A Conversation with Nick Tsiolis

Good morning, Nick, and welcome to Commodity Conversations. Could you tell me a little about yourself?

My name is Nick Tsiolis. I’m the founder and CEO of Farmers Keeper, based in Chicago. We help US farmers manage price risk when selling their physical grain. We offer them margin-free hedging structures derived from futures and options, giving them flexibility regarding where they eventually deliver their cash grain.

Our team manages the execution of price risk to physical delivery and settlement for over 1,000 farmers from North Dakota down to Mississippi, and all over the “I” states of Illinois, Iowa, and Indiana. We are not a physical elevator but work with over 1,000 grain elevator operations, processors, feedlot operators, merchandisers, and ethanol producers.

What did you do before setting up Farmers Keeper?

I was in the supply chain industry with CH Robinson, the world’s largest supply chain consultant. I dealt with Fortune 500 CPG companies down to mom-and-pop operations moving freight across the planet.

I got involved in the grain industry, working with commodity brokerages, and helping farmers hedge their futures and options risk without using paper financial products.

I met many farmers across the country and realized that to get margin-free finance, they had to commit delivery ahead of time to sell their physical grain to a particular elevator. But when the time came for them to deliver their grain, that elevator might not offer the best physical basis. I saw an opportunity for them to hedge their outright price risk ahead of time and lock in the basis later.

I launched the company about four years ago.

You work with a thousand farmers and a thousand grain elevators. Are you happy with your progress so far?

I am. I own the company outright. We are not looking for investor dollars. We are a profitable company that adds value to our customers. We are growing our customer base, and our brand recognition has shot through the roof in the past year.

We give out information on cash grain marketing via social media and the American agriculture news media – free information about how basis works and how the global supply and demand markets dictate what happens to local prices.

What is your biggest challenge?

I don’t have enough resources on my team to keep up with all the farmers that reach out to us, to vet them and give them access to what we’re doing.

Our challenge is to scale our model and still give each farmer a personalized white glove service. As we expand and bring on new farmers, I want to continue giving every one of those farmers one point of contact.

How big is your team?

There are five of us.

Are you hiring?

Yes. As a matter of fact, I sent out one offer this morning.

Where does your revenue come from?

We charge a fee per bushel when farmers transact through us—the cost ranges between corn, soybeans, and wheat – our core products.

We advise a handful of customers on their local markets, but it’s a separate business line and not our core model.

How does your core model work?

We leverage the same clearing firms that the grain elevators use to hedge their grain when they directly purchase from farmers, except we don’t take delivery of the grain.

We marry up the futures contract with a physical sale, just like grain elevators do when contracting grain, sometimes years out. However, we leave the delivery component of that futures contract open. It allows the farmer to choose later where to deliver his physical grain.

The average US farmer delivers to four different grain elevators. There can be an enormous variation between the bids that each offers. We allow our farmers to deliver their physical grain to the elevator that provides the highest price at delivery. They don’t have to decide ahead of time.

We help farmers hedge some of their price risk ahead of time through the clearing firms in the same way the elevators do, without putting up margin money.

We leave the delivery component open. When a farmer decides when they want to sell their grain, we help them with our analytics and our local market knowledge.

Do you only lock in the basis at delivery?

About 70 to 80 per cent of the time, our farmers lock in the basis one month before delivery. The rest of the time, farmers will lock in their basis earlier, depending on the market opportunities that arise.

Leaving it to the last month doesn’t necessarily give you the best price, but we offer our farmers the option to lock in their basis at any time up to delivery.

So, you act as a marketing agency for their physical grain and as an introductory broker to the exchange members – the clearing firms – who handle the futures and options. Is that correct?


Who is the counterparty?

The clearing member is the counterparty on the futures and options element, and the elevator is the counterparty on the farmer’s sale of physical grain.

If the market moves higher, the clearing member must post variation margins with the clearing house. Do the farmers pay the variation margins?

The clearing firm pays those variation margins. But the bit you are missing is that the farmer sells the equivalent quantity of physical grain to the clearing firm at the same time as he hedges the futures. The clearing firm hedges that purchase from the farmers and creates an offsetting futures position on the exchange. When the farmer eventually sells his physical grain to an elevator, the clearing member exchanges their futures with the elevator.

Isn’t there a risk that a farmer sells grain he doesn’t have?

We do due diligence on every farmer we deal with and submit an onboarding application – like a credit application – on the farmer to the clearing firm.

We vet the farmer regarding their acreage, average yield, crop insurance, grain storage capacity, how they market their grain today, what grain elevators they deliver to, and finally, their corporate structure.

Under the existing system, if a farmer sells to an elevator, the elevator will give them margin-free pricing. But if the farmer wants to keep a choice of where they sell it to, they will have to hedge futures in their account. That is your advantage over the existing system. Is that correct?

Correct. We want farmers to understand their available options and how to perform one of the most complex parts of their job: selling their grain. We don’t take positions in markets. We enable farmers to take their own margin-free positions with the flexibility of basis delivery to any elevator.

I understood from earlier that you don’t have any competitors.

We’re a hybrid between two well-established industries: grain elevators and commodity brokerages. We view elevators as partners because we carry the hedge for them from farm to elevator. We’re a conduit for grain flowing from farm to elevator. The elevators see us as a source for the millions of bushels we manage and can route to them if they want.

In that sense, you’re a client of the elevators.

Yes. We are also a client of the clearing firms.

I read recently that US farmers have been building storage capacity on their farms and taking business away from the existing silo operators like the ABCD+ companies. Why have they done this, and is it working for them?

On this side of the pond, we don’t say silos, we say grain bins.

Before the 1990s, we had a decentralized model in the United States: a cooperative model where small farms pooled their resources, built centralized grain storage, and then, as a group via the cooperative’s corporate entity, sell the grain to a grain processor (like an ethanol plant).

As yields have increased and farms have gotten larger, they’ve attained the economies of scale to build their own on-farm storage. Now they’re vertically integrating into their own merchandising operation equipped with logistics capabilities to ship grain further afield towards end-users.

Do farmers deliver grain to the elevator, or does the elevator collect it from the farm?

The farmer transports the grain to the elevator. They may hire a trucking company, but as the farms get bigger, they often run trucking companies themselves, renting out the trucks during the off-season.

Is the cooperative structure in the USA disappearing?

It’s a complex subject in the grain world because grain co-ops have played an essential role in the community for so long. The farmers owned them, and they provided a lot of value.
They were – and still are – pillars of many communities. So, there’s a lot of loyalty from the farmer’s perspective.

The cooperative model will face challenges to stand alongside the new vertically integrated farms that don’t need grain storage, trucking capacity, or help with merchandising.

Farms are getting bigger; they’re becoming more vertically integrated; they’re taking more control of their businesses and becoming more formalized in a corporate structure.

How are farmers adapting to these changes?

There is a lot of anxiety in the countryside about how out-of-town land speculators and wealthy individuals buy and rent farmland back to farmers. That anxiety comes from two places.

First, it’s taking away local control of that production land. The farmer is losing the ownership that, in many cases, has been passed down for generations. In that sense, farming risks going the same way as local restaurants and retail stores have already gone, bought out by large corporate chains.

Second, should one person or one entity have that much control over such a wide swath of land? What are they doing with that resource – are they looking after the land correctly?

Thanks, Nick, for your time and input.

© Commodity Conversations ® 2023

Women in Agricultural Commodities

A Conversation with Maryana Yarmolenko Stober

Good morning, Maryana, and welcome to Commodity Conversations. Thank you for taking time out of your vacation to talk with me. First, tell me a little bit about yourself.

I’m a lawyer with ADM in Rolle, Switzerland.

I come from a small city in the Ternopil Region, Ukraine, and I did my first university degree at the Ivan Franko National University in Lviv. I did my law degree at Lund University in Sweden and then worked in a law firm in Ukraine before joining ADM in Switzerland 13 years ago. I have been working at ADM’s EMEA headquarters in Rolle since then.

What does your current role entail?

I cover various interesting corporate legal issues: M&A, joint ventures, competition, commercial and trade. I manage a team and am the lead lawyer for one of our business units.

Can you give an example of the type of issues you deal with?

As part of my job, I manage legal and trade matters for our leadership team in Ukraine. As you might imagine, the past year and a half has been challenging for me personally and in business. We have had to deal with things we never handled before, from evacuating our people to advising on the rights of refugees in different countries.

We have had to manage our legal issues in Ukraine from a distance, supporting the team members there to find new export routes. We have put in place internal policies on bomb shelters during an attack. All this is entirely new and challenging.

In addition, we have handled Western European matters resulting from the invasion: force majeures and supply chain disruptions. We had to be agile and fast-moving.

I can imagine it’s been quite emotional for you to deal with these professional problems while being Ukrainian.

It’s still emotional, but being Ukrainian gives me insights and knowledge and helps me assess the situation quickly. This inside knowledge of the language, legislation, and culture helps. It is an advantage.

Did you work for ADM in Ukraine before moving to Switzerland?

I worked for ADM for one year in Ukraine on secondment from a Ukrainian law firm, but ADM first employed me directly in Switzerland.

What prompted you to become a lawyer for an agricultural company? Do you have a history of agriculture in the family?

No, not at all. Both my parents are doctors.

I understood that Ukraine plays a significant role in the global agricultural business, and my knowledge and experience could contribute to that. I never specifically wanted to work for an agricultural company; it just happened, and I enjoy it very much.

And why did you become a lawyer?

I was always interested in law. Although I first planned to be a doctor, the legal profession makes you independent much earlier than a doctor. Being a lawyer gave me more international opportunities.

What’s the most challenging thing about your job as a corporate lawyer?

To keep updated and follow the rapidly changing regulatory environment. It’s not only sanctions but also the changing laws on disclosure, sustainability, food, feed, and fuel. On the one hand, we must keep current on these changing regulatory requirements and react before they become valid. On the other hand, we must understand the company’s strategy and how legal requirements can influence strategic decisions. We must keep ahead of things.

What keeps you awake at night?

I sleep well; nothing keeps me awake at night. I try to structure my life so that nothing keeps me awake at night. It is my goal. I must think about my work, family, projects, and hobbies during the day so that when I go to bed, I don’t think about anything anymore.

Let’s move now to WISTA. Could you tell me how and why you became President of WISTA Switzerland?

WISTA stands for the Women’s International Shipping and Trading Association. I am president of the Swiss Chapter. WISTA is in over 50 countries and has over 5,000 members globally.

I joined WISTA when I moved to Switzerland and was looking for a professional network. But WISTA is not just a networking organization but an organization with a purpose. When the opportunity arose, I decided to run for president and was elected. I am now in my second term.

I enjoy my role as president. It has taught me a lot about leading a team, approaching issues, and delivering projects with purpose.

What does your role entail?

I work together with the board on strategy. What is our goal, and what will we do this year or maybe in the next couple of years to reach our goal?

I have a public relations function, promoting our association within the sector and communicating with our members.

Are your members individuals or corporations?

