| NEW YORK
NEW YORK Anthony Tancredi, president of Allenberg Cotton, has left the world's largest cotton merchant after 27 years, an unexpected departure that traders said indicated last year's market turmoil is still reverberating through the industry.
Tancredi, who was second in command to Allenberg Chief Executive Joe Nicosia and responsible for global merchandising, left about a week ago, according to two sources who have spoken to senior company employees. Allenberg is owned by Louis Dreyfus Corp LOUDR.UL, one of the world's largest agricultural merchants.
Few other details are known about the exit of the veteran trader, widely credited with helping transform the Cordova, Tennessee-based Allenberg from a modest domestic merchant into a global powerhouse that claims to handle about a fifth of U.S. production each year.
But his departure surprised many. The firm had appeared insulated from much of the turmoil that has upended the market since last year, as an unprecedented wave of defaults shredded trust among traders, caused hundreds of millions of dollars in losses and triggered a series of high-profile personnel changes.
"This has been a mystery. You see that happen and you wonder what´s going on in the company," said one market source, who had confirmed the news with Allenberg officials as word spread through the market late last week.
Louis Dreyfus spokespeople in Switzerland and Allenberg declined to comment. Tancredi did not return calls to his home or office numbers seeking comment.
The news was all the more surprising as Tancredi was viewed as heir apparent to Nicosia, traders said. He joined Louis Dreyfus in 1985, five years after Nicosia, who had been working in the firm's grain division. This was about the same time that Dreyfus teamed up with Allenberg, according to company websites.
Brokers who know him say he is less intense than Nicosia. The latter has been the more dynamic public face of Allenberg, which was founded in 1921 just outside Memphis, the epicenter of U.S. cotton trading. It has almost 300 employees.
Tancredi was key to the company´s purchase of its closest domestic rival, Memphis cotton legend Dunavant Enterprises, in 2009 after that firm fell victim to the previous round of whipsaw market volatility, market participants said.
The departure comes amid one of the cotton market's most tumultuous periods, as companies count the consequences of last year's unprecedented price surge, subsequent collapse, widespread contract defaults and huge trading losses.
It is also a critical time for Allenberg and Nicosia as they prepare to face a lawsuit leveled by former Glencore (GLEN.L) trader Mark Allen, who is accusing Dreyfus, Allenberg and its chief executive of manipulating Intercontinental Exchange cotton futures prices last July.
Allen was among several high-profile personnel changes to follow the upheaval, having left Glencore last November as the company reported a loss of more than $300 million in the cotton market. He has set up his own trading firm, Compass Cotton.
Few merchants have emerged unscathed. Noble Group (NOBG.SI) blamed its first loss in more than a decade last November partly on cotton defaults. Olam (OLAM.SI), based in Singapore, reported a 14 percent fall in fourth-quarter net profit last month, which analysts attributed mainly to ructions in the cotton market.
"It's a sign of the times as firms lose money and people," said Mike Stevens, an independent cotton analyst in Mandeville, Louisiana.
In August, Cliff White left his job running the North American cotton operations of commodities merchant Olam, which expanded into cotton through acquisition and is ranked behind the big three - Allenberg, Cargill CARG.UL and Noble. He joined Texas-based merchant Omnicotton as vice president to drive its expansion into Australia.
White, who had been at Australia's Queensland Cotton when it was bought by Olam in 2007, said in an interview that his decision to leave Olam was not linked with the roiling in the markets, but rather the opportunity to grow Omnicotton beyond its main markets of the United States, Brazil and Argentina.
With the major merchants recoiling after last year´s losses, it is a rare example of a cotton firm under expansion.
The impact on Louis Dreyfus is not known because it does not release its financial results as a private company.
STUCK IN THE MIDDLE
Merchants, who act as critical middlemen between the growers and the mills, have borne the brunt of contract reneging.
Last year, some of the world´s largest merchants ratcheted up losses as mills and growers walked away from contracts at the height of the price volatility.
Prices more than doubled to records above $2.2 per lb in March last year, exceeding their Civil War peak from 1861. Farmers who had contracted to sell their cotton crops at much lower prices reneged on those deals, "washing out" their contracts and forcing merchants to buy at much higher prices to meet their export commitments.
Then merchants got hit again. Prices collapsed as quickly as they had risen, falling back to historic averages around 90 cents. Mills, which had rushed to secure supplies as prices surged, no longer wanted to pay those high prices - and defaulted on their own contracts with merchants.
While price gyrations have subsided this year, traders say contract defaults have become endemic. With margins thin, output rising and demand weak, counterparties are quicker than ever to walk away from deals if prices shift, according to traders.
Trading volumes are down, particularly on forward business beyond next March, with merchants terrified of their counterparty risk and anxious over a bearish outlook. One broker said volumes had fallen by a third or more.
To be sure, this is not the first time cotton merchants are grappling with excess capacity in an industry whose history is rife with cyclical swings. But it´s tougher because merchants fear their counterparties.
The damage will take years to heal.
"Everyone´s scared to do business with spinning mills and get forward exposure," a second broker said. "It means we´re doing less business."
(Editing by Jonathan Leff and Dale Hudson)
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