RETURNING TO OUR CORE BUSINESS

HANK HODGES WAS THE VETERAN who helped steer Staplcotn through the difficulties of Jerry Sayre's last years as president. Bill Moore was the newcomer and Staplcotn's executive vice president. Each was an obvious front runner for the job of president and each had his advocates on the Board. The competition ended tragically when William T. Moore, Jr. was killed in an auto accident on Mother's Day 1978.

The following month, Jerry Sayre moved to the newly-created position of director-consultant until his retirement. Board chairman Cauley Cortright took on the added duty of chief policy officer. Dexter Walcott was named vice president of Stapldiscount.

For Hank Hodges, the long climb had ended. The man who began his career as Oscar Bledsoe's errand boy had been elected president and chief executive officer of Staplcotn and Stapldiscount.

"Hank faced a turn-around job," said Woods Eastland, then a newly elected director from Indianola, Mississippi, "and he did a very good job." "Frankly, I don't think they could have made a better choice," Bob Dilatush said. "Hank had the financial contacts. We needed financial support at the time."

PROBLEMS GALORE

Hodges moved fast to have his management team in place. They included Spann Robertson, vice president for Member Relations; Don Ford, vice president for Chemical Fertilizer and Seed Operations; Bob Montgomery, vice president for Grain and Warehouse Operations; Mack Alford, treasurer; and W W Walker, secretary.

Staplcotn's declining volume had not been matched with commensurate staff reductions. The co-op was over staffed. Manpower cuts were very painful and caused a backlash against the person doing it. Hodges cut staff, and then sought new people, especially someone to head the cotton field staff, hire the cotton specialists and train them to contact growers and sign them up. He also needed someone to head a revamped sales effort and hired Dick Tipton as sales manager.

One of the first problems facing the new president was the decision to merge Staplservices with Staplcotn. There were hard feelings over the merger. When the merger was voted on by the membership, a large group of members cast 'no' votes.

Another change facing the new president was the decision by Farmers Grain Terminal to end its management agreement with Staplcotn.

MARKETING CHOICES

By 1980, the decline in Staplcotn's market share had reached alarming proportions and the Board was ready to respond. At its December 10, 1980 meeting, Woods Eastland, head of the Cotton Marketing Review Committee, laid it on the line. He recommended only a Call Pool and a Seasonal Pool be offered for the 1982 crop.

For the 1970-77 crops, Staplcotn's share of the total cotton produced in Mississippi had fluctuated in a narrow range around 40% of the total market, whether the crop was as high as nearly two million or as low as just over one million bales.

"However, starting with the 1978 crop, we began a slide in market share of about 3% a year," Eastland said, summarizing the report of the committee headed by Mike Sturdivant. "We were down to about 37% in 1978, 33% in 1979, and in 1980 we were looking at about 30%. Members are leaving Staplcotn because they don't think Staplcotn is providing them services which are worth $2.25 a bale.

"To provide a real service, which equates with providing dollars for our customers, would be to ship this cotton. We should be a merchant of the cotton, and not just have the cotton go through Staplcotn on a forward contract to some other merchant. The margins a merchant normally makes shipping cotton from the Mississippi Delta to the Carolina mills, with cotton at 80 cents a pound, works out to about a gross of $15.45 a bale.

"Staplcotn forward contracting acres as the principal is too risky. There is too great a chance for us to lose too much money. We have already proven we have the ability to lose a lot of money forward contracting acres because we have done it.

"Forward contracting customers are leaving Staplcotn, and we are down now to where we are looking at a volume this year of about 430,000 bales total. We don't have the time now to afford the luxury of letting the pool prove itself by attracting growers to the pool in their own good time. It would take five or six years' history, and we just don't have the time.

"We are losing this market share so rapidly that if something is not done to change our marketing program immediately, Staplcotn will very easily be out of the business in four or five years. Unless our cotton marketing program is changed substantially, we will continue to lose members. We recommend that starting with the 1982 season, Staplcotn offer only pool programs. Also, we ask that Board members go all pool in 1981," Eastland said.

Eight or nine were already committed to doing so. Several Board members wanted to begin offering only a seasonal pool and a call pool.

"We were offering forward crop contracts, a call option, a seasonal option, and spot market purchase. The only way to get the grower to participate in the new plan, since it is so different from what they are used to, is to offer only these options," he said.