Our individual members pay membership fees of CHF 300 per year. More corporations are now joining us as part of their goal to support women in leadership. We have some of the biggest trading houses as members.

We have around 100 members, and our chapter is probably as large as those in larger countries like France, Germany, or Norway.

Now let’s move on to the PWC report on the number of women in the Swiss shipping and trading sector. What prompted you to commission the study?

Together with the board, we agreed that we had to do something more than just networking. We had to make our organization bigger and more impactful.

I searched the Internet and found no benchmark for women in shipping and commodities in Switzerland. The country is a crucial commodity trading hub, and all the commodity trading companies in Switzerland talk about gender equality and the promotion of women to leadership roles. But where were the numbers?

What did the study find?

It found that, on average, women compose about a third of Switzerland’s total shipping and commodity trading workforce and hold around a quarter of senior leadership positions. These are slightly higher than global numbers and suggest the industry is above the Swiss average and ahead of other sectors.

Do you think those figures are representative of the whole sector? And if they are, are you satisfied with them?

It’s a question we discussed in the report. These figures are almost too good to be true. I’m not saying they are incorrect – they are correct. However, we saw that the companies that participated in the survey were those that were most interested in gender equality.

The survey included questions from employees and employers, but it was challenging to get feedback from employers—only companies devoted to the topic filled in the employer side. We will have another project with PWC later this year to dive deeper into the numbers.

If these numbers are correct, are you satisfied with a third of the workforce and a quarter of the senior leadership positions? Or would you aim for 50 / 50?

We would like to aim for higher.

An earlier survey by the IMO (International Maritime Organisation) found that the percentage of women in the shipping industry is 29% worldwide. That number includes seafarers and women on board vessels where there are fewer women than men. Most of the shipping and commodity trading jobs in Switzerland are office jobs. We see no reason why more women could not be in these jobs. So yes, we would like this number to be higher, more than 33% and much closer to 50%.

Did the study cover just French-speaking Switzerland, or was it the whole of Switzerland?

The whole of Switzerland.

PWC didn’t look at pay. Is this something you’re looking at or will look at in the future?

We didn’t look at it for two reasons. First, pay is a sensitive and confidential issue in Switzerland. We felt we would get even fewer responses if we asked direct questions about pay. Second, new legislation in Switzerland will require companies to self-audit and report on pay equality between genders.

However, we did ask about the different perceptions of gender equality. We asked, for example, whether employees felt that women in their workplace were promoted at the same rate as men, were paid the same as men, were given equal opportunities for development and had equal decision-making power.

Individuals, not HR departments, answered these questions, and the perceptions differed between men and women. Only a third of women considered they were paid the same as men at their workplace, but two-thirds of men felt women were. On the perception level, most men thought that employers treated women equally to men in pay and promotions, but most women disagreed.

The PWC survey found a low employee awareness of diversity and inclusion priorities in their companies. I suspect things are changing, but are they changing fast enough?

Things are changing. It’s easier to have a career as a professional woman in this industry than ten or 15 years ago, but it’s not equal yet. Things are changing, but the speed with which they are changing is not good enough. Too slow.

The PWC report mentioned a World Economic Forum estimate that if we continue at the current pace, it will take more than 100 years to close the gender gap.

Many women in our sector work in support functions like operations, HR, and communications; there are few women traders. Why do you think that is?

Women can do trading jobs exactly like men can do them.  At WISTA, we refer to several studies that find that women are not risk-averse; they just tend to face consequences when they take risks.

Modern trading is more around teamwork and networking than in the past. There is less room to make independent risky decisions. Trading has become more structured, meaning women can easily enter trading roles.

Historically, trading was seen as a job that required you to be plugged in all the time – on weekends, evenings, and vacations. Men have more possibilities to do this than women.

Since COVID, trading companies have started to give their employees more flexibility. It’s OK to work from home; it’s almost OK to work part-time, and it’s also OK to switch off during vacation. I believe we will see more women traders with this new normal.

Working from home has become customary since COVID. Companies will lose good people if they are unwilling to give this flexibility.

Now a question close to my heart – something I’m struggling with now. I find it challenging to get women to interview for this project while men ask me to interview them. I don’t understand why men should be so keen and women so shy. Can you help me with that?*

It’s interesting. Maybe it’s because you want to interview people in senior or mid-level positions, where only a quarter are women.

We run a series of events called Sharing is Caring, where we invite a woman CEO, or a senior woman, to talk about her career, achievements, and how she got there. We have had four or five such events in the last twelve months, but it is challenging to find a woman CEO. There aren’t that many of them.

I understand that you struggle to find women for the interviews because we also find it challenging to identify senior women for our events. It’s not that women don’t want to come and share their experiences with other women. They do want to come. We never have a problem when somebody says no, but we have trouble finding them.

In your case, it is also maybe because of how society works – and the education in the last 50 years or so – that women tend to pass on opportunities. Women may feel they must be 100% ready for the interview – to be perfect, more perfect than men. It’s something we talk about a lot at WISTA. Women may feel they don’t have the time to prepare and pass on the opportunity, while men would just take it even if they are not ready.

What new projects are you planning in WISTA to promote the association and women in general in the sector?

As I mentioned, we will dive deeper into the numbers with PwC. We are also working on a virtual reality movie about a woman’s role and her experience on the trading floor. We will invite guests, including men, to put on a virtual reality headset, watch the movie and play the role of a woman in virtual reality on a trading floor.

 What would your 19-year-old self think of you now?

I think she would think I have done well. I think she would be impressed even if she didn’t become a doctor.

What advice would you give to your 19-year-old self?

I would advise her to be braver and bolder than I was – to have the courage to seize opportunities.

What are you most proud of in your life so far?

Proud? Well, I’m proud of my family, husband, and daughter. I am proud of the work we do in WISTA. Incredibly proud. I think we are changing the world a little bit.

I am also proud that my husband and I, along with several friends, have started a charitable foundation in Sweden to send medical equipment and supplies to Ukraine.

How do you envisage your career moving on from here?

I like my legal work, so I would like to develop in this area, to move to the general counsel or the top legal position. But I also see myself moving to a business role. WISTA has taught me that when you have a project or an idea you are passionate about and know how to execute it, you can do great things.

Thank you, Maryana, for your time and input.

© Commodity Conversations® 2023

If you are a woman involved in the agricultural supply chain – and would like to be interviewed for this project – please let me know via either the comment button or LinkedIn.

A new approach to price risk

A Conversation with Joe Brooker

Good morning, Joe, and welcome to Commodity Conversations. Could you tell me about your career so far?

I started in commodities as a market analyst for ADM, then moved on to ED&F Man and Platts. I have been with Stable since 2019. Somewhere in the middle, I took a year out to travel. I wanted to travel before settling down. My wife and I expect our first baby later this year.

Congratulations on the new baby! I hope it all goes well. Could you please tell me about Stable?

Our CEO, Rich Counsell, the son of a UK farmer, founded Stable in 2016. He realised that hedging price risk was a complex, risky, and intimidating experience for businesses more interested in safety than speculation. He also realised that the futures markets provide an inadequate hedging mechanism for many agricultural products.

He looked at an insurance model and how insurance companies price contracts through actuarial data science – and wondered if the model would work in hedging agricultural products. He got in touch with the universities of Liverpool, Harvard and Lisbon and built out an academic bank of research. In 2019, the company launched ten products working with farmers in the UK.

That was when I joined the company. My job was to build out our suite of reference prices for expansion into the US and expand from our farming customer base. We contacted food businesses, manufacturers, and processors active in markets with an inadequate hedging mechanism – any market with a significant basis with the existing futures contract or where there was no futures contract. There are a lot of them!

We now have over 500 prices on our platform and offer hedging for protein cuts (beef, pork, and chicken), organic grains, lentils, pulses, fruit, and vegetables.

What was the most challenging contract to write?

We have written contracts for a Californian guacamole manufacturer. It was challenging for our risk managers because avocados are highly perishable, and storage is limited. Most avocados come from Mexico, and the manufacturer relies on a narrow supply chain. It is sensitive to any kind of demand shift, supply shortfalls, or changes in customs regulations; prices can double in a week. It is challenging, not only for the algorithm but also for our underwriters.

What’s your business model?

Stable works between businesses and reinsurers to offer a solution, essentially put and call option contracts across 6 to 18 months.

Within that, we must pay our pricing partners – the PRAs, Price Reporting Agencies. We’re already working with FastMarkets and Mintec and are continually expanding. We pay them a percentage of the premium.

So Stable takes on some of these risks and transfers the rest to the insurance companies?

This year we became a fully-fledged insurer in Bermuda. It’s a big step, as you might imagine. The reinsurance companies take 95 per cent of the risk, with Stable taking 5 per cent, using capital from our last round of funding when we raised $60m

How does the insurance company evaluate the risk, and how do they cover it?

Stable sources the deals worldwide and prices the risk; we share in the annual performance of the portfolio.

Can you give me an example?

A US construction company came to us to hedge its lumber exposure. We agreed, and as part of our partnership with RISI, now part of Fastmarkets, a publisher of lumber prices, we offered them some call options on lumber prices. Lumber prices had recently exploded following the COVID-19 pandemic, but they had since retraced. There had recently been a hurricane, but we studied the correlation between hurricanes and lumber prices – which showed minimal correlation – and put a price on the risk.

After our work in lumber, we have expanded to the paper and plastics packaging market.

If I understand correctly, insurance companies take on these risks but don’t hedge them. They just say, “We’re going to win on some and lose on the others.” Is that what they’re doing?


Our data science team in London has built an algorithm that prices the initial premium based on historical volatility using traditional options pricing methods.

The data science team prices risk mathematically, but we also have an underwriting team, including economists and quants. We then add commodity market knowledge, working with market experts. For example, we have an expert for each of the fruit and veg, nuts, dairy, proteins, and grains markets. We ask our market experts for their opinion. You could call it a quantitative and qualitative approach.

We’re building out an almost trading mindset alongside our panel of reinsurers. We assess each type of risk individually and ask how it will fit in our portfolio.

How do you build a diversified risk book?

We offer a broad range of products across puts and calls; it helps to balance the portfolio. We also diversify our risk geographically, with imminent expansion to Europe to balance our presence in the US and Australia. We’ve got US risks across hundreds of different markets, and there’s time diversification within that.

Is it a new business for the reinsurers?

Yes, it is a new venture. Some already have exposure to energy products, but agriculture is a new risk for them – none ever had exposure to avocados! The more niche we become – and the further removed from the markets correlated with futures contracts – the more diversifying we become for the reinsurers.

The insurers think about diversifying their risks and see Stable’s risk pool as one aspect among their different books.

Do you hedge in the futures markets?

We don’t. As our energy and petrochemicals book expands, that may change, but there’s no good futures hedge for fruits, vegetables, and organic grains.

Do you work with trading companies?

No, we only work with companies that have genuine physical exposure. It takes away the portion of the market that wants to trade rather than insure its risks.

Do you work with multiple reinsurance companies? If you only work with one, there’s a risk that they have a significant loss one year, decide they don’t want to do it anymore, and then your business model is ruined.

