a role in the passage of the 1914 Cotton Futures Act, and its 1916 revision.

Today the organization, which has around 100 members, still conducts trade arbitrations and acts a rule-making body for international and domestic cotton trading.

“The purpose of our arbitration service is to provide an alternative to litigation, which is not only expensive, but can take months, if not years, to reach resolution,” adds Lyons.

For arbitration cases, a panel comprised of three MCE members is put together. All must be knowledgeable about trading rules, as well as the customs and practices of cotton trading activities. They each must verify they have no conflict of interest with the parties in conflict, and the parties in conflict must both agree on their appointment.

To maintain the confidentiality of resolution communications, all administrative work related to the arbitration is handled by a Dispute Resolutions Officer. “Between 2006 and 2011 we conducted a small number of arbitrations, but in 2012 and 2013, we had the largest arbitration in the history of the Exchange,” says Lyons.

The MCE Annual Dinner was held on June 1, in conjunction with the organization’s annual board meeting. “At this meeting each year, we review the organization’s financial information, address any present issues, plans or topics of interest, as well as confirm a new president,” says John Romines, who was elected president for 2015-17.

The organization has been housed in various locations through the years, but by the mid-1920s, it was relocated to its current location at Front and Union where huge chalkboards were posted with quotations of all futures markets, spot prices, gin information, acreage and consumption numbers.

By 1962, resurgence in downtown Memphis’ commercial and residential properties led to the breaking up of “Cotton Row” and by 1978, the trading room floor went silent as digital trading became the norm.

The old trading room, almost frozen in time, today serves as the signature exhibit hall and centerpiece for the Memphis Cotton Museum. This educational and historically significant venue is a must-see for anyone. “The museum, located on the southeast corner of the Front Street and Union Avenue intersection, has undergone some additional renovations over the last three months and is more interesting now than ever before,” says Calvin Turley, a Memphis cotton merchant who has been the driving force behind the development and ongoing funding for the museum.

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