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New online company sells first cotton

U.S. cotton producers may soon have another way to market their cotton — directly to foreign textile mills via the Internet.

In late September, the Internet company iFarm, through the London-based company DealCotton, completed the sale of 2,000 bales from three U.S. growers over the market and received acceptable offers from a textile mill in India.

According to Chris Long, president and CEO of iFarm, Inc., “We were able to match the three grower lots that included middling, strict middling and strict low middling qualities satisfactorily with mill requirements.”

The shipment is now on its way to its destination.

The transaction is significant because the U.S. textile industry continues to be a shrinking market for U.S. cotton producers, making the export market more and more crucial.

“We're seeing a lot of changes — globalization, the strong dollar, weakening domestic mill use,” Long said. “Because of the shrinking domestic cotton market over the past year, the export market has become increasingly important to U.S. cotton producers. This greater market access benefits growers by insuring they have timely and competitive marketing opportunities.”

Long stressed that the eventual goal of the iFarm/Deal Cotton venture is to bring more money per pound for U.S. growers. For now, he believes iFarm could save producers storage costs by facilitating the movement of cotton through DealCotton. Long also noted, “How much we move depends on how competitive U.S. cotton is internationally.”

Long stressed that DealCotton, “is very interested in bringing U.S. supply into its relationships and contacts network. Our vision was to connect U.S. growers directly to key export markets in Asia. We identified DealCotton as highly experienced and uniquely positioned to provide the market access.”

USDA recently projected that the United States will export 9 million bales in 2001-02, a somewhat controversial figure according to some analysts. But Long pointed out that cotton economists project that one potential DealCotton customer, India, will import 1 million bales in the coming season, a nice market for U.S. growers.

Long says the 2,000-bale shipment was a test transaction “to validate some of the process technology, which included using the DealCotton market plus DealCotton's affiliate, DealLogistics, to handle some of the export documents via electronic delivery services. Another part of what we're doing with the test is to see what other countries need.”

Long said iFarm intends to set up an online market, then will introduce the grower to the system “as soon as possible, hopefully by the end of the year.”

Although the business model for trading through iFarm is still being worked on, Long stressed that “future transactions will be accommodated with participating cotton-shipping professionals and other ancillary services, including risk management, logistics and third-party verification services.”

Long is fully aware that doubts still linger about the durability of Internet companies. The revolution of the late 1990s produced a breathtaking number of failures, including a few that ventured into trading grain and cotton.

“For many Internet companies, things didn't happen quite as fast as they had hoped,” Long said. “But our plan is to go slow. Our idea is to build a private trading business-to-business procurement network.

“Because of current market conditions, unprecedented opportunities exist for agribusiness with B-to-B e-commerce,” Long added. “Our business model can be applicable for the grain markets as well.”

iFarm was created by a Memphis-based investment group in June 1999. It offers farm implements and supplies, Internet tools for farmers and market news, including real-time agronomic news, and member forums. The company briefly considered building its own exchange before striking the deal with DealCotton.

DealCotton is a team of cotton traders and Internet technology experts and is a part of DealGroup, a business to business commodity trader.

DealCotton regularly trades cotton in India, Asia and republics of the former Soviet Union. Under the relationship with iFarm, “DealCotton identifies the mills that need cotton and iFarm identifies the U.S. growers,” Long said.

According to company literature, DealCotton is a transparent and neutral trading environment. It takes care of haulage, shipping, insurance and financing requirements. iFarm trades spot cotton only.


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