Innovations: TELCOT™
One of PCCA's most outstanding and innovative developments was TELCOT™, a marketing system developed in the mid-1970s to be an electronic extension to the way cotton producers had traded their cotton for decades. TELCOT was a centralized place where buyers and sellers could meet to trade cotton via computers connected to PCCA's servers. With the advent of the Internet, TELCOT's conversion to the new technology was another, natural evolution process.
Evolution
TELCOT was designed to be an online, real-time cotton trading system. Conceptually, it operated similar to that of the New York Stock Exchange (NYSE). TELCOT provided producers a number of options to sell their cotton as well as access to more than 50 major buyers of U.S. cotton and the opportunity to receive the most competitive price available at the time of sale. TELCOT guaranteed each producer payment for his/her cotton and guaranteed each buyer delivery of the cotton purchased. From TELCOT's inception in 1975, more than 25 million bales traded over the system, justifying the title "Window of the Marketplace."
TELCOT extended tremendous benefits to buyers as well as producers including timely, accurate recaps of cotton offered for sale. TELCOT differentiated between cotton placed in the Commodity Credit Corporation (CCC) loan program and non-loan cotton and notified buyers where the cotton was ginned and stored. Producers and buyers also benefited from TELCOT's marketing options including Regular Offer, Firm Offer, Automated Counter Offer and the Loan Advance Program.
Regular Offer, the first feature incorporated by TELCOT, was similar to a floor trade on the NYSE in that buyers bid on a blind basis for cotton offered for sale on the TELCOT system. After 15 minutes, the computer closed the bidding and awarded the cotton to the highest bidder, provided the price was above a predetermined minimum. Due to the overwhelming popularity of other programs offered by TELCOT, Regular Offer is not available through The Seam.
Firm Offer became the most popular option among both producers and buyers because it allowed buyers an opportunity to review all lots of cotton offered for sale at a firm price. Buyers could establish price, quality, warehouse/gin location, and crop year parameters, and TELCOT selected and displayed only those lots that met the criteria. The offer remained outstanding until a buyer purchased the lot of cotton, or it was withdrawn by the producer.
Another innovative feature offered by TELCOT was the Automated Counter Offer program which was a quick and documented method for buyers to provide notice as to what they were willing to pay for a particular lot of cotton already offered in Firm Offer. Automated Counter Offer provided additional price discovery information concerning offered cotton. Additional sales opportunities also were achieved through price negotiations between buyer and seller, resulting in a transaction that otherwise might not have occurred. Both Firm Offer and Automated Counter Offer continue to be available through The Seam.
Another innovative marketing program that continues to be available to producers is the Loan Advance Program (LAP). PCCA members can tender their cotton to PCCA and receive an interim cash advance equal to the CCC loan price. When the market is right, the members then notify PCCA to offer the cotton on The Seam to obtain the best price available. Thus, the producer has available an immediate cash advance, and the cotton can be marketed at a later date.
The trading of cotton which PCCA places in the CCC loan program is facilitated by the Equity Trading Option. A buyer can purchase an option to redeem the cotton from the loan at a later date. The Seam's programs handle all calculations to ensure the producer receives the correct amount, and all calculations such as storage and interest are correct when the option is exercised by the buyer.
The advent of TELCOT allowed PCCA to further expand its services to local gins through an Online Gin Bookkeeping (GBK) system. Like buyers, gins reduced their labor requirements. TELCOT aided in this by freeing gins from relying on manual recapping methods and electronically replacing the cumbersome hand set of books and "computer batch systems." Today, GBK provides PCCA- affiliated gins access to the services' significant features including Bale Accounting, General Ledger, Payroll, IRS reporting, W-2s and Financial Statements that augment the more traditional bookkeeping functions.
Throughout its existence, TELCOT computer screens provided gins, their patrons and buyers with reports on all trades. TELCOT users also had access to futures prices for all major commodities, weather forecasts and general news.
An Electronic Title System (ETS) was introduced by PCCA in 1989 to work hand- in-hand with TELCOT. This ETS feature was developed by PCCA to eliminate the need for paper warehouse receipts, improve efficiency and reduce costs incurred by gins and cotton buyers, and to expedite shipments to textile mill customers. The need for ETS became apparent in February 1989 when a record 385,599 bales were traded on TELCOT in a single day.
In 1985, TELMARK, Inc., was founded to extend TELCOT services to independent gins and their customers in Texas and Oklahoma. This expansion enabled TELCOT's data processing services to be shared by a larger number of users which lowered operating costs and increased volume.
In the spring of 1998, PCCA completed implementation of the TELCOTnet system for cooperative gins that gave them Internet access, e-mail and word processing capabilities. All gin and buyer documentation became available online via an Internet browser.
Conclusion/Summary
TELCOT was a marketing success unequaled in the agricultural industry. Since 1975, PCCA continued to enhance the TELCOT system to satisfy the needs of both buyer and seller. Producers looking for more flexibility in their marketing operations, greater market information and a guaranteed payment found TELCOT met all of their needs. Buyers were looking for a more comprehensive description of cotton offered, the ability to buy large volumes faster and maintain a running tally of their purchases and guaranteed delivery of cotton, all of which the found in TELCOT.
In 1989, the ETS system developed by PCCA eliminated the card warehouse receipt and recorded cotton warehouse and ownership information electronically. Later PCCA added the ability for many gin and buyer locations to access TELCOT via the Internet through the encryption of data on a virtual private network (VPN), helping lower the access costs and decrease dramatically the amount of lead time it took a customer to access TELCOT. This legacy which earned for TELCOT its reputation as "Window of the Marketplace" continues today through The Seam.