We began as a Lloyd’s cover holder but now have a panel of five or six reinsurers. We are a regulated insurer ourselves.

Have you considered working with hedge funds as well as insurance companies?

Perhaps in the future, but Reinsurers will always be the most important component of our capital pool.

Some of these markets are small and specialised. How do you deal with that?

There are a couple of things that we can do to mitigate risk. We always look at the market size and the competition within that market. Some of these markets are oligopolies.

We also look at how the prices are reported for that market. The crucial thing is to understand who the contributors are to the price used as the settlement mechanism.

We are not so concerned about the mandated markets. The US pork and beef markets are under livestock mandatory reporting. Every US slaughterhouse that sources over 150,000 head must publish the price they sell every cut of pork or beef in the morning and the afternoon – a fantastic plethora of data.

We have built a grading system for published prices. We work with BDO*, which helps PRAs comply with IOSCO, the International Organization of Securities Commissions, to ensure that their price reporting is regular, transparent, and traceable. IOSCO shores up methodologies to prevent any form of manipulation.

We work primarily with IOSCO-compliant PRAs as they have the paper trail to understand how they report prices.

We also have a strenuous onboarding process to ensure we’re working with people genuinely trying to hedge their physical exposure and not just trying to trade with us.

It’s a minor revolution for people to hedge their avocados, proteins, and organic grains without using the futures markets. An organic barley producer might previously have hedged in wheat on the MATIF, but now they would come and hedge with you. Is that a fair statement?

Yes, that is correct. We want to help businesses reduce basis risk and offer liquidity against the price they are exposed to. Our aim is not to take business away from the futures contracts. They are there to serve a real need and are effective. However, many new futures contracts don’t get the liquidity they need. It’s a massive logistical effort to simultaneously get the buyers, sellers, and speculators. It takes time to build up. We aim to sit alongside the futures markets and supplement the existing risk management tools. We aim to offer market participants a hedge where it previously has not existed.

Do you offer risk management tools on a basis against the futures, or do you only work with outright prices?

It’s all outright now. We may look at options against a basis.

Do you only offer option contracts?


What about counterparty risk? Some potential clients may be concerned that you’re too small and you might not be able to honour the contract if there’s a big market move. Is that an issue?

Our reinsurers (with colossal balance sheets) set our precise risk limits, so we operate very clearly within those boundaries. We also limit our loss on any contract by selling call-and-put spreads, not outright options, so our potential losses are limited, especially with such a diversified book.

Ahh, I had missed that. You sell options spreads, not outright options. It limits your potential loss on any deal. *


Do you sometimes have to educate your clients on risk management?

Our commercial team comes from risk management consulting firms, food businesses, and trading companies. Our people know how risk works. They do a lot of listening and are highly knowledgeable.

Education is crucial. We’ve held various workshops to help our clients understand their risks so that we can work out the most suitable products for them.

It’s often a question of language and terminology. Hedging can sound more complex than it is, so we work hard to simplify it all in terms of structure, language, and user experience.

How do you see the business developing?

We have recently launched into the US Sugar, US energy (biodiesel, ULSD, methanol), and packaging (paper, plastic). We will enter many other markets in the coming months.

The opportunities to help businesses with unmanaged commodity price volatility are enormous and, in some ways, overwhelming!

Thanks, Joe, for your time and input.


BDO is an acronym for Binder Dijker Otte, an international public accounting, tax, consulting, and business advisory network. It takes the PRAs through the IOSCO compliance process. IOSCO validates and certifies the PRAs’ processes, shoring up methodologies to prevent manipulation.

A call option spread is where you buy one strike price and sell a higher one. Buying a call option gives you the right but not the obligation to purchase at the strike price. When you sell a call option, you must sell at the strike price if the option buyer demands it. By selling a call spread, Stable limits its payout to the difference between the higher and lower strike prices. The same works the other way around when they sell put options to a producer to protect them against a price fall. For a fuller explanation of options trading, please see my book Commodity Conversations – An Introduction to Trading in Agricultural Commodities.

© Commodity Conversations ® 2023

How will AI transform the agricultural supply chain?

A Conversation with Saurabh Goyal

Good morning, Saurabh, and welcome to Commodity Conversations. I am keen to learn more about AI’s impact on the supply chain for agricultural commodities.

Good morning, Jonathan. Thank you for inviting me to your platform. We are all in a learning phase, but I am happy to share everything we have learned.

First, please tell our readers about yourself. I see that you studied at the Indian Institute of Technology.

Yes, I did a course in mechanical engineering, after which I worked as a programmer with Tata Consulting Services before doing an MBA in marketing and finance. I then worked as a program manager for the New York Mellon Bank, where I developed some trading systems. Later, I worked for Accenture Capital Markets and Prudential Asset Management. In both positions, I worked in development and implementation roles, managing trading systems for financial instruments.

Olam International hired me in 2009 as their head of CTRM – Commodities Trading and Risk Management Systems – where I developed trading systems for physical commodities. I was with Olam for eight years, working in almost all aspects of commodity trading operations, including supply chain and risk management, hedging and trade finance. We developed many of their in-house operations systems for cocoa, cotton, coffee, sugar, and grains.

What made you leave Olam and start your own company?

As Olam grew, the company replaced their in-house systems with SAP. I was initially involved in SAP implementation, but I quickly realised that SAP was more complicated, expensive, and challenging to implement than our in-house systems. That realisation gave me confidence that there was a market for small and medium-sized commodity traders – like Olam 20 years ago – who could not afford to implement SAP or develop an in-house solution.

Some companies provide front-office applications for order and risk management. Still, few give end-to-end solutions, including the front office and hedging, operations, accounting, middle and back-office activities, trade, and finance.

We founded Phlo Systems in 2016 to provide an end-to-end, easy-to-use, fully custom-built solution – something built on-cloud for consumption on-cloud.

We do almost everything from order management to sustainability. Our latest project is to help companies manage the traceability required under the new EU deforestation rules.

We are around 30 people. Thirteen are in the UK. The remaining are in India, Ukraine, Bulgaria and Ghana, West Africa. Our smallest client pays $150 monthly, and our largest pays $15,000 monthly.

Do you work with Blockchain?

We were initially optimistic about Blockchain, but after one year of working on it, we realised it was not a solution and stopped.

Many people gave up on Blockchain after investing significant time and money. Blockchain was designed specifically for Bitcoin; it is the technology behind it. Our biggest mistake was to think we could separate Blockchain from cryptocurrency.

The only place where Blockchain will work is cryptocurrency. It is the only use case for it. Taking the technology that drives cryptocurrency and using it for something else does not work. It is like trying to fit a square peg in a round hole.

Do you use AI?

We began using AI three or four years ago. We used it for scanning documents like bills of lading, invoices, packing lists, and origin certificates and then auto-filling forms in the system. It saved someone manually filling them. We used an AI technology called Amazon Textract, but every time the format of a document changed, you had to make changes in the system setup – and it was not 100% reliable. It made mistakes in reading the data and importing it into the system. As a result, we were cautious about including traditional AI in our applications.

Chat GPT and Open AI have made things 100 times better. We now feed all our documents to Chat GPT through the back-end APIs (Application Programming Interfaces).

Is it more reliable?

It has so far provided 100% reliability and accuracy in reading the data from the documents and importing it into our application.

It is an example of how generative AI has completely changed the landscape. You previously had to put a lot of investment and effort into integrating traditional AI into your systems, but with Chat GPT, all that hard work is gone. You apply basic software engineering to integrate Chat GPT and ensure the process flow works fine. Chat GPT provides the intelligence to read, interpret, and structure the data, leaving us free to focus on the engineering part.

Some might say that our enthusiasm for AI is like what we initially had for Blockchain, but it isn’t. With Chat GPT, we are already reaping the benefits.

Will Chat GPT be transformative for our business?

I believe so. We are now looking at many different use cases where we can start using Open AI and similar models.

User support is one obvious application. No matter how wonderful your system is, you must provide client support, especially regarding ERP (Enterprise Resource Planning). Our scalability as an organisation was dependent on being able to hire resource people to give that service to our customers. Chat GPT can automate most client support functions, leaving human interaction only for critical use cases.

So, you are using AI for CRM (customer relationship management) and document processing. Anything else?

Absolutely! Much, much more. I just gave you examples of traditional use cases where Open AI is a game-changer because it does the job 100 times better.

But there are 100 other use cases which were earlier not even possible. For example, we have a customs module where an international trader can make a customs declaration without using a customs broker, an agent, or a freight forwarder.

So far, we have only done it for the UK. All the information you need to make a UK customs declaration is available on the HMRC website. We have extracted that information and trained Open AI to do the work. The trader explains the scenarios, for example, importing animal products from Germany to the UK, and the system guides them step by step. Our clients appreciate this kind of functionality.

Is it something that you could repeat in other countries?

We are working on it for the Netherlands. The module should be ready by the end of this year.

Is language a problem?

No, but it’s a good question. Chat GPT was trained only in English, and no one expected it to understand any other language. No one intended it to be fluent in different languages, but it read foreign language documents during the training process and taught itself.

We have done a proof of concept for a Polish freight forwarder who wants to use Chat GPT to process their documents, many in Polish and Italian. We thought the system would fail, but Chat GPT could interpret them 100% correctly.

Language from an AI perspective is not a problem. However, language from a user interface perspective is. We’ll have to change our system to display other languages, but it should not be a problem.

Okay, that’s a perfect example of how you’re implementing AI. Do you have other examples?

One useful plugin converts a natural language question into a structured one that the database understands.

In our application, for example, the user can ask a question like, “List my ten top customers last month, based on the number of transactions, but only the customers exporting from the UK into Germany.” It is a complicated query, and you can make it even more complex by saying that you’re looking for customers dealing with robusta coffee or organic grains. We have developed a plugin to take this query in English, map it to your database structure, convert the English query into SQL (Structured Query Language) and provide you with the answer. We are still in the proof-of-concept stage, but it is reasonably accurate.

Do you have to pay to use Chat GPT?

Chat GPT has a free-of-charge open interface and another with an internet connection and several 3rd party plugins that costs $20 per month. It gives better results.

The problem with the open-ended interface is that you interact with the Chat GPT model and the data within that model. You can’t do anything beyond that. In the customs example, Chat GPT will not function correctly as some customs information sits behind a firewall on the HMRC website, and you need to enter your username and password to get it.

Similarly, Chat GPT will not be able to access your in-house database. However, Open AI offers you back-end APIs through which you can connect your data and allow access.

Are you worried about allowing Chat GPT access to your data? Isn’t there a data protection issue here?

These large language models allow you to protect your IP (Intellectual Property). You don’t provide Chat GP with raw data; you first convert it into vectors – a matrix of numbers.

When you ask Chat GPT a question, it converts it from text format into a vector using “embeddings”. Embeddings are the science behind all these language models. Chat GPT uses nearly 20 billion parameters to convert a question into a vector. It then compares it to all the other vectors it has stored, looking for the closest match and coming up with an answer. Chat GPT doesn’t understand words; it understands the numbers and vectors created from words.

