Tote that Barge, Electronically Trade that Bale

Cotton trading not what it used to be

In Augusta, Georgia, at the corners of Reynolds and 8th Streets, there is a stately red and white building that dates back to the days when cotton truly was king in the South. Now called the Cotton Exchange Welcome Center, for years it was the Augusta Cotton Exchange, in which capacity it was a nerve center of cotton trade throughout the world. Traders from as far away as England, Germany and India transacted business in the building, reacting to cotton prices and temperatures from far-flung cotton-growing areas that were duly noted by scrambling clerks who posted the news on a 45-foot blackboard. Too long ago for anyone to remember the exact date, the board, with price and temperature data from close of business of an unknown date still intact, was walled over. It stayed secreted away in darkness, the ultimate hard drive, until the late 1980s, when it was uncovered during the building's restoration. Today that board resides behind glass as part of a museum exhibit, a literally dusty artifact of the days when the information superhighway was a telegraph and a quick-scrawling clerk with a step stool and a piece of chalk.

Some things don't change. Cotton is still an important fiber, and it still has to be traded worldwide. But instead of clerks and chalk, there are computers and electronic marketplaces. And those marketplaces are getting more sophisticated by the day. Yesterday in Memphis, online cotton marketplace The Seam announced that it had expanded its grower-to-business (G2B) exchange to include growers nationwide. The expansion of its G2B marketing system brings growers in every state the same marketing system that was made available to cotton businesses in February 2001 when The Seam launched its nationwide B2B platform.

Growers in Texas and Oklahoma have been trading on The Seam since December 2000, when the company began offering users in those states the ability to buy, sell, and/or trade cotton using the company's e-commerce system. The Seam modeled its system after TELCOT, the industry-standard technology that was in operation in Texas and Oklahoma from1975 until 2000 and enabled more than 25 million bales to be traded online.

The Seam's growing marketplace has attracted growers, merchants, mills and cooperatives throughout the cotton belt, trading more than 600,000 bales of cotton since its December 2000 launch. More than 65 firms are buying cotton on The Seam's B2B and G2B exchanges.

Phillip Burnett, president and CEO of The Seam, says that expanding the G2B exchange nationwide completes a core component of The Seam's commitment to the industry. It has been our highest priority to provide our neutral marketplace to all U.S. growers. With all of the challenges facing cotton producers, it is imperative that they have the best possible marketing options at their disposal. We're especially pleased to have this expanded capability online well ahead of the 2001 season.

Growers are able to offer their cotton for sale on The Seam's G2B site by uploading their bales and establishing a price. The Seam then generates a traditional recap that can be viewed online by its nationwide network of cotton buyers. Buyers are able to search for specific types of cotton through The Seam's powerful search engine that gives buyers the ability to quickly navigate hundreds of thousands of bales to find the desired cotton.

Buyers and sellers are able to negotiate a price and complete the transaction entirely online, including the transfer of funds and electronic warehouse receipts. (In a stroke of irony for an entity known as The Seam, you could say that the process is seamless.)

One of the best features of the system is guaranteed trades, continued Burnett. Sellers are always assured that they will receive payment because we actually pay them and then collect from the buyer.

Growers listing their cotton on The Seam participate through a Special Service Provider, such as a gin, warehouse or country merchant. The Special Service Provider uses the output of a gin or merchant software program to generate the farmer's file for upload. Most software programs are able to easily create the upload file.

The Seam's expansion provides a much-needed alternative for many growers. Although pool participation is active in many growing areas, the majority of the crop will be sold in the spot market. That means growers will want as many buyers as possible to see their recaps.

I believe that The Seam will provide greater opportunities for us, noted Eddie Gibson, producer and ginner from Laurinburg, N.C. With all of the problems our domestic industry is facing, it's great to have a new marketplace for our cotton that not only provides increased numbers of players on the field but also guarantees the transactions.

Buyers believe the expansion also will provide considerable benefits to their businesses. I am excited to see The Seam bringing new technology into other areas of the cotton industry, says Jeff Johnson, cotton buyer at Allenberg Cotton Co. in Memphis, Tennessee. Not only will it provide enhanced trading efficiency and better price discovery, it will ultimately generate the widest possible viewing audience, assuring that sellers receive the best bid for their bales on any given day.