Market Gyrations Blamed for Cotton Buyer's Exit

Weil Bros. Cotton and English partner Stern say seeds for quitting were sown last March.

Published on: Nov 24, 2008

Weil Brothers Cotton, Inc., is leaving the cotton business after 130 years, citing the loss of the futures market as a dependable hedging tool in the face of 2008's wild gyrations in prices.

"It's sad, but it's the end of an era," notes Andy Weil, president of the firm based in Montgomery, Ala. "We knew after the market fluctuations in March we just wanted to get out in an orderly manner and meet the commitments we had made." That desire was noted in a company news release Nov. 20, in which Weil Bros. stated "We will also trade out of our existing positions in an orderly fashion. We anticipate completing these obligations and bringing operations to a close sometime in early 2010."

In September the company announced it was leaving the drought-ravaged Australian cotton market because that industry had effectively been halved over previous years.

Andy, and brother Bobby, are fourth generation family members at the helm of the firm which, with Weil Bros. & Stern Ltd., its long-time associate company in Liverpool, England, handled more than half a million tons of cotton a year on the global market. Both firms are leaving the cotton trade.

Weil says the entry of speculative dollars exiting the collapse in the U.S. housing industry into the commodity market skewed the board so far in favor of speculators there is no way business could price in the fluctuations that had come to the trading floor. "Business has to price in market variability, and for years we'd enjoyed our relationship between speculators and hedgers, but March, 2008, was a turning point from which we could no longer continue. It's sad, very sad."

"The risks in this business have become greater and greater, and the rewards are just not there to justify taking those risks," Weil told Farm Progress Cos. "If we can't trust the futures market to do what we're accustomed to it doing for generations -- without that confidence we can't continue. It's really a shame for the industry."