"What we had been doing did nothing for the grower, as far as marketing was concerned," Eastland said. " If we offered this, and the grower doesn't want it, then we just wouldn't be a marketing company any more. We will be a warehousing, money lending, chemical company. I am willing to accept that."

The Board had voted against a change to all pool marketing prior to the 1980 crop. The 1980 crop produced very low yields, because of a terrible drought. Staplcotn didn't have many acres committed to market.

It looked as if the downward trend of the Marketing Division would continue. In the fall of 1980, the Board realized how few bales Staplcotn would have available for sale. Again, the Board had to look beyond the immediate problem to provide the long-range leadership needed to secure the future of Staplcotn. It authorized the Mill Sales Program as a pilot project for the 1981 crop.

HOME RUN

"The staff hit a home run on the prices and paid above 80 cents per pound for this season. A price that high had never been paid in the seasonal pool," Eastland said.

The committee thought that Staplcotn's merchandising of the basis for the grower and getting the grower a good basis would sell the program, and all the cotton would go into the call pool. "We really miscalculated," Eastland says. "We didn't realize the growers really wanted somebody to watch the market for them and try to call their cotton for them."

Rayner joined Staplcotn almost immediately after the switch to the Mill Sales Program to develop a field staff. "Walter did a lot for Staplcotn. We were fortunate to move the Mills Sales Program like it should have moved, with all the changes," Hodges said.

"Hiring Walter Rayner was a brilliant stroke on Hank's part," Eastland said. "Walter brought a lot of the National Cotton Council mentality with him," Billy Percy said. "What he had been doing at Cotton Council was not all that unlike what he began doing at Staplcotn. Walter was the organizer and planner," Percy said.

Prior to the adoption of the Mills Sales Program for the 1981-82 season, Staplcotn was charging $2.25 per bale. "Producers were asking, " Why should I pay you $2.25 a bale when I can go across the street?," Rayner recalls. " All we were doing was handling it for some other merchant. Why should they pay us when they could go straight to them?"

"I never was very much in favor of the Call Option. Most growers don't have time to follow the markets, don't have time to stay on it every day. Ninety-nine percent of them didn't have time to put to it, but there were a few. That's why we kept the Call Option.

"It was successful, and nothing sells like success," Rayner said. Key to its success was the Board demanding that its members market all the cotton under their control or get off the Board. "That caused some hard feeling, but it got us a good Board," Rayner said. "Hank Hodges was the big mover, along with Aven Whittington and Cauley Cortright," Rayner said.

Advisory committees to the Board, based on office regions, were formed. The committee members had the same requirements as the Board members. "You can't advise it if you're not going to market it."

"Walter Rayner's contacts were amazing," Eastland said. "The role that he played in getting the grower to have confidence in what Staplcotn was offering could not be overestimated because so many of them knew him, really liked him, and had confidence in him," he said. "Hank deserves a lot of credit because he really pushed changes in Staplcotn's marketing system. For a long time Staplcotn was kind of following what everybody else did," Whittington said.

THE 1980s

The inflation boom of the 1970s led to a huge boom in land values. A lot of people came into agriculture, speculating in land values. Commodity prices were up.

In October 1980, President Jimmy Carter appointed Paul Volker chairman of the Federal Reserve Board.

The new chairman immediately convinced the board to change monetary policy to get inflation under control, precipitating a terrible washout in agriculture.

Land values went down as much as 50 percent, depending on land quality. Commodity prices also cratered. There was tremendous overproduction, and huge surpluses built up after the 1982 crop.

This had an effect on Staplcotn's Fertilizer and Chemical Divisions. Staplcotn carried a lot of accounts receivable, and the credit business began to really worry management.

Faced with that, and the amount of time it would take to get the Mill Sales Program launched, Hodges decided to sell the Chemical and Fertilizer Divisions and the grain elevators. It forced him to find a ready and willing buyer for the Chemical Division in Valley Chemical Company of Greenville. Staplcotn continued in the fertilizer business through 1983 when the Fertilizer Division was sold to Delta Purchasing of Greenwood.

Late 1982 saw the U. S. economy struggling with the worst economic recession since the 1930s.

Overproduction depressed crop prices so much that farm bankruptcies reached epidemic proportions.

To help U S. agriculture, the USDA created Payment-In-Kind (PIK). PIK used commodities in farmer-owned reserves, existing CCC holdings and regular loan stocks to compensate growers for idling land until excessive stocks were utilized.

