Good morning Chris, and thank you for taking the time to talk with us. First question: You rowed in the Oxford & Cambridge Boat Race from 1979 to 1981 and are a four-time winner at Henley Royal Regatta. You won the silver medal in the eight at the 1980 Moscow Olympics. What lessons did your rowing career teach you that have been useful to you as a commodity trader?
Sport for me is a microcosm of life, especially business life. As in everything, the more you put into it, the more you get out; the harder you work the better you become. So the things that you need to do to succeed in sport are the same things you need to do to succeed in business: effort, focus, discipline, and dedication. The beauty of sport is there is little politics, if you are fast nobody can deny it. There is no quick fix, it takes years of effort and hard work to do well in sport; the same in business!
When the Canadian Globe and Mail interviewed you in 2016, the journalist wrote that you looked like you “could empty a grain silo in about 10 minutes with a shovel.” How do you keep so fit, and how does it help you bear the pressure of the job?
I probably exercise five times a week, including cycling at the weekends. When I cycle I go at it hard. And in the gym I don’t sit on the rowing machine for 45 minutes. I do interval training, for example five times 1,000 metres. That is not only better for you but is also less boring! Also, I time and record everything, and I wear a heartbeat monitor.
Ivan Glasenberg, the CEO of Glencore, was a champion race-walker for both South Africa and Israel, and runs one hour every morning with a group of senior managers. Is physical fitness actively encouraged at Glencore?
I believe Ivan runs or swims every morning, there is an office swimming group I know because I have tried and failed to keep up with them when I have been in Baar. We used to run together when we were travelling. I think it is part of the culture, although not for everyone. When you are exercising hard you are not thinking about anything. In fact, if I am not suffering I find it less relaxing!
Marc Rich once famously told his wife when they got married that he could spare the family 30 minutes on a Saturday and 45 minutes on a Sunday. How do you manage your work / life balance?
That is absolutely not the case with me. There was one big transaction, the Viterra transaction, which was an exception. It was an intense six or seven month period during which I spent many weekends in Canada. That period aside, I believe I have always been able to balance my family and my work. I virtually never travel on the weekend—I make a point of that. My family is very important to me.
When you were at Cargill you “invented” the model of modern sugar trading, levering large physical positions against futures positions and then making big profits on the futures. That was very innovative, although the model has pretty much run itself to death now. You could have ended up running Cargill. Why did you leave?
I don’t know that I could have ended up running Cargill. I started in sugar which was relatively independent, and a little apart from corporate Cargill. Working in the sugar division of Cargill at that time was a little bit like running your own company. There was no real interference from above, but at the same time the financing and the corporate support were there. It was ideal.
Cargill likes to rotate their senior managers, and in the mid-nineties I was transferred to the grain division in a regional management role. There are a lot of people in Cargill who know something about grain and, good company though Cargill is, there were too many opinions at that time for my liking. Perhaps unreasonably I found it restrictive and missed the trading and so I left, probably more my fault than Cargill’s.
Didn’t you at one stage trade coffee?
Yes, you’re right, but for only a short period. Every morning we had to taste different grades of coffee, and one day my colleagues played a trick on me, and slipped in two cups of tea. I couldn’t tell the difference! Let’s say I was not the best coffee taster in the world!
When you first left Cargill you worked for a short while at Phibro?
Yes, in Westport Connecticut with Andy Hall, who incidentally also rowed for Oxford against Cambridge, but a few years before me. I made the easy choice—which probably wasn’t the right choice—to go back to what I knew: to go back to the sugar business in a pure trading role.
When I joined them, Phibro was part of Salomon Smith Barney, but a few months later they were bought by Travellers Group, and then three months after that they merged with Citibank. These were two big bank mergers and commodities didn’t fit their plans. Andy told me I could stay on, but that I would have to keep the business small, and focused entirely on futures and derivatives. I already believed that a pure derivatives trading business was never going to work in sugar. It had to have a physical base with origination, sales and a distribution book. Guessing whether the market was going to go up or down was never going to work, or at least it was never going to work for me.
So you joined Glencore in Rotterdam. You had moved from Geneva to Westport, and after only a few months moved back to Europe. What did your wife think of that?
She was not very happy. My wife is American—she had been excited about going back to the US, and that was one of the reasons why I accepted the position with Phibro. I remember promising her that this would be our base and this was going to be our life. We bought a nice house in Connecticut, one of those old colonial houses. Our daughter was born there.
But eight months later we talked it over, and both realised that the opportunity with Glencore was just too good to turn down. She was very supportive. We agreed to give it a go for a couple of years, and that if it didn’t work out we would come back to Connecticut. That was 21 years ago. We moved to The Hague. She found it tough for a few years, but stuck with it. The Dutch are easy to get on with, and it is a lovely place to live—great for kids. We love it.
I joined Glencore in 1998 as number two with geographical responsibilities for South America, the FSU and Africa, and became head of Agriculture in 2002.
In 2011 your cotton-trading department lost $300 million, wiping out your total profits of that year. Would you like to briefly explain what happened, and what you learned from it?
We had a large long position in non-US physical cotton hedged in the US futures market. It was a basis, or premium, position—not an outright position—so we believed our risks were somewhat limited. The physical market was tight at that time—both in the US and globally. Our position expressed the view that world cotton was undervalued compared to US cotton.
One company decided to take delivery of the US cotton futures. They had specifically sold US cotton to their customers and wanted US cotton to cover their sales. The problem was that they wanted to take delivery of more US cotton than was physically available for delivery. Rather than swap US cotton for other cheaper origins, which was the economic thing to do in my view, they maintained their long position in US futures and the market went sky high. Non US origins also went up in price, but to nothing like the same extent. A huge differential opened up between US cotton and non-US cotton.
You were head of Glencore Ag at that time, so the problem ended up on your plate?
I was responsible for setting up the cotton desk so it more than landed on my plate. It was my plate. It was clearly my responsibility. We had hired a team from outside, because we didn’t have a cotton business. Clearly with hindsight we should have looked to have developed a cotton team from within, supplemented with outside expertise. Glencore in Switzerland was not happy of course but Ivan supported me in a way that I never forgot.
How important is corporate culture, and if it is important does it make it hard for mergers to work in the trading business?
Corporate culture is critical and that is one reason why it is challenging to acquire trading businesses. Acquiring assets—a logistics business and supply chain management—is easier. There is also the issue that unless you are willing to double the risk—double the size of the VAR—then one plus one doesn’t necessarily equal two. We also do not feel we need to buy trading expertise as we already have it.
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