Glory Days of the Cotton Exchange

New Orleans Cotton Exchange, circa 1924

Photograph COURTESY NEW ORLEANS PUBLIC LIBRARY

“My mother always said she could drive down Carondelet Street, and when she’d pass the Cotton Exchange she could hear my father’s voice. He had a loud, carrying voice, and I do too. That’s a big item in trading. You had to be heard.”

Eli W. Tullis, whose quote is above, (and his late father, Garner H. Tullis) were members of the New Orleans Cotton Exchange. For 93 years, from 1871 to 1964, the Cotton Exchange was a place where cotton futures were traded; setting prices that farmers would get for their crop and mills would pay for their materials.

At one time the Cotton Exchange was of prime importance to the city’s economy, and, as cotton was a major cargo on the railroad that serviced the port, the exchange had the privilege of nominating members of the Public Belt Railroad board – as recent news of the Public Belt Railroad revealed. Although the Cotton Exchange no longer exists, it was once vibrant and active in international trade.

Actual trading took place in the “Ring”, the central area in the exchange building.

Trading was by “Open Outcry” – prices and offers were called out loud so trading could take place.
“I started in 1951, after I graduated from college,” Tullis explains. “I didn’t really want to go to college, I knew I wanted to go on the floor of the Cotton Exchange, but my father persuaded me to wait.”

Tullis noted that when he first went to work there, “I was petrified. There were only about six traders under 30 years of age on the floor, and I was 22.”

The Cotton Exchange had always been located near the corner of Carondelet and Gravier streets; in fact, there were two Cotton Exchange buildings on that corner, one lasting from 1883 to the 1920s, the other still on the corner (now the Holiday Inn Express at the Historic Cotton Exchange).

Trading took place in “a beautiful room, that huge second floor of the Cotton Exchange Building. I guess the ceiling was 40 feet high. And when you got in the Ring, and all the lights were bearing down, it really got hot,” Tullis says.

Those open windows through which voices could carry were necessary before air conditioning. Tullis points out that, in his father’s day, “they used to have a huge fan, and they’d place a 500-pound block of ice in front of it every day to try to cool the Ring.” In another attempt to keep cool, his father wore a white linen suit. “It would get so soaked, at the end of the day, it looked like it had been in the laundry.”

While the New Orleans Cotton Exchange was in operation, it opened and closed at the same hours as the New York Cotton Exchange, which was one year older. Tullis’s father’s firm was Tullis Craig and Company, which represented planters and mills, and acted as clearing house for up to 18 New York firms.

“My responsibility on the floor was arbitrage,” Tullis says, referring to the simultaneous purchase and sale of the same commodities in different markets to profit from unequal prices.

“I had only been there about 6 months when they caught one of the clerks ‘front running’ (acting with insider knowledge). They rang the bell (usually used for opening and closing the market) and, while everyone on the floor watched, the Exchange president and vice president went to that clerk, took him by the arms, led him to the door, and told him never to come back,” Tullis recalls. “Those were the days when gentlemen policed their own business.”
Tullis also found clients for his firm, which could involve a late summer driving trip across all the southern states. “All you saw was cotton, field after field of nothing but cotton,” he says. “It was just unbelievable.”

Those field trips could result in important market information. When Tullis called on a Mississippi cotton planter just before Labor Day one year, he was told they were already picking for the fourth time. “I went back and told my father that the cotton crop was going to be a lot bigger than people thought.” Sure enough, the report proved correct and the price of cotton “went down the limit two days in a row.”

The New Orleans Cotton Exchange began as a modern innovation in cotton marketing. Old family firms had been conducting business in leisurely fashion, with samples of cotton on the premises. The impressionist painter Edgar Degas depicted his own family’s firm in his painting, “A Cotton Office in New Orleans.” Degas’ uncle Michel Musson is the older man in the forefront, and his brothers, Achille and Rene, are in the back. Musson was one of the founding members of the New Orleans Cotton Exchange, a “new, more anonymous system of commerce,” according to Marilyn Brown in her book Degas and the Business of Art: A Cotton Office in New Orleans.

The 1964 closure of the New Orleans Cotton Exchange followed a Federal Farm Bill that created an artificial floor for the price of American cotton, and set the price so high it was no longer competitive, taking away the need for a futures market.

Herman S. Kohlmeyer Jr. says that the beginning of the end of the exchange was the 1951 move by President Harry S. Truman to freeze prices of commodities. In the years since, the business community in New Orleans has changed tremendously. Kohlmeyer says, “I’m still working, I’m the only guy left in the city whose full-time job is in cotton – and there used to be thousands like me.” The New York Cotton Exchange has been absorbed into the Intercontinental Commodity Exchange Inc., and Kohlmeyer has served on its board for decades.

In 1981, an exchange to trade both cotton and rice was established in New Orleans. The enterprise leased space in the Board of Trade building on Magazine Street. Business was brisk for a time, but the exchange closed in ’82.

Kohlmeyer was involved in that, as was a Lubbock, Texas, cotton man named Mike Stevens. “Herman is the one who introduced me to the Sazerac cocktail, at a dinner at Antoine’s,” Stevens recalls. The introduction to local culture took and Stevens moved to Mandeville in ’84. He is still an independent cotton analyst and commodity trading advisor.

On Oct. 15, 2010, cotton prices soared past $1.19 a pound and hit the highest point in 195 years. Trading was so volatile that “there was a greater range that day than in the entire 18-month trading seasons for 1979 and ’93,” Kohlmeyer notes.

“There are fundamentals behind this rise in price, Stevens points out. “There was a major flood in Pakistan, early frost in China, unwanted rains.” Even the huge United States harvest can’t make up the difference because demand is so high.

With instant electronic trading, and New York as the marketing center, the New Orleans Cotton Exchange won’t return. “They couldn’t even start an exchange in Sao Paolo, Brazil,” Kohlmeyer says.

And the price of cotton? Stevens says, “The jury is still out.”

 

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