The USDA announced the PIK Program January 11, 1983. Basically, the program offered cotton and grain growers the opportunity to reduce their planted acreage in exchange for government commodity stocks. PIK was designed to reduce production and to shift the enormous burden of major commodity stocks from the government to growers.

Skeptics in Congress and the agriculture industry questioned the prudence of the program. National news media took a critical stance against it, saying PIK was unacceptably expensive and too favorable to farmers. There were no real alternatives to PIK, and Staplcotn helped formulate PIK's cotton provisions. It was expected that PIK would take at least two years to bring supplies back into normal relation with demand.

PIK lasted only one year, however, its demise helped by the Soviet Union. No sooner was the program in place, than the Soviets surprised the cotton world by appearing on the scene in late February as buyers. Before they left the market, the Soviet Union purchased almost a million bales of high quality cotton worldwide, because flooding hit their own cotton crop at the end of their growing season.

The PIK program began reducing cotton supplies and raising cotton prices. It didn't solve all of agriculture's problems but it did buy growers some time. Without PIK, prices would have gone to the loan level and stayed there. For many producers, PIK made the difference between being in business and not being in business.

Cotton producers had little time, however, to enjoy the success of the PIK Program. The U. S. Cotton industry was hurting again, this time from sharp declines in cotton exports, caused by a strong U. S. dollar, which had increased 40 percent from its 198O levels. The PIK year was not a good year for Staplcotn. Stapldiscount vice president Dexter Walcott began to learn the marketing job, preparing for leadership.

A NEW CHAIRMAN

By 1981, Cauley Cortright was ready to step down as chairman of the Board. Seeking a younger chairman to balance the age and experience of Hodges, the Board turned to 36 year old Woods Eastland, an outspoken proponent of the successful Mills Sales Program. "Our whole job was to make the Mill Sales Program a success because the entire future of the company hinged on it," Eastland said.

The following year, Hodges and his wife jean were in a serious auto accident in south Texas, and he was hospitalized there for more than a month. That wasn't a very good year for Staplcotn earnings.

Marketing of cotton was changing. Mills consolidated the way they were buying cotton. Government programs were getting more complicated every day, and the marketing programs were extremely complicated. Hodges began thinking about following Cortright into retirement.

In 1984, Biddley Wood of Grady, AR, was the first woman elected to the Board, representing growers in the Pine Bluff area. In 1990, she was joined by Margaret McKee from Friars Point, MS, who left the Board in 1994 when she ceased farming.

LIVING WITH THE STRONG DOLLAR

In mid-1980, the dollar was extremely strong, compared to most Western European currencies. The dollar's strength persisted for several years because investors believed they could get the best and safest returns on their money by investing in America. Farmland in the Mississippi Delta and throughout the nation became prime targets for nervous European investors.

In 1985 America's textile industry created "Crafted With Pride in the USA," a campaign to influence the public to buy American-made textile products. An attempt to overcome Washington's seeming indifference to the damaging effects of the strong dollar, the campaign was funded by a coalition of cotton producers, industry, labor and manufacturers.

The strong dollar made American products more expensive to foreign buyers, and attracted cheaper imports of textiles and apparel. The situation hurt U.S. cotton growers and American textile mills, as well as producers of other manufactured goods nationwide. Almost a year passed before the Reagan administration finally dealt with the problems of the U. S. dollar. In September 1985, representatives of the world's five major industrial nations met to bring down the value of the dollar, but there was no time to relax. Already the 1985 Farm Bill was being hammered out, and new battles were brewing.

Also in 1985, Hodges reorganized the sales operation to deal more effectively with the textile mills. Dick Tipton's role in sales was shifted to export sales only and Meredith Allen, a 33 year old buyer for V & M Cotton Company in Inverness, MS joined the staff to head domestic sales. Within a year, Allen was vice president of Marketing, and Tipton had left the organization.

By the time Hodges was ready to retire, the company was doing extremely well overall. The Chemical and Fertilizer Divisions had been sold to allow management the time and effort needed to develop the Mill Sales Program.

"When I became president, we closed down the cattle operation. We sold the Chemical Division to Valley Chemical of Greenville, the Fertilizer Division to Delta Purchasing in Greenwood, the inland grain elevators to Farmers Grain of Greenville, and the Mississippi Chemical Corporation stock. At this point, we started building back, and we haven't looked back since," Hodges said. Hank Hodges retired in 1986.