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Freepoint Adds Cotton Business as Top Crop Traders Struggle

Freepoint Adds Cotton Business as Top Crop Traders Struggle

2017-09-19 04:01:00.4 GMT

By Alex Nussbaum

(Bloomberg) — Freepoint Commodities LLC is expanding into

cotton trading and eyeing growth in sugar, grains and other farm

products, as sliding prices help to upend the ranks of top

agricultural traders.

Freepoint has hired Crawford Tatum, formerly head of cotton

trading for Cocfo Agri Ltd., to lead a new office outside

Auburn, Alabama, Chief Executive Officer David Messer said in an

interview Monday. The Stamford, Connecticut-based merchant

house, which already trades coal, oil, metals and other

commodities, plans to add at least five more employees to the

office, Messer said.

“We’re looking for areas to grow our company and the

agricultural space fits a lot of the characteristics of what we

are already doing,” said the CEO, whose six-year-old firm now

has more than 400 employees worldwide, including more than 20 in

agriculture. “It’s a natural extension to our existing

business.”

The company is looking to expand even as bumper crops for

grains and other products have driven down prices, complicating

life for traders who depend on volatility to notch up big

profits. Last month, six grain traders leftLouis Dreyfus Co.

amid disputes over strategy. In February, Archer-Daniels-Midland

Co. announced a 41 percent drop in earnings, fueled by losses

from its global trading desk for wheat, soybeans and other

foodstuffs.

Unlike more established crop-trading houses, Freepoint

hasn’t invested heavily in physical assets and operations,

leaving it with less debt and more capital to devote to trading,

said Victor Osle, the company’s newly appointed global head of

agricultural products. That’s given the company an advantage in

recruiting traders, he said in the interview.

 

Lighter Burden

 

“Many of Freepoint’s peers are still feeling the impacts of

asset investments made at a different point in the cycle,” Osle

said. “Freepoint is unburdened by such legacy assets.”

Besides cotton, sugar and grains, the company also sees

opportunities to grow in oilseeds, feed ingredients and ocean

freight, said Osle, who’s based in London. He joined Freepoint

last year from Cofco, the Chinese state-owned trader.

Founded in 2011, Freepoint has grown as regulatory pressure

has pushed Wall Street banks away from commodities trading and

financial troubles beset rivals like Noble Group Ltd. and

Engelhart CTP. Messer last year added a retail energy sales

business, bulked up metals and energy trading in Asia, and

opened its first crop trading office in Kansas.

Messer and two fellow executives led Sempra Energy

Trading’s growth from a $50 million firm in the late 1990s to

$1.5 billion in annual revenue by 2005, according to Freepoint’s

website. The business was sold to the Royal Bank of Scotland in

2008. Messer and his partners founded Freepoint with backing

from private equity firm Stone Point Capital.

The cotton market is contending with ballooning global

supplies, fed by rising U.S. production and China’s plans to

sell off reserves. Sales of synthetic alternatives like

polyester are also on the rise. Messer nonetheless sees promise

for Freepoint, which will focus on North American markets.

Cotton futures traded in New York are up about 6 percent

from this year’s low in July, but almost flat from the end of

last year.

“We still see an important merchant role in the cotton

business in connecting growers with some of the mills, and also

potentially exporting cotton overseas,” he said.

 

To contact the reporter on this story:

Alex Nussbaum in New York at anussbaum1@bloomberg.net

To contact the editors responsible for this story:

Simon Casey at scasey4@bloomberg.net

Carlos Caminada