You can provide Chat GPT with your raw data to process, or you can convert it first into vectors. The Chat GPT model is open because it discloses the embeddings you need to convert your data. You can apply these embeddings to your data, transforming it into a vector format before sending it to Chat GPT. It then sends a vector back as a response. It doesn’t get to know the raw data behind the vector.

There may be a counterargument that Chat GPT can apply reverse engineering on the vector and return to the original data, but that process is computationally heavy. If Chat GPT started to do that, it would need an enormous amount of hardware. It’s not computationally feasible for them to do it.

I can’t imagine Chat GPT letting you do all that for £20 per month. Or are they?

No, the API connectivity charges are based on the number of tokens we send to it in each question, but the pricing is not exorbitant. We spend less than £500 per month as of now. It will be an issue if Open AI increases its pricing, but there are other large language models. Open AI is not the only game in the town. There are many different models, and some are free of cost. They are not as good as Open AI but are catching up.

Meta, the company behind Facebook, has released an open-source model and pledged never to turn it into a commercial venture. But then Open AI started as an open-source model before Microsoft converted it into a commercial model when they realised its massive potential.

You never know what’s going to happen in the future. Open AI is currently reaping all the benefits. But there is a consensus in the development community that an open-source model will prevail in the long run. And it won’t be Open AI.

How will AI transform the agricultural commodity trading business?

It is a difficult question to answer. As software developers, we see that it is transformative in developing and providing our systems to our users. GPT is excellent with the English language, but it is ten times better with software programming languages.

Microsoft owns Open AI and GitHub, an online repository for code. We suspect that Microsoft trained Open AI on the software code stored on GitHub. It has made Open AI an excellent programmer. It generates perfect code in any language you want. It is also suitable for testing your code, finding bugs and issues, et cetera. It has made the software development process five or six times faster than without it. So, it is transformative for us as a software development business.

I believe that Chat GPT will transform the way users consume software. Users currently consume software in a form-like interface, entering and saving the information. It’s a data-driven approach.

In a few years, we will see conversation-driven user interfaces. You will tell the system what you want to do. For example, you will tell it that you have received a new contract to supply a commodity to a customer. It is lying in my email. Can you please check and store it in your system?” And the system would be able to do that.

Will AI make some professions redundant?

The politically correct answer is, “No, it won’t. It will help professionals do their jobs better, remove the mundane tasks and empower workers to focus on higher-level thinking.”

The correct answer, however, is, “Yes, AI will make some professions redundant. We’re already seeing it. Shares in Chegg, the biggest tuition-assistant company in the US, lost more than 40% within six months of Chat GPT launching. The company connected kids to different teachers, helping them with their homework, but Chat GPT does a better job than many teachers.

UK schools have banned children from using Chat GPT. I think it is a shame. You can’t stop technology; you must use it correctly rather than prohibiting it.

Chat GPT was supposed to be a purely language model; it was not supposed to solve mathematical questions. However, it solves mathematical questions by breaking down any question into logical steps. Some people still think Chat GPT is just a stochastic parrot, but it is not. It is much more than that.

So, Chat GP wasn’t supposed to understand non-English languages or solve mathematical problems, but it does. Were there any other surprises?

Yes, but they were not all positive; some were negative. Hallucination is the most negative. It is when Chat GP gives you a wrong answer with confidence. No one expected it to do that, but it does.

Should we be afraid of AI?

I don’t think so. AI doesn’t have an agency; it will not suddenly wake up at night and start thinking for itself. It is a program residing on a system, waiting for you to ask it a question. When you ask a question, it looks back into all its learning and provides an answer. It is not fundamentally designed to think for itself.

The doomsday scenarios are not applicable here. What is possible is a wrong actor will use it for destructive purposes. Safeguards are in place, but you can trick Chat GPT into answering a question it has been told not to answer.

What is the difference between AI and machine learning programs?

With machine learning, you train a machine for specific data and context-driven tasks. AI is not dependent on any particular use case. A machine learning program trained to do one thing couldn’t teach itself languages or maths.

Could AI learn to trade on the futures markets for speculating or hedging?

Electronic and high-frequency trading, identifying micro patterns and then acting on those patterns, have been in existence for many years. Companies have made fortunes using the technology. But their success has depended not only on their mathematics and algorithms but also on their better connectivity to the exchanges and some information-based edge.

Trading companies tend not to try to identify ultra-short-term trends but look at a broader horizon based on supply and demand imbalances.

 Chat GPT will not revolutionise short-term trading because short-term traders analyse real-time tick-by-tick data; it is not Chat GPT’s model. Short-term trading will continue to rely on statistical probabilistic models already out there. It’s a mature industry.

Chat GPT may be better suited to longer-term trading, looking at supply-demand imbalances – crop and weather reports and the like – and then taking a direction-based strategy. I think it can work.

Thank you, Saurabh, for your time and input.

© Commodity Conversations ® 2023

Innovation in the Coffee Supply Chain

A Conversation with Raphaelle Hemmerlin, Chief Innovation Officer for Sucafina. 

Good morning, Raphaelle, and welcome to Commodity Conversations. First, could you tell me a little about your career so far? 

I’m French and have been in the commodity business for twenty years.

When I was young, I always wanted to do something where I would speak different languages.  I found a course on transport and logistics in an international school based in Paris and began my career with Bolloré, one of the largest French forwarding companies. I enjoyed it, but they did not pay me much, and I was keen to progress.

In 2006, when I was 22, I visited Geneva and said, “Oh, this is a great place to live, and the salaries are much higher than in France!”

I interviewed with Sucafina and joined the company as a logistics officer, overseeing East African export logistics. Five years later, the company appointed me to a position as senior logistic coordinator.

I felt the company at that time lacked vision, and there was little opportunity for me to grow in my career. I decided to widen my horizons and joined BNP Paribas in their commodity trade finance department. I spent three years with them in their front office, discovering the world of soft commodity finance. It was a tremendous experience, and I built a great network, but I didn’t like the bank’s environment. It excluded all aspects of entrepreneurship.

I had kept in touch with Sucafina, who, during this time, had developed a vision, a culture, and a growth strategy. I came back to them. I have gone from senior logistics coordination to heading group logistics and operational efficiency in the ten years since then. I have been responsible for technology and innovation for the past six months.

What does your current role entail?

It mainly entails project coordination. Sucafina fosters entrepreneurship as one of the company’s core values. We don’t have a single person leading innovation. Every employee comes up with ideas, and my job is to implement those ideas.

I love it, as we have an immense capacity for brainstorming, trying, failing, and learning. We have an escalation guide and an organization that can bet on the ideas with the most potential at the group level. My role is to bring project management together, align the strategy in the innovation pilots, meet with partners, decide whether to invest in start-ups and lead the teams that can scale from piloting to implementation.

You mentioned that you invest in start-ups. Would these be external to Sucafina?

Both external and internal. I don’t do the financial analysis and due diligence, but we invest in start-ups external to Sucafina. We have also taken an internally generated idea, scaled it, and spun it off as a start-up.

Could you describe Sucafina to people that don’t know the company? 

Sucafina is a family-owned coffee merchant which aims to be the world’s leading sustainable farm-to-roaster coffee company.

How does your experience in logistics and finance help you in your current role? 

My experience has given me a 360° view of coffee and soft commodities. It helps me listen to people in the supply chain and understand their needs, dependencies, and pain points. My network allows me to discuss ideas, leverage and scale them.

Working with the bank expanded my network. It helps to have counterparties with whom you can brainstorm – to say, “Hey, I have this idea; what do you think on your side? Is it a pain point for you? Shall we try it together?”

Logistics present an immense opportunity for innovation. Many people are still doing things the way they always did them. The number of actors in the chain is crazy – from the people loading the trucks, stuffing the containers, processing the customs forms, signing the bill of lading etc. There are so many steps.  Having this experience helps me to speak the language and understand a project.

Is it usual for companies to have a designated head of innovation? 

The head of a research department could potentially have the same role, but I haven’t seen that specific title in any commodities trading company. It’s new even for Sucafina; the company created the position just six months ago.

But I stress that I don’t aim to be the person who is doing the innovation. My objective is to be the enabler for the company’s innovation strategy. My role is to create value for our clients, our suppliers, and our ecosystem in general.

It is slightly different in logistics because of my background in them. I have a pool of opportunities for innovation that I pilot and develop with the team. I’m deeply involved in all the innovations, ideas, proposals, and pilots that touch the logistics aspect of the company. But in other areas of innovation, I am more involved with finding the winners and scaling them up.

Do you find resistance within the company from people who say, “We’ve always done it this way; why should we change?”

We can find resistance to change, sometimes because of a fear of the unknown, sometimes because people are too busy.

But even when people were busy with Covid, we still managed to implement and scale innovation in document handling. Even though there was freight squeeze, COVID, and many other issues, the team managed to pilot, validate, and implement a tool that enabled us, together with custom brokers and trucking companies, to create digital documents in ten different origins of the group.

I recently interviewed the CEO of Covantis. Are you involved in Covantis? 

No. Covantis tackles soft commodities from a grain perspective. Grains move mainly in breakbulk, whereas coffee moves in containers. You might imagine these are the same, but the processes and actors differ. We use Cargoo, a different platform. It is better suited to our needs.

Cargoo was my first experience of leading innovation at Sucafina, starting in 2017 when the platform was at its beginning. We wanted to innovate in the sector and supported Cargoo as a partner. It was an amazing experience.

But document handling is not the only area for innovation in logistics.  There are many more.

Such as smart containers?  

Smart containers help when you need help. They can make a difference in specific cases, for example, in the case of theft. You don’t need smart containers when everything goes well. Their use case is rather limited, but they don’t cost much. You gain a lot of data, but we have not yet learned how to compute and leverage that data. We are working on it.

Are you duplicating Farmer Connect with your smart containers? 

For the sea voyage, potentially, yes.

But the Farmer Connect story is different. Farmer Connect is the spin-off of an idea from Dave Behrends, Sucafina’s head of trading. I participated in it from the very beginning.

The use case is to provide farm-to-roaster traceability. Farmer Connect puts the miles before and after the container into a tangible form. You can attach information about the farmers, soil analysis, deforestation, and carbon emissions. Smart containers just tell you if your goods are inside the container and what happens to them while they are in it.

I read you moved Vietnamese coffee to Europe in breakbulk at one stage. It was innovation going in reverse. How did it work out?

It worked out well, but, as you say, it was going back to how merchants transported coffee 50-70 years ago.

There was a freight squeeze at the time, and instead of paying $1,000 to ship a container from Asia to Europe, we were suddenly paying $13,000 per container. It didn’t make sense for a low-margin business like coffee. We decided to try breakbulk whilst ensuring we maintained food safety and traceability. We had to relearn everything. It was stressful, but we learned a lot. We could do it again if the situation arises.

Innovation covers so many different things. Could you give some examples of where you’re currently innovating along the supply chain?

