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  • Jan 8th, 2004
  • Comments Off on Online cotton exchange eyes China and Brazil
An online cotton exchange called The Seam which survived and flourished after the high tech crash is mulling an expansion into big player China, a senior official said Wednesday.

The Seam is also looking into Brazil, another agricultural power.

"You have to look at China. There's so much in world consumption and production (of cotton) that is tied up there that you have to consider it," Kevin Brinkley, vice-president for Marketing and Business for The Seam, told Reuters in an interview at the annual Beltwide Cotton conference here.

China has emerged as a major force in the world cotton market. The Asian nation is the world's biggest producer and consumer of cotton.

When poor weather last year ravaged its cotton crop, China was forced to turn to heavy imports to meet explosive demand from its apparel and textile industry.

Based in Memphis, Tennessee, The Seam was launched at the height of the technology boom in November 2000.

It survived the subsequent meltdown in that sector and has become a popular service providing a grower-to-business (G2B) and business-to-business (B2B) exchange for cotton, mainly in the United States.

The Seam's success was enhanced when the US Agriculture Department decided last August to sell government inventories of cotton to the firm. It also provides real-time pricing data to the New York Board of Trade's New York Cotton Exchange where cotton futures are traded.

Brinkley said there have been exploratory discussions on China in "trying to figure out what our role should be."

He added, "We've even discussed in general terms how we can be involved with the CNCE (China National Cotton Exchange)," but did not elaborate.

The Seam has become a major player in the US partly because its list of primary investors include heavyweights in the US cotton industry.

They include top merchants like Dunavant Enterprises, Allenberg Cotton and Hohenberg Bros. The others are key textile mills like Avondale and Parkdale, and major co-operatives like Calcot in California and Plains Cotton in Texas, the top growing state in the country.

Brinkley said The Seam would weigh the risks about China, but a decision on how and which way to move would have to be made soon.

"In a technology world that we live in, I don't think you can wait around," he said.

Brinkley said that aside from China, the company is looking to see what opportunities are available in Brazil which is the world's top producer of coffee, sugar and oranges, among other things.

"They have so much that they can do in a short amount of time. They've got a lot of acres in production in other crops that can easily be switched to cotton," he said.

The only possible hindrance to that move would be the complaint filed by Brazil against the United States at the World Trade Organization against Washington's cotton support programs.

Closer to home, Brinkley said The Seam is looking at introducing a forward contract for US producers in 2004. The firm's domestic trading system uses electronic warehouse receipts to clear transactions.

"We've always been a spot trading company," he said.

The Beltwide Cotton Conference is the biggest annual meeting of the US cotton industry that features projections of supply and demand trends for the upcoming season.

Copyright Reuters, 2004


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