Rotating Crops: Dunavant went from a cotton-trading titan to helping meet the global need for alfalfa hay
May 31st, 2013
By Anna Cox, as published in Memphis Business Quarterly
Known for decades of substantial clout in the cotton business, Dunavant Enterprises has well-established global relationships in the agriculture community. Looking to steer away from the risks associated with commodities trading, Dunavant sold its cotton outfit to Allenberg Cotton, part of Louis Dreyfus Commodities, in 2009 and shifted its focus toward its already extensive logistics arm. While some might think it risky to change the emphasis of a company after an 80-plus-year history, it was a logical next step for Dunavant.
"It was a fairly natural transition for Dunavant to develop an ag sector in the global logistics market, primarily because Dunavant had a lot of experience and infrastructure in place all over the world when it was moving a significant amount of cotton for many, many years," says Richard McDuffie, COO of Dunavant Enterprises.
"The background and expertise required in ag revolves around a lot of things, from understanding the documentation required to understanding contractual obligations, international contracting, and the risks associated with that," McDuffie continues. "If you're negotiating a letter of credit of a purchase agreement with a foreign entity, an exporter that hasn't done it before, they may be a little apprehensive. So, because of our background in doing that for so many years, we've tried to transition into a selling point for us and how we move product. If you look at Dunavant's origin, the cotton business really sat on a three-legged stool: purchase and sell side, opportunity trading, or financial side, and the big piece was always logistics. Hence, [Dunavant having a] logistics company since 1970. At the end of the day, we have an ag focus and concentration because of Dunavant's background in the cotton industry, and we specifically focus on logistics solutions for agricultural products. That could be tobacco, cotton, cotton seed, hay, lumber, or grains."
During the warm summer months waiting for cotton and corn to be harvested, Dunavant has found a new project to oversee - alfalfa hay. "Part of the reason we're concentrated on hay right now is because cotton is shipped mainly from November to April," says Don Lake, vice president of global operations for Dunavant Logistics Group. "Hay is generally shipped April to November, so, it dovetails very nicely into what we're doing."
Commonly used for livestock feed, alfalfa hay demand is soaring due to "changing diets and urbanization in the Middle East and Asia," says Jim Lange, director of business development for Dunavant. Specifically, the demand is for dairy items such as yogurt, cheese, and, of course, milk to incorporate into the new "Americanized" diets.
Lange is "the boots on the ground" for Dunavant's Phoenix location, and he focuses almost exclusively on alfalfa hay shipping. Dunavant opened the office to capitalize on the growing demand of the crop, which required a 3PL company with global connections and experience in agriculture.
"The Middle East tried to grow alfalfa locally with some success while also trying other countries like Spain and Portugal, but they had challenges with the quality and with drought," Lange says. "The issue has been water, and they basically had to make the decision to turn the spigot off for alfalfa to keep the water for the population. In Asia, the Chinese demand is rapidly rising due to a government mandate to increase milk production; so, that means they have to increase alfalfa imports. Cows just don't produce milk at the levels they do in the U.S., and the only way to get them to produce more is to feed them alfalfa."
While emphasis is on hay for cows for milk production, Lange says the crop is also essential for the beef-producing cattle farmers and horse and camel markets. The best quality of alfalfa is from the American Southwest because of the arid, sandy soil and constant sunlight. "We enjoy eight to ten cuttings per season, which is pretty phenomenal, says Lange. "Western Canada can grow alfalfa, but it only grows in about a two-month window. Anything not exported is used domestically. We do send it to dairies regionally and to the Mid-west, Texas, and Florida."
McDuffie says, "Based on our vast history within commodity ag shipping, we are trying to build a better mousetrap, to help our customer see better profits. Eliminating waste [in the process] and creating efficiency is just as good as reducing the cost itself."