We are working on waste and water management in coffee washing stations to reduce carbon emissions and create value for farmers.  We operate two pilot plants that take the water, clean it, and reuse it in a closed cycle. Up until today, it was not something you could do in coffee. Usually, you use the water, clean it, and then dump it.  Having a closed cycle reduces water consumption. We are currently trying to perfect the technology and, once we do, will introduce it across all our origins.

We are also working on the way we dry coffee beans. You’ve perhaps seen coffee being dried in the sun on tables. It’s what they do in Africa, but most other origins dry the coffee in machines that use a lot of energy. We are currently testing using electricity from solar panels to power the devices and then recycling the generated heat.

Otherwise, we are currently talking with companies about bean-free coffee. It’s an interesting debate. Bean-free coffee could have potential. It could reduce coffee’s carbon footprint. It could bring new flavours. But at Sucafina, we are very attached to the farm and the farmer. So, this is the kind of innovation where we want to learn and be informed, to know what is happening, what the consumer appetite is for it, and how it could benefit the environment.

Some companies buy carbon offsets to meet consumer demand for carbon-free coffee. Carbon offsets have fallen out of favour recently. Is carbon-free coffee possible without carbon offsets? 

End to end, I don’t think so. However, you can reduce emissions and create carbon insets.

We start by choosing the right variety of seeds to grow trees that need less water and give farmers better yields. We then look to see if we have good regenerative agriculture practices. If you combine both with soil analysis, multi-crops around the coffee, and reduced water consumption during processing, then, potentially, we can think of having a carbon footprint close to zero. I don’t dare say it would be zero, but it can be close to zero. I think it’s possible.

For the rest of the chain, you’re dependent on the partners. You depend on your trucking company, shipping line company, and logistic distributor. Can Sucafina be the driver of change? No, standalone, we cannot. Can we use offsets to reduce those parts of the chain where we cannot go to zero? Yes, if it’s beneficial, let’s do it.

What about green financing – is it still a thing?

It’s still there, but it doesn’t mean lower interest rates. It doesn’t work like that. What happens is you link borrowing conditions to certain environmental and social goals. We get reduced interest rates and return them directly through investment in sustainability projects.

It’s a positive cycle. It’s a way to incentive the industry to change and to achieve goals, but at some point, it becomes the standard.  Today, you’re super happy when you meet specified objectives, but once you reach them, they become the baseline.

In other words, the banks won’t finance you unless you meet certain sustainability criteria. 

Exactly. The trend is in this direction.

Of the different things Sucafina does regarding innovation, which is the one you’re most proud of? 

I’m most proud of Farmer Connect. I love that it’s a data-driven innovation where you give the benefits back to the farmers. It is a start-up whose purpose is to improve farmer incomes by allowing them to monetize their data and be at the centre of traceability.

I’m super proud of how we have transformed logistics at Sucafina. My son was in the office last week, and I kept him busy archiving documents. I laughed because all the documents were dated from 2006 to 2017, but none after 2017. It was a huge change in how people worked, sending 2,000 emails daily, printing every contract, putting them on the file, scanning documents, and presenting them to the bank.

We went from so much paper to no paper. And that, for me, is a carbon opportunity. But it’s more about how people have managed to change their way of working. It makes me super proud.

I am proud of a project we are working on connecting Sucafina with the warehouse keeper. Warehousing is a huge deal in coffee. We store coffee all along the supply chain. We exchange information with warehouses all over the world.

Sucafina is willing to invest and assign people to an idea where we know we will repeatedly fail, but we will keep trying until it works. There are not many companies that allow you to do that. It’s not a huge budget, but it is a significant investment. I wouldn’t be free to do that in another company.

Sucafina drives innovation, but how do you spread it through the industry?

Innovation cannot just be company- or person-driven. A company or a person can play a leadership role – that’s what we want to do at Sucafina – but innovation must be embraced and shared at a wider level. We need to think about how to support people who are not equipped – or do not have the time – to innovate.

How can we help people who are working hard to feed their families but don’t have the time to think about changing how they work? And how can we help companies to be more willing to try and fail? The fear of failure is sometimes bigger than the opportunity to win.

How might artificial intelligence change the business? 

We already use AI at Sucafina with machine learning for our trading model. AI is a powerful assistant enabling us to make better trading decisions. AI helps in other fields like invoicing, market research, PowerPoint presentations or blog updates. It helps us go faster in the cycle of trying and failing or trying and delivering. I have a chatbot I use to compose technical specifications. I have used it with some developers to see how AI can create user code to develop a tool.

AI has a variety of use cases. We must learn and adapt while keeping our people and our strategy relevant. As with every disruption, be aware, learn, and don’t be scared to embrace it.

Innovation is not just limited to companies; it’s also personal. You recently studied at the THNK School of Creative Leadership. What motivated you to do that, and what did you get out of it? 

I joined the experience from May to October last year, partly on-site and partly remote. It was amazing.

Why did I do it? I wanted to do an executive course to help me participate in decision-making and strategy. After twenty years in my career, I wanted to learn new skills and recognize where I had a shortfall.

What did I gain? I gained confidence that I could be different in how I engaged in leadership. It brought me a frame of thinking around change management.

It’s an executive creative school. It’s about incorporating art, feeling, emotion, and your dreams into your business functions. It spoke to me. I’m a romantic person. I cry at the cinema. But I am not like that at work. I’m not emotionally driven at work. It’s funny. I realized that if I linked the two, I would get the best of me and the best from the people I work with. So, embedding stories, reframing, and peer coaching supports me and the innovation culture within the company. It also helps the way people engage with their ideas.

I’d like to move on to women in commodities. I think you recently won an award for your role in the commodity sector. Is that correct? 

WISTA, the Women’s International Shipping and Trading Association, nominated me. I joined WISTA’s Swiss chapter in 2016 as a member and became Treasurer and Vice President. I’m no longer on the board but remain a member. The nomination came from a commodity networking company WISTA partnered with to promote women in commodities.

Why are there so few women in commodities? 

There are many women in shipping and trading, but they are more in procurement, operations, accounting, and human resources. Few are traders.

I think it’s about creating the pipeline. Trading has a reputation for being male-dominated. It’s a bias we have, but that bias is breaking down on both sides. Women are gaining more confidence. I see it at Sucafina, where we are getting close to 50/50 in our Geneva office. We have a pipeline to take female employees into management positions.

Awareness is important, confidence is important, and the world has changed. Work from anywhere. Work with parental leave, work with whatever you want to do in your life. It’s more normal now. It’s going to take time. It will get there.

So, you are optimistic? 

I’m an optimistic person. I’m confident about this because I can see it coming.

Thank you, Raphaelle, for your time and input. 

© Commodity Conversations ® 2023

This is part of the Commodity Professionals – The People Behind the Trade series.

A Conversation with Michael Duspiwa

Good morning, Michael, and welcome to Commodity Conversations.  Please tell me a little about Fixkraft – is it a private company?

Fixkraft is a compound animal feed manufacturer founded in 1971. We are Austria’s second largest feed producer in volume – and the largest privately-owned one. We are proud of being in private ownership. It feels more like a family than a big organisation. We’re close to our five owners, the sons of the founding fathers, and they’re close to the business, to the industry. It makes working here quite nice.

Our facilities are in Enns, a port on the river Danube with railway access and close to a highway.

How did you get into the business?

That’s an amusing story. I attended a tourism school, so I know how to cook, but I always wanted to do something internationally. In 2010, I worked for six months in Ukraine as an intern in Donetsk, where I learned Russian. When I returned to Austria, I looked for a job and applied to VA Intertrading, an Austrian grain trading company. They were looking for a Russian-speaking trader, and I started with them as a junior trader in Russian origination.

 I also used to study Arabic; although I don’t speak it, I can read it. In my first months with the company, I participated in a business trip to Morocco, even though I didn’t know anything. The company had a client in Casablanca purchasing around a million tonnes of corn every year. He asked me what I thought of the market. I managed to give him an answer, but I thought, “Wow, it’s nice that he asked me.” In other industries, they look at you, see that you’re new and have no clue, and then talk to the older guys with more experience. But no, he genuinely wanted my opinion.

The company then sent me to Algeria to try to open some markets. I also worked with Iran on grains and oilseeds. As you know, commodity trading is about contracts, and you don’t see the physical grains. I thought getting a little bit closer to the goods would be nice, so after three years, I moved to an Austrian apple juice concentrate manufacturer, buying apples in Poland, Hungary, Romania, and Ukraine. It was interesting but different to the grain business. There was no forward business, no futures, nothing. If you offered a reasonable price, the trucks turned up at your plant. If your prices were too low, they went to your competitor.  It made it linear. I missed the grains business, so in 2019, when the opportunity came up with Fixkraft, I grabbed it.

 How do the different types of animal feed vary? Is pig feed different from cattle feed, for example?

Yes, absolutely, both in terms of nutrients and legal requirements.

There are different legal requirements depending on the type of animal feed. For example, you can use GM soybeans for pigs but not poultry. Most of our feed goes to poultry, where we cannot use GMOs. For cattle, on the other hand, we are restricted to European-origin meals. I can buy Brazilian non-GM feed for poultry but must purchase European non-GM soymeal for cattle.

It is diverse. Non-GM European-origin meals would work for everything, but they are the most expensive option. You could use non-GM European soybean meal for pig feed, but you wouldn’t sell a kilo because it would be too expensive.

We use Danube-soy-certified soymeal for laying hens. They require meals exclusively grown in Europe. And then we also use some high-protein, mid-protein GM and non-GM soy, depending on price. The price plays a role here. We use eight, maybe nine, different types of soya in our production.

And you must separate them all.

Yes, we must keep them separate.

Is your objective to obtain the right mix of carbohydrates and proteins at the best possible price, or is it more complicated than that?

There is the legal side I have already mentioned, but there are some further issues, such as the permitted level of toxins. We need to track them, particularly in corn.

Some farmers believe that they can do on the farm what we do in a compound feed factory by mixing their homegrown grains with soya. It does work. I’m not saying it’s wrong, but they do not have the analysis. It’s a natural product, and corn has different humidity and starch levels.

Our customers often require specific feeds for their animals. There are so many factors in raising livestock. It’s not just feed; it’s also the water and the heating. We have harsh winters here in Austria, and with high energy prices, farmers may reduce the heating, which can affect livestock growth.

We also look at the amino acids in the soya. We use synthetic amino acids to make the feed more easily digestible for the animals.  And there it becomes a kind of rocket science.

Do you have computer programs that help you? Is it something that artificial intelligence could help you with in the future?

To a certain extent, yes. We do have a computer program that gives you the best mix for the best price. You enter the costs and the products available, and you press Start. It then shows you the cheapest combination for each breed of animal. However, there are certain aspects that the computer program does not measure. For example, we add sugar beet pulp pellets or apple pomace to our cattle feed. Neither calculates financially, but it is hard to quantify how much taste is worth.

Artificial intelligence will struggle with customer needs. If one of our customers has a problem, we visit them and try to find a solution together. Sometimes it’s obvious, like increasing the heating or changing the air filter; sometimes, it is more complicated, and we may call a veterinarian to help.

