Aug 6 (Reuters) - Two of the world's dominant cotton merchants, Dunavant Enterprises Inc and Allenberg Cotton Co are in talks to merge their global operations, with a deal
anticipated by the end of the third quarter.

Last autumn, two other leading U.S. cotton merchants exited the cotton business, citing difficult market conditions and increased trading risk.

Weil Brothers Cotton, in the top five at the time, decided to close down and Paul Reinhart, a top-ten merchant, filed for bankruptcy protection after incurring severe losses in U.S. cotton futures.

In March 2008, an unusually steep speculative spike in cotton prices forced players to ante up extremely high margin calls to cover their positions, eventually leading to a
Commodity Futures Trading Commision investigation and congressional hearings.

Cotton industry analysts contacted by Reuters said they ranked remaining players in the market as follows. No immediate figures were available on the size of their market positions as most are privately held.

The three largest players collectively account for about 80 percent of world cotton business, they said.

1. Allenberg

2. Dunavant Enterprises

3. Cargill [CARG.UL]

4. Olam International (OLAM.SI)

5. Noble Group (NOBG.SI)

6. Plexus Cotton Ltd

7. Plains Cotton Growers Cooperative

8. Staplcotton Cooperative

9. Calcot Cotton Cooperative

Top cotton producing countries/regions in 2009/10 (USDA data in 480-lb bales)

1. China - 33.0 million bales

2. India - 25.0 million bales

3. United States - 13.25 million bales

4. Pakistan - 9.20 million bales

5. Central Asia - 6.56 million bales

6. Brazil - 5.50 million bales

(Reporting by Rene Pastor and Carole Vaporean, Editing by Marguerita Choy)