Effort Will Create Added Value for Members’ Cotton

By John Johnson

A legacy of innovation and industry leadership that has characterized the history of Plains Cotton Cooperative Association (PCCA) continues with the recent announcement of a new business-to-business (B2B) electronic marketplace for cotton and cotton-related products and services.

PCCA announced May 24 it had signed a letter of intent to form a joint venture with Allenberg Cotton Co., a division of the Louis Dreyfus Corporation, Dunavant Enterprises and Cargill’s Hohenberg division. Officials of the four companies said they hope to create a comprehensive, independent, electronic exchange for prospective suppliers of and customers for cotton and its products and supplies.

The initiative gained momentum in early June with the addition of two prominent U.S. textile mills to the project: Avondale Mills of Monroe, GA; and Parkdale Mills of Gastonia, NC. Avondale and Parkdale are the largest U.S. consumers of cotton.

“We are constantly seeking ways to improve the efficiency of the supply and production process for our raw materials and products,” Duke Kimbrell, CEO and chairman of Parkdale Mills, said in a news release. “Even though the movement of our products has been significantly streamlined over the years, there still exist many inconsistent and incompatible systems that can be eliminated. We are convinced that the electronic marketplace is the way to accomplish this and is the future of this entire industry.”

Stephen Felker, chairman, president and CEO of Avondale Mills, said, “We welcome this unique opportunity to join the industry leaders in this effort. The textile mill component is an integral part of the cotton marketplace, and we are pleased to be involved in the planning at this early stage.”

The marketplace, to be offered by a newly-created company, will give buyers and sellers of products and services a single, convenient place to connect, conduct and facilitate transactions and better manage their supply chains. It will serve organizations of all sizes from every facet of the cotton industry and will significantly expand the scope of PCCA’s TELCOT system.

“We think this will act as a catalyst for positive change in the industry,” PCCA President and CEO Van May stated. “Our 25-year commitment to the electronic marketplace has clearly demonstrated the many efficiencies and advantages of electronic trading,” he continued. “This new marketplace will expand the electronic services available to all cotton growers, the rest of the industry and the customer base to which those services will be offered. It’s a major milestone.” W.B. Dunavant, Jr., chairman of Dunavant Enterprises, also cited improved efficiency as a major goal for the new company.

“The multi-billion dollar cotton industry has some inefficiencies that make it ideally suited to benefit from a B2B marketplace,” Dunavant said. “It is marked by fragmentation among producers, merchants and manufacturers who must deal with incompatible, labor-intensive logistical systems. In many areas, cotton transactions still involve multiple, redundant faxes and phone communications. An online marketplace offers great potential to allow manufacturers and merchants to more effectively purchase and sell cotton and to expose producers to a far broader range of buyers and services,” Dunavant explained.

“We believe this new marketplace will provide more choice, not less, for its users, and they will be able to instantly compare prices and buy or sell more efficiently in an open market,” May added. “It will shift some competitive advantages to producers who will have immediate, online access to prices and other information,” he continued. “As we attract more buyers, this will mean more choices for farmers wanting to sell their product.”

The new company will allow any merchant meeting necessary criteria and agreeing to pay the trading commissions to trade cotton on the system. TELCOT currently serves 53 buyers, however, there are approximately 200 cotton buyers in the United States. Additionally, PCCA members and their coop gins will see little difference in the way they sell cotton and receive payment.

“Our members will continue to deal directly with PCCA,” May explained. “This will be an Internet-based company which has a more modern look and feel. It is our intent to eventually change the look of TELCOT and Gin Bookkeeping to be more like that of a ‘Windows’-based program. Our members still will be able to trade equities on the system, and the service to which they have become accustomed will continue as it has in the past.” May also noted PCCA has no plans to significantly expand its patronage base.

“Growers in other territories will not become members of PCCA simply by trading their cotton on the new website,” May stated, adding, “nor will they be eligible to participate in PCCA’s Mill Option or any of our dividends.” Improved prices received by growers should result from expediting the flow of cotton from producer to consumer.

“Competition should increase based on the number of merchants across the country,” said May, “and this increased competition will have a positive impact. Also, growers will benefit as new services become available.” May noted that as the new company profits, PCCA will participate in the earnings as an equal partner.

“We believe that, over time, those profits will increase the value from our ownership stake in the new company and will give us more profits from electronic trading than we could have enjoyed by keeping TELCOT all to ourselves,” May concluded.