For cattle, we also need to analyse the farmer’s grass. If the grass is dark green, it will have a lot of protein, and we can lower the protein in the compound feed. We must analyse the corn for pig feed if the farmer uses his own corn.

How many inputs would go into feed for dairy cattle – five, ten?

Much more! And as I mentioned, we work with our clients to get the proper feed for them. We also do niche feed products, for example, for deer.

How do you hedge your inputs and sales? Do you use futures, OTCs, or physicals?

My favourite hedge is when we buy the raw material and sell the compound immediately. In most cases, it is not possible.

How I hedge depends on the product. There are some products where I feel comfortable working with futures. Matif wheat correlates well with feed wheat, especially regarding new crops.

It is more complicated for corn. Many German producers use Matif wheat to hedge their corn. They say it works for them. I have had bad experiences with Matif corn futures due to a lack of liquidity.

Sometimes, I do physical hedges on corn. I buy corn delivered on a barge to my factory and sell it elsewhere.

Soya bean meal is more complicated. In the last two years, you have had a poor correlation between Chicago and non-GM soy; you could lose a lot of money. If the euro/dollar exchange rate is stable, it’s easier for GM soy because I can hedge it on the CBOT. I prefer to keep my hedges in euros, so I use physicals to hedge, buying a delivered physical barge and selling the same quantity in the port.

Do some trade houses offer OTCs and hedging platforms?

They do, but I prefer to do the hedging myself.

Do you sometimes buy full cargoes of soybeans?

We are unfortunately too small for that. Our trading business is not that big. We sometimes buy a part cargo, maybe a hold of 5,000 tonnes, but it would be the maximum.

How has the Russian invasion of Ukraine impacted your business?

My job was easy when I first started with Fixkraft. Things started to get messy regarding availability when the Covid pandemic hit in 2020. Nobody knew whether the trade flows would continue or the borders would close.

In January 2022, I told one of my colleagues that the pandemic was over and we would enter a calm period again. The Russians invaded Ukraine a month later, and I realised the pandemic had just been a warmup. All hell broke loose. Price volatility exploded, and you couldn’t buy anything. Suppliers didn’t know if they could deliver. Nobody was selling.

We had three contracts that specified Ukrainian origin. Our suppliers could have claimed force majeur because of the war. But everyone delivered. They executed the contracts even though they were at a lower price than the market. They said, “Please understand it’s not easy, but we will deliver.”

One supplier told me he couldn’t find truck drivers. He had the cargo in Ukraine but said males between 18 and 60 could not leave the country. Somehow, he found a guy who was 62 years old. They pulled him back from retirement, got him in a truck, and three days later, he delivered the cargo. These guys value their business relationships. I will not forget that. But I had never seen anything like it regarding volatility and market movements.

Did any of your supply chains break? Was there ever any risk that farm animals wouldn’t get enough to eat?

Many of our customers called us to ask if we could deliver. And we said, “Yes, we can.”

We had a temporary challenge with mono-calcium phosphate. A raw material for mono calcium phosphate is only produced in Russia, and our supplier had his account frozen and couldn’t deliver. We found other suppliers at a higher price. The market worked; we all managed, and the trade continued.

Do you buy some of your inputs on long-term contracts, or do you buy mostly spot?

We do buy some products, for example, salt, on an annual basis, but we mostly buy up to a few months forward.

I imagine that you buy in volume and sell piecemeal. Does that mean that you hold significant stocks?

Our storage is relatively small for the volume we are producing. I would prefer more storage, and I hope my CEO reads this interview. We do not hold extensive stock.

How many countries do you buy products from?

The market is global, and it’s a matter of how you define the origin. Our GM beans become soybean meal when crushed in Germany or Netherlands. But the beans are from the US and Brazil. They are not of European origin.

We do not use palm oil, so we don’t import from Indonesia or Malaysia. We get amino acids and vitamins from China, which we buy from traders because we are not yet big enough to ship from mainland China. So, the goods might come from China, but our partners are German, Italian, Spanish, and Swiss trading companies.

Indian soybean meal occasionally finds its way to Europe. We get phosphates from Russia and Morocco.

I would say we have business partners in about 30 countries. It is a truly global business.

Will the recent EU legislation on deforestation affect your business, particularly for Brazilian soymeal?

I think the legislation is a good step, but it will be challenging for the trade houses to trace soybeans back to the field and certify they are deforestation-free. I do not originate and import beans into Europe. My trade house suppliers will be the ones who must bear the weight of the new legislation.

We implemented traceability in our supply chain a few years back. We know which farmers get which goods, and we can trace each truckload back to a particular supplier.

Have biofuels complicated your business or increased the price of your inputs?

They are a price determination issue. They have increased price volatility but have not impacted our physical supplies. Molasses might be an exception as it is often difficult to find.

In Austria, we need to import corn for feed because the citric acid and starch sectors consume the equivalent of our domestic production. A while back, there was a political discussion about whether to reduce industrial consumption by law. Some favoured it, while others said it would be too big an intervention into the free market. From an ethical point of view, I would prefer it if the country prioritised human consumption, then animal feed, then ethanol and industrial use. But it is complicated.

I’m beginning to understand that you have so many different inputs you can easily find a substitute in the case of a shortage or price spike in one of them. It effectively means that the supply chain for animal feed is very flexible.

That’s true to a certain extent. Some inputs substitute well based on relative prices. If wheat is cheaper than corn, you use more wheat.

But there are limits. For corn-fed chickens, 50 per cent of the feed must come from corn. Some of our feed comes with unique ingredients like sugar beet pulp pellets. We can’t replace them.

You can substitute sunflower meal with rapeseed meal, but to obtain a high protein feed, you need soymeal. You cannot reach the required amount of protein with a rapeseed meal.

There are some inputs you cannot substitute, like vitamins or phosphate.

The Netherlands is working to reduce their livestock numbers to meet their GHG emission targets. Do you see the same thing happening in other EU countries?

In general, we see meat consumption declining, although it will only have a limited impact on animal feed demand. However, it could result in a consolidation of the animal feed industry in Austria.

I see opportunities in terms of quality rather than quantity. For example, we have developed cattle feed that reduces the cattle’s methane emissions. It’s an excellent product.

Also, for animal welfare reasons, there is a trend towards slower-growing breeds, especially poultry. There is also a trend for animals to spend more time outside, where they grow more slowly. They need feeding for a longer time.

What is the greatest challenge in your business?

Probably, my biggest challenge is to keep our production running. We have customers who need daily deliveries. My worst-case situation would be if we were forced to halt production due to flooding, low water levels, border closures etc.

My second most significant challenge is price. Our target is not to always have the lowest price but to always have a lower price than our competitors.

My third challenge is maintaining the quality of our feedstocks. However, we have long-term relations with our suppliers and trust them. We keep open communications with them and work together to solve quality issues.

You mentioned the water levels. Could you supply your port on the Danube when water levels fell last year?

We had problems upstream. Downstream, where the water levels are always higher, it was still somehow possible.

One upstream supplier usually ships 1,000 tonnes per barge but had to reduce each load to 400 or 600 tonnes. We managed to get corn deliveries from Hungary and Serbia with barges carrying 800 tonnes. We have good water levels now and are receiving shipments of max. 1600 tonnes.

I always try to diversify my purchasing to have cargo on barges and trucks in case of low water or flooding.

How do you see the business developing over the next few years?

As I mentioned earlier, reducing greenhouse gas emissions, mainly methane, will lead to a consolidation in our industry. The overall market will not grow, but the smaller players will exit.

I also expect energy sources to change. We already use some solar panels in our production and reuse the heat from our machines.

Thank you, Michael, for your time and input.

© Commodity Conversations ® 2023

This is part of a series Commodity Professionals – The People Behind the Trade

A Conversation with Guilherme Cauduro

Guilherme Cauduro is Executive Director for the Bureau Veritas’ AFC Division in Brazil. AFC stands for Agriculture, Food and Commodities and is one of the company’s five divisions in Brazil.

Good morning, Guilherme, and welcome to Commodity Conversations. Thank you for taking part. First, could you tell me a little bit about yourself?

Good morning, Jonathan. I’m an Agronomist. After I graduated with my master’s degree from the Federal University of Rio Grande do Sul, I started to work for an agricultural research firm. I stayed with them for two years before realising it was not for me.

I had a friend working for Schutter Group, a Dutch inspection company headquartered in Rotterdam. His work sounded much more interesting than what I had been doing. Schutter offered me a job, and I started as an inspection and certification manager at Rio Grande Port. In March 2007, Bureau Veritas acquired Schutter, and I stayed with them. So, I’ve worked for the same company for 16 years.

What is the role of a commodity inspector?

Our role is to inspect the commodities to ensure that they meet the description of the goods in the agreement signed between buyers and sellers and to meet international commodity regulations and rules.

Could you tell me a little about Bureau Veritas?

Bureau Veritas is a French company specialised in testing, inspection and certification founded in Belgium in 1828. Five years later, the headquarters moved to Paris, where it is now publicly quoted on the Euronext exchange. Bureau Veritas has 82,000 employees in 140 countries with a network of over 1,600 offices and laboratories. It operates in various sectors, including building and infrastructure, agri-food, and commodities, marine and offshore, industry, certification, and consumer products.

I understand you did an agricultural degree. Does it help you in what you’re doing now?

Yes, because we have some upstream businesses dealing with farmers and cooperatives. Being an agronomist helps me understand the language and the people.

 Do you come from an agricultural background?

My father was an Agronomy professor at the Federal University of Rio Grande do Sul. He also grew soybeans for about ten years. As a teenager, I used it to travel with him to the farm. I saw that it was a good business, and it suited me.

Did you grow up on the farm?

No, I grew up in the city, but my father spent a lot of his time on the farm when I was at university, and I accompanied him when I could. Many of my university friends were from farming families, and I spent time on their farms. I don’t enjoy the noise of the big city. I prefer the quiet of a farm.

You mentioned the upstream work that you do. Is that mainly certification work on sustainability?

Sustainability is part of our corporate culture; all our solutions consider its pillars. We do work with sustainable certifications, but it’s not the primary demand in our division.

We have a massive operation inland. When trading houses originate soybeans or corn from farmers, they send the trucks to the farms to load and transport the commodities to the ports or the crushing plant. They hire our services to inspect the trucks when they load to ensure the quality is according to the contract between the farmer and the trading house.

Another business we do upstream is credit monitoring. The trading houses, banks, and chemical companies prefinance the farmers and cooperatives who need money to plant and harvest. We are on the farms to check how the crops are growing and to see if the harvest will be good enough to pay back the money to the financier.

Bureau Veritas is also prominent in cotton, particularly in Mato Grosso State, where we test about half of Brazil´s cotton production. We have five laboratories in Brazil that test cotton fibre quality.

We are very much involved in farm transhipment. When the trading houses tranship cargoes from trucks to rail cars or trucks to barges, we are in the transhipment points collecting samples from trucks, from the barge, and from the rail cars to see if the quality is OK.

