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THE SEAM: HIGH-TECH COTTON TRADING
The Seam may have popped into the e-commerce marketplace at just the right time: A time when record-high cotton production is creating a demand for alternative ways to sell the crop, despite low prices.

The Seam, Memphis, Tenn., is an online cotton trading exchange that was founded by four cotton companies: Plains Cotton Cooperative Association; Dunavant Enterprises, Inc; Allenberg Cotton Company; and Hohenberg Brothers Cotton. On December 8, 2000, The Seam made its first online trade and has since seen more than 1.6 million bales flow through its system, which represents more than $200 million in value, says Kevin Brinkley, marketing manager, The Seam.

According to Brinkley, The Seam had instant credibility in the marketplace as one of its founding partners, Plains Cotton Cooperative Association, had successfully traded over 25 million bales of cotton electronically on the system that preceded The Seam - TELECOTŪ.

With a 25-year-old foundation to stand on, it is no surprise that the online trader has seen enormous volume traded in the short time that it has been in operation. The record volume traded in one day through The Seam is 113,868 bales and almost 10 percent of U.S. off take was traded on The Seam in 2001.

BUYING AND SELLING

The fundamentals of The Seam are really very simple to understand. "Sellers are able to list raw cotton for sale to a nationwide network of buyers and negotiate the transaction online," explains Brinkley. "When the sale is completed, the transaction is cleared electronically, and ownership and funds transfers are handled electronically, as well."

Some producers may question the advantages of using an online trading company because it goes against the longstanding traditions of shaking hands and looking your partner square in the eye. But as agriculture becomes more consolidated, online trading offers a producer the opportunity to sell cotton to a buyer halfway across the country or the globe. "Growers and buyers benefit from The Seam by having access to a large network of buyers and inventory. For example, a grower in a small community has access to buyers across the U.S. that have previously not been customers of his cotton," says Brinkley.

Additional benefits from the cotton exchange are convenience and speed. Growers are now able to find potential buyers with just a mouse click. "Businesses involved in buying and selling cotton have found The Seam's technology to be robust and easy-to-use," explains Phil Burnett, CEO of The Seam. "We've designed the system to speed-up transactions and reduce the overhead associated with moving cotton from seller to buyer.

"What makes us dramatically different is our guaranteed trade feature," continues Burnett. "The seller is paid and the buyer is assured of delivery when cotton is sold through our exchange. Sellers receive payment from The Seam immediately upon delivery, and The Seam collects from the buyers."

The Web site has two distinct e-commerce exchanges: The business-to-business (B2B) and grower-to-business (G2B). Cotton on the G2B site is still owned by growers, while B2B cotton is in the inventory of cotton merchants and can be traded between other merchants or textile mills.

Presently, there are more than 70 buyer firms across the United States, representing the majority of the merchandising sector. The Seam is also moving beyond domestic borders.

In December 2001, the company hired Bill Ballenden as international manager, and he will soon be opening offices in London, England. The international exchange will allow cotton from different regions of the world to be listed and sold based on standard qualities and contracts.

"I have begun developing several non-U.S. initiatives from Memphis before opening the international office in London, which will occur as soon as possible," says Ballenden. "The first of these products will be a swap product based on the CIF North Europe Index, followed soon thereafter with the launch of The Seam's international online trading exchange. Both of these initiatives are expected to be operational in the spring of 2002."

"Our industry hasn't changed a great deal in the last 20 years or so, but The Seam is ushering in a new way of doing business. Electronic commerce has the potential to change the cotton industry in much the same way that biotechnology has changed the seed industry," explains Kelly Burkholder, vice president of marketing with Anderson-Clayton Corporation, Fresno, Calif., an investment partner in The Seam. AM


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