Olam loses cotton traders to Australian trade start-up

By Chris Prentice

NEW YORK, Feb 25 (Reuters) - Three key members of Olam International Ltd's OLAM.SI Australian cotton business have left to set up their own shop, executives said, the latest sign of upheaval as the commodity merchant overhauls one of its most volatile businesses.

Cotton managers Tim Whan and Peter Horton and cottonseed trader Ian Grellman resigned in recent weeks and have set up a trading and consulting company called Rain Agribusiness in Australia's key cotton-growing state of New South Wales, Whan told Reuters late last week.

A spokeswoman for Singapore-based Olam declined to comment on their exit.

Their departure comes after the surprise exit last month of Olam's top U.S. cotton trader after 17 years and a tumultuous year for Olam after short-seller Muddy Waters criticized its accounting practices in late 2012.

The global fiber industry also continues to reel from the tumult of 2011 and 2012 when whipsawing prices triggered contract defaults, costing most global merchants hundreds of millions of dollars and forcing some to retreat from the volatile market.

In its second-quarter to end-December results earlier this month, the company reported a 12.5-percent drop in profits and warned that volumes this year would be subdued as it curbs activity in less attractive markets and restructures its cotton, sugar, and dairy businesses.

In those divisions, "there are some trade flows and volumes we are deliberately giving up," said Sunny Verghese, managing director and chief executive officer, in a conference call.

The company sold a cotton gin in Australia last November.

The traders' exit also follows more senior changes at Olam's natural fiber division last year. The company installed former rubber chief, Ashok Hedge, as head of natural fibers, replacing Jagdish Parihar.

Parihar, who spearheaded Olam's acquisition of Queensland Cotton in 2007, now runs risk and market compliance.

The latest executives to leave joined Olam since the Queensland takeover, a deal which catapulted it into the top tier of global cotton merchants. In its 2013 annual report, Olam ranked itself as the world's No. 2 cotton merchant and No. 1 private ginner.

Whan started in September 2007 as regional commercial manager and Horton followed in 2010 as area manager for southern New South Wales, according to their Linkedin profiles.

While Olam has dialed back, other bigger rivals have expanded in Australia, the world's 5th biggest producer.

Last year, Louis Dreyfus Commodities, the world's top cotton trader, bought a majority stake in one of the country's largest grower groups, Namoi Cotton Cooperative.

Australian cotton is popular for its high quality and proximity to mills in South East Asia and China, the world's biggest textile hub.

RARE START-UP

Rain Agribusiness will supply cotton and related products including fertilizer to farmers and mills in Australia and will be run by the three former Olam executives alongside Andrew Tout and Iain Sommerland, who have backgrounds in banking and agronomy, Whan said.

Rain represents a rare start-up in an industry dominated by companies with family cotton legacies and global commodities giants such as Louis Dreyfus.

Whan said the company is in early negotiations with potential customers and the group has signed a supply agreement with S&G Cotton, a Chinese merchant looking to secure more cotton in both Australia and the United States.

(Editing by Josephine Mason and David Gregorio)

((Josephine.Mason@thomsonreuters.com)(+1 646 223 8925)(Reuters Messaging: josephine.mason.reuters.com@reuters.net))

Keywords: OLAM COTTON/AUSTRALIA