We also work for seed companies, protecting their royalties from GM crops. In Brazil, seed companies can charge royalties against GM crops for ten years, and we have teams that inspect the crops to ensure farmers pay royalties.

Do you weigh the cargo during transhipment? 

Yes, absolutely. We check the scales to see if everything is correct and do a draft survey on barges to verify the volume.

Within Brazil, how much of your business is upstream, and how much is at the port?

Nowadays, our upstream accounts for around 60 per cent of our income – that’s for the agriculture division.

Are trade houses now originating more volumes directly from the farm?

Yes, especially in the central part of Brazil. Large farms in Mato Grosso produce around 30-35 per cent of Brazil’s soybeans. The trading houses buy about half of the crop directly from the farms.

And the trade houses advance the money to the farmers and then get paid back with the grain and oilseeds?

They don’t pay 100 per cent in advance, only part of it. They buy the rest in the spot market.

How many people do you have in your division?

In the harvest season, we have around 3,000 – 3,200 inspectors working in our division in Brazil. In the mid-season, we have 1,500-1,800 people.

What is it like being a surveyor?

We have a saying in the business that we must “kill a lion a day.”

We have a lot of responsibilities and pressures from the clients. The costs can quickly mount if we fail to do our job correctly, whether quality inspection or crop surveying. It can be a considerable amount of money for a trading house. If we make a mistake in our analysis, we have problems with the farmers because they have guaranteed a certain quality.

Testing, inspection, and certification are all about trust. We must maintain an excellent relationship with our clients. They must trust us because we protect the quality and the quantity of the goods they are trading.

We operate 24/7. In our business, we are always available to perform operations or to attend to a client; readiness is one of the critical factors of Bureau Veritas’ success in the agri market in Brazil.

What are your biggest challenges?

Our business is people. We train our people and help them develop their skills.  We are present in fifteen ports in Brazil, and our clients expect – and need – the same standard of service in each port. So, our biggest challenge is to ensure our inspectors and local managers provide the same high standard of service to the client regardless of where they are based. Our business assets are not computers or cell phones; they are people.

Every day is a new story, and every crop season is different. We never have a crop season that’s the same as the other. As an inspector, you can expect something different every day.

We must guard against corruption. People sometimes try to corrupt our people by asking them to issue fake certificates – to lie about the quality of the goods. One of the absolutes of Bureau Veritas is Ethics, and we invest a lot in training our people about the fundamentals of our core business, principles, the relevance of our role, code of conduct and the absolute values of the company, among others.

So, your biggest challenge is ensuring your people are well-trained and ethical.

We must also keep them motivated. Working 24/7 means working weekends. People usually want to relax on weekends with their families. My job is to keep our teams motivated to supply the same standard of service to all our clients, to guard against corruption and maintain integrity throughout our business. Integrity is the big thing. We continually train our inspectors, showing them how critical and sensitive our job is and how much value we offer our clients when performing our service according to national and international standards.

What initially attracted you to become an inspector?

As I mentioned, I heard about the business through a university friend. I knew nothing about the job, but it sounded way more exciting and interesting than what I was doing then.

The commercial side of the business attracted me, and the company soon promoted me to commercial director. I started to make overseas business trips to visit clients in Asia, Europe, Africa, and North America. It was an opportunity to meet people, to get to know different cultures, and to make friends in the business.

But when you ask me why I started, it was an accident. A happy one, I must say.

Do you travel much in your present position, internationally and domestically?

Before the pandemic, I did seven or eight overseas business trips yearly as Commercial Director.

Why so many?

You may have an excellent relationship with your clients in Brazil, but you must also develop relationships with end buyers – the final receivers of the cargo.

When a trade house sells cargo to China or Vietnam, or wherever, it is often the final receiver who chooses the inspection company at load. Remember, weight and quality are final at load. A trading house may prefer a different inspection company but will not say “no” to a client. My job as commercial director was to persuade the end-buyers to choose us rather than our competition.

In December 2021, I started in this new position as Executive Director. I still travel overseas, but a maximum of two trips a year. There is much to do here in Brazil, and I cannot stay away too long. That will change over time. I’m training my colleagues and passing all my client relationships on to them.

Is it usual for a buyer to appoint a surveying company and a seller to nominate a different company? And what happens in that case if they disagree?

Yes, it is widespread. The buyer and the seller may want to appoint their own supervisory company.

If there is a discrepancy or a disagreement, the seller, the buyer, and the inspection companies talk together to come to an agreement. They may agree to remove, for example, part of the cargo that may be off-spec – or the seller may compensate the buyer financially.

I am surprised that you had no training when you started with Schutter. What training does Bureau Veritas give to your trainee inspectors?

I learned on the job when I started in the business in 2007. I stayed in the port for 10-12 hours per day to understand how it all worked – the trucks, the terminals, and the conveyor belt loaders. I also learned how to do a draft survey.

Most of the issues occur at night and at weekends. I initially spent many nights and weekends at the port. I would often only get home at three or four in the morning. It was tough on my wife, but she supported me.

It is entirely different now with Bureau Veritas. We spend considerable time and money on training, particularly regarding safety. The safety of our employees is our number one priority – and our number one risk.

You mentioned issues often occur at night or the weekends. Why is that?

First, people sometimes try and load off-specification quality goods at night or on the weekend when they think our inspectors are less focused. If a seller has a quality issue with a portion of the cargo, they may try and load that portion at night or at the weekend.

Second, more accidents occur at night, especially in winter in southern Brazil. Temperatures sometimes fall below zero degrees, and surfaces can become dangerous.

There have been issues with traffickers smuggling cocaine in commodity shipments, particularly in containers. Is that a big problem?

It is a big problem. The traffickers have a lot of money and a lot of power. It is not only in containers. Nowadays, the traffickers have divers in the load ports, attaching boxes with cocaine onto a vessel’s hull, and then divers removing these boxes from the ships at the destination. Rotterdam Port Authority employs divers to randomly check arriving vessels to see if they can find these boxes.

It is a problem for the entire Brazilian agricultural sector.  Did you know that the GDP of Brazil’s agricultural industry is higher than Argentina’s total GDP?  Therefore, the Authorities in Brazil should make all efforts to try to avoid such kind of situations.

There was once an issue with sand in sugar shipments from Santos. Was it a result of corruption?

Not really. Sand and sugar look almost identical. So, many years ago, some gangs replaced sugar with sand on the trucks going from the mills to the ports. Fortunately, our people are trained to identify visually or do quick tests to see if there is fraud in the cargo. It is one of the reasons why Bureau Veritas is continuously investing in our teams’ technical development and qualification.

Not many people outside the business understand commodity traders don’t trade commodities; they trade documents. What shipping documents do you produce and handle?

We are not involved in trading. All we do is certify the quality and weight of the traded goods.

What about the phytosanitary certificates*?

Good question. In Brazil, the Ministry of Agriculture is responsible for issuing the phytosanitary certificate for corn, rice, and wheat. Inspection companies issue a document called IN 15 for soybeans. The Ministry of Agriculture will use this document to issue the phytosanitary certificate to the shipper of the cargo.

How has technology changed the business over the past few years? And how do you imagine it changing in the future?

It’s incredible how technology has changed our business, especially in digitalisation. Only five or six years ago, our inspectors in the ports would note their observations on paper about weight and quality and then send them to our local office, where a guy would manually enter the information onto an Excel sheet and then send it by email to the client. Our port inspectors enter the weight and quality information directly into their tablets or smartphones, and the system sends it automatically to our clients. OK, it’s not still 100% digitalised, but I would say it’s 85% digitalised in Brazil.

We now have a machine that measures the moisture content of a commodity underload and sends the results through our system, which goes directly to the client. We don’t need people typing in the moisture anymore. It is a significant change.

The conveyor belts in Brazil load about 3,000 tonnes per hour. It’s fast, and you don’t have time to waste. When it comes, the continual automated quality screening will be more efficient and accurate.

To what extent can you take out the human element? Can machines replace inspectors?

We already have some grading machines in Brazil that screen for damaged, mouldy green beans and foreign matter and impurities. We must calibrate these machines correctly and manually double-check they provide accurate results for the sample. This technology will help our inspectors to work faster and more efficiently.

What do you like and dislike about your job?

I like the job dynamic, meeting people, connecting with them, getting to know their cultures, and doing business in their countries. I like the speed of the business – the adrenaline. I like that every day is different. You don’t sit in front of your computer doing the same thing every day.

I don’t like my job when people try to bribe our inspectors to issue fraudulent certificates. Corruption is a problem in Brazil, as it is throughout South America.

So, how does somebody reading this become a surveyor?

They just need to apply through our website or local offices. We are always open to newcomers, and we like to train people.

Are there any professional organisations for vessel inspection and others?

Yes. In Brazil, we have an association of inspection companies where we mainly discuss technical stuff about new regulations.  We ensure everyone has the information to prepare for new rules. Internationally, we are members of all the leading industry associations, such as GAFTA and FOSFA.

What advice would you give someone who thinks this might be an exciting career for them?

I would tell them it’s a dynamic business. We don’t do the same thing every day.

I would tell them that they must be aware that we are a 24/7 business and that they must always be available to receive a call from a client with a question or from a team member looking for help in an operation. It’s not a regular business from Monday to Friday, from nine to five. It’s not; it’s different.

You have a stressful responsible task managing all these people and dealing with all these issues. How do you cope with that stress, and how do you manage your work-life balance?

My family supports me. I couldn’t do this job if my family didn’t help me – my wife and two boys. I have a very supportive wife. I travel a lot, and most of the responsibility is with her because she is with the kids and doing the everyday stuff.

One of my boys is ten, and the other one is fourteen. They like soccer. I take them to soccer games and play soccer with them as often as possible. I also take them bike riding.

Sport helps. I go to the gym every morning for an hour and don’t take my cell phone. I need the time with no cell phone, WhatsApp messages, or calls. It allows me to clear my brain and prepare for the day.

Is there anything you’d like to add?

I would like to emphasise that a surveyor’s role is essential to the agri-commodity supply chain. We, as surveyors, are responsible for checking the weight and quality of the goods traded between seller and buyer, and we are pleased to see that the clients understand how valuable our job is.

Thank you, Guilherme, for your time and input.

  • A phytosanitary certificate verifies that agricultural products have been inspected and are pest and disease free (“phyto” means “plant”, and “sanitary” means “clean” or free from pests and diseases).

© Commodity Conversations® 2023

This is part of the series Commodity Professionals – The People Behind the Trade.

A Conversation with Alex Gedrinsky

Good morning, Alex, and welcome to Commodity Conversations. You have extensive experience in commodities and the agricultural supply chain, procurement, traceability, certification, and price risk management. I want today to concentrate on cocoa and your role as a cocoa arbitrator. Where did you learn about cocoa?

Good morning, Jonathan. I began my commodity career in sugar. I learned about cocoa when I joined Barry Callebaut after completing an executive MBA at Université Paris Dauphine. I was a senior cocoa trader with Barry Callebaut for about ten years in Zurich.

Barry Callebaut was – and still is – the world’s number one chocolate producer and transformer. It was a fantastic learning experience. I went through the whole value chain, from cocoa bean production to the different steps of transformation all the way to the chocolate bar and liquid industrial chocolate. Except for chocolate, I touched on every cocoa product. By trading all the products, I developed a deep understanding of the problems linked to the supply chain. My time with Barry was an immensely fulfilling one.

Was it a procurement or a trading role?

It was more of a procurement role. Eight people were on our desk, handling a little more than 10 per cent of the world crop and a substantial quantity of cocoa products. We were all backups to each other. Not only did we have responsibility for hedging our own portfolio, but we were also, at times, required to participate in the pricing and structure of the market management.

Did you have a specific geographical area that you looked after?

Initially, I was trading organic and certified cocoa beans, omnibus, from origin niche markets. From there, I moved to cocoa products, liquor, and butter, mainly in Europe but also from Asia.  Because of Barry Callebaut’s large footprint, I was also involved in the Americas flows. I then moved to bulk beans from West Africa. I oversaw Ivory Coast and Ghana.  That last role is the one I kept with my subsequent employers.

You began your commodity career in sugar before moving to cocoa. How does the sugar market compare to the coca market? Are there any specific differences between the two markets?

First, the sheer size of the market. World sugar production is more than 180 million mt compared to 5 million mt for cocoa beans. It’s on a different scale.

Second, cocoa is grown in a relatively narrow band between 15 degrees north and 15 degrees south of the equator. It limits the number of countries which can produce cocoa. Sugar is grown pretty much everywhere due to beet and cane production.

Third, cocoa has two main crops. The first is from October to March, and the second is a smaller crop from May to September. Both crops are significant and have implications for the market and its prices.

Fourth, the weather can have more of an impact on cocoa than sugar. For instance, if you have too much rain in West Africa, the area will develop different types of fungus that can wipe out the whole crop.

Fifth, cocoa is a tree crop, so you have a lag between planting and production of three to five years.

Six, sugar is harvested on an industrial scale – very little is now done manually. Cocoa farmers manually harvest the pods, open them, and often ferment the beans around the trees. The average plot size is small, usually slightly more than one acre. The farmers sell the beans to the middleman, who goes around different farmers or groups to gather their beans, bring them to the port and prepare them for shipment.

Lastly, sugar is still shipped in large bulk or breakbulk vessels. In cocoa, most of the trade is done in containers.

It seems that disease is a significant factor in cocoa. As you say, disease can wipe out the crop if you get terrible weather.

Absolutely. Cocoa traders pay specific attention to meteorological events. La Nino and El Nino are examples of patterns that can affect crops significantly and specifically around the equator. Some market actors take protection or insurance on the market with over-the-counter (OTC) instruments on weather patterns. Meteorology is indeed an essential part of cocoa trading.

Sustainability, farmer welfare, and human rights, particularly child labour, are significant issues in cocoa. What are the specific challenges you faced as a trader and procurement manager?

These issues changed the whole supply chain, flow and pricing of cocoa beans and their derived products.

When I started in cocoa in 2006, consumer demand began to drive profound structural change within the supply chain. There was a significant shift in the profile of chocolate consumers. The population was getting older and wealthier. Consumers were looking for a healthier product, but also for a product that demonstrated it cared about our environment and the welfare of growers.

There was a particular focus on child labour in the fields, notably in West Africa among immigrants from neighbouring non-cocoa-producing countries working in cocoa fields.

What about deforestation?

The first problem in West Africa is that people often don’t know who owns the land. Farmers often don’t have official title to their land. I understand that several initiatives are currently being rolled out to address this issue.

The second is that protected rainforests are not protected enough. Farmers go into natural forests, cut down indigenous trees, and plant cocoa trees. It is attractive because the soil in these areas is more fertile, and you have a better canopy. Farmers have discovered that the trees grow better, and they can turn around their crops quicker, reducing costs.

Deforestation is a huge issue, especially with the new EU legislation on deforestation. It will be challenging for the supply chain to demonstrate that the cocoa they are importing hasn’t caused deforestation.

I would like to move on to your role as an arbitrator for the Federation of Cocoa Commerce. Is the FCC the cocoa market’s equivalent to GAFTA in grain or the SAL or RSAL in sugar?

Yes, it is.

The FCC was established to serve the trade in physical cocoa. Its aim is to develop a single robust commercial framework for the cocoa market – to harmonize the rules.

It also provides support services and education programmes, not only for traders. FCC members come from various stakeholders in the cocoa supply chain: exporters, processors, chocolate manufacturers, traders, brokers, warehouse keepers, and all other ancillary services. The FCC has about 200 members spread across 38 countries.

The different bodies, FCC, GAFTA, RSAL and SAL, enforce their contract terms under English Law and the provisions of the Arbitration Act 1996. There is a constant watch on what is happening with these different trade associations to see if we should consider their findings in our rules or guidelines. The FCC follows what happens at GAFTA as well as other trade associations.

Cocoa destined for Europe normally trades under FCC rules, but cocoa for other destination trades under different rules and associations, such as the Cocoa’s Merchant Association of America in the USA.

When did you first become an arbitrator, and how many cases a year do you arbitrate?

I became an arbitrator in 2011. I went through the FCC training with some of my Barry Callebaut colleagues.

The number of arbitrations varies yearly, usually depending on weather, market conditions, shipping issues, etc. Poor weather can lead to quality issues with the beans. It can also lead to defaults if the production is below expectations. An oversold crop can lead to disputes between sellers and buyers on the beans and the products. Depending on the years, I have anywhere from two to ten cases. In some years, I have none. Beyond arbitrations, we also have appeals to arbitration decisions.

How many cases a year does the FCC arbitrate?

I believe that is protected information from the FCC. All FCC contracts are copyright protected.

Okay, no problem. How many arbitrators are there?

I would say we have around 43 arbitrators. Most are from the big names in the sector, such as Barry Callebaut, OlamCargill,  Sucden and Mars Wrigley.

You must understand that there’s a significant percentage of traders in my age group, and retirement is looming. We’re trying to get younger people in the industry involved as arbitrators.

What’s the role of an arbitrator?

That’s a big question. The point of arbitration is to have respected members of the trade, not only in terms of people but also of organizations, to find a fair, timely, and economical form of dispute resolution as a service to parties who use our contract terms.

Okay, that’s the number one point. Arbitration provides a fair, timely, and economical form of dispute resolution. What else?

Cocoa coming to Europe and contracted under FCC rules follows English law in accordance with the procedures of the FCC and the arbitration and appeal rules of the Arbitration Act of 1996. All disputes are arbitrated by arbitrators recognized by their peers. To become an arbitrator, your peers must support and identify you as a respected individual who knows the business. To become an arbitrator, you must follow serious training with your peers, older traders, and lawyers. There’s a whole language, behaviour and way of thinking that develops in this training.

And then, once you are in the FCC or arbitration and appeal panel, the Council will periodically review you and your decisions. They might ask you to go for further training or review your standing.

I understand that there are two types of cases. One is quality, and the other is contract non-performance.

Yes, you have two types of arbitration. Technical arbitration pertains to contractual rules, such as default, late shipments, or companies that have gone bankrupt and, in general terms, contract non-performance. It can also involve two entities that have a complex contractual agreement. They may ask the board of arbitration for their interpretation of the contract.

The second type of arbitration is about the quality of the cocoa beans. Arbitrators will do a cut test to ascertain the quality of the beans. They may then ascribe a discount to the cocoa or reject it as unfit. While the FCC is not a grader of cocoa, it is essential beyond resolving a dispute, as it may determine specific problems at a given time from a particular origin.  For products, the process of ascertaining quality is a little more complex.

Do you arbitrate any cases on the New York or London futures exchanges?

No. We restrict ourselves to the physical movement of cocoa rather than trading on the futures markets.

Are the FCC rulings confidential, or are they published?

They are confidential. And arbitrators are not allowed to talk to each other about the cases they’re doing.

You mentioned that many of the arbitrators work for the big companies. Can’t that lead to a conflict of interest? If an arbitrator from a big company arbitrates a case, they could look at their interest rather than for fair results. How do you get around that?

There is a spirit of the rules and the spirit of the law. You should not be an arbitrator if you’re not fair or looking for a good resolution. However, human nature is what it is, and yes, it has happened.

But if you feel that you’ve been unfairly treated, you can go to appeal, which will bring in a new tribunal with a new panel of arbitrators, sometimes with totally different views. I’ve been on appeal panels that have overturned decisions. Finally, if you feel the whole process has been unfair, you can go directly to the High Court of London.

So, if you’re not happy with the first arbitration ruling, you can go to appeal with a different set of arbitrators. You can go to the High Court of London if you’re still unsatisfied. That last step sounds like a big one.

Yes, it becomes serious because everybody involved throughout the whole history of the case, including the FCC, becomes liable and is under the scrutiny of the law.

Very interesting. When you’re arbitrating on the panel, Alex, do you look at precedent?

Parties to arbitration may take on a law firm to represent them. A law firm will often try to use legal precedent to defend or claim innocence for their parties. But I’ll be frank with you; arbitrators prefer it when lawyers are not involved. It’s quicker and cheaper. I have been in some arbitration cases where the legal costs were so high that they threatened a company’s economic survival.

It’s the role of arbitrators to tell the parties when to stop. There are rules. The claimant states his case, the defendant states his case, and there is room for rebuttals. The arbitrators then decide when to cease submissions from the parties unless they need more clarification.

With modern technology, it is now unusual to hold face-to-face hearings. Each party presents their arguments electronically.

If a counterparty is found in default on a contract, it must pay compensation to the other party. How do you ensure that they pay the compensation?

We publish a list of companies that fail to honour an arbitration ruling. Reputable trading houses will not trade with anyone on that list. Companies will be taken off the list once they fulfil their obligations.

What advice would you give to cocoa traders and buyers to avoid finding themselves in arbitration?

Cocoa has the benefit of being a small market. Most participants in the market know each other or know someone who knows somebody. People understand the contractual terms they’re trading. The rules of contracts are available in French and English. The contract terms spell out the obligations of each party at each stage. As with everything in life, people should not enter contracts without knowing the rules.

And they should be careful not to overtrade and find themselves in an unfavourable financial position where they cannot honour the contract.

So read the contract and don’t overtrade.

 What’s the most challenging thing about being an arbitrator?

Time. Being an arbitrator takes commitment and tempo in your work with the other arbitrators.

What qualities do you need as an arbitrator?

Humility, an open mind, and the curiosity to listen to all the arguments from both sides. You also need to have listening, writing and analytical skills.

To continuously test any biases you think you may have.

The ability to work in a team with your colleagues on the arbitration panel.

Stubbornness.  If something is not clear, you must go back and dig. Sometimes, one point can take a long time. You must make the effort necessary to clarify any unclear issues.

A sense of fairness – and the will to find the fairest solution.

And once you have made a ruling, you must be able to write it clearly and coherently.

How do you become an