You can’t say that August Buchberger and his fellow team members were shy when it comes to trading cotton in the futures market.
Buchberger and other members of his yellow team “bought” nine futures contracts on the New York Cotton Exchange. They were feeling good about the trade until the market began moving against them, and they began receiving margin calls.
They “got out” or sold their nine contracts at 47.80 cents per pound for a loss of $6,075. Fortunately, the loss was on paper, part of a training exercise at the American Cotton Shippers Association International Cotton Institute.
“Actually, it wasn’t a bad trade,” says Bill Griffin, program director at the Institute, which until this year has been held at Rhodes College in Memphis, Tenn. “The market closed just as it seemed to be rallying, and we had to get them out by selling their contracts. It points out how quickly the market can come and go.”
Students like Buchberger have been learning a lot of relatively “painless” lessons since the American Cotton Shippers Association started the Cotton Institute at Rhodes College in 1995.
“We show them the pieces of the puzzle and try to help them put it together,” says Griffin. “We try to teach them everything we know about the cotton business.”
Buchberger, whose family owns a farm and cotton ginning operation near Vicksburg, Miss., is the second member of his family to attend the school, which is relocating to the University of Memphis this session.
“My brother attended last year,” he said. “We felt we needed to learn more about the cotton business than how to produce it. It’s been interesting to learn how merchants discount cotton and other facets of the business.”
Buchberger, who graduated from college in Virginia in 2004, was one of 37 students from countries as diverse as Australia and Zimbabwe who attended the Cotton Institute last summer. This year’s Institute, which will be held from May 31 to July 18 at the Fogelman Business Center at Memphis, is expected to attract a similar number of students.
“We just felt that we needed to know more about cotton,” he said. “This business seems to be getting more complicated every year.”
Zhongyao Yang, one of Buchberger’s teammates, had been working for eight months in a cotton spinning mill in Bangkok when he went to Memphis to attend the International Cotton Institute.
Besides learning how or how not to trade futures, Yang said he had been studying how to buy cotton, how to know the characteristics of different kinds of cotton and how to mix different cottons for spinning.
“Companies say that because of the press of business it would take them three years to teach employees what they learn in eight weeks here,” says Griffin.
The program features a number of visiting lecturers, including members of the cotton industry from the Memphis area. On the day Buchberger and his team closed out their trade, an economist with a local cotton merchant discussed the USDA cotton program.
The eight-week sessions typically begin with a trip to a cotton field. Last year’s class visited a farm near Clarksdale in the Mississippi Delta. Near the end of the session, class members travel to Raleigh, N.C., for a tour of Cotton Incorporated.
“We used to include a visit to a cotton mill in that trip, but there aren’t any mills in close proximity to Raleigh anymore,” said Griffin. Students will also visit the USDA Agricultural Marketing Service’s Cotton Division offices in Bartlett, Tenn., and shipping and warehouse facilities.
Mornings are generally spent in the classroom. In the afternoons, students work on marketing and classing cotton. The latter includes the visual and mechanical process of manually classing cotton and becoming familiar with High-Volume-Instrument (HVI) machines and micronaire testing equipment.
With last year’s class, 515 participants from 59 countries have completed the program.
All classes are taught in English, which requires that foreign students have more than a passing familiarity with the language. The institute offers a one-week class prior to the start of classes for those who need assistance with their English skills.
The American Cotton Shippers Association provides some scholarships for producers, ginners and others who want to attend the school.
University of Memphis officials said they are pleased the school is relocating to larger facilities at the Fogelman Business Center.
“Almost a fourth of the nation’s cotton is grown in the Mid-South, with the major Memphis firms trading 50 to 60 percent of the world’s cotton,” said University of Memphis President Shirley Raines.
“Innovations in cotton’s production, processing, classification and transportation and the evolution of new trade patterns brought on by the expansion of free trade in cotton throughout the world, require expanded education programs for those involved in the cotton industry. It is appropriate that the University of Memphis, a leading educator of business professionals, is the new home of the Cotton Institute.”
“This is a great development for ACSA and the young men and women from over 40 countries who will come here for intensive training in all aspects of the cotton industry,” said ACSA President John D. Mitchell. “The Fogelman Center is a world-class facility, and that’s appropriate for our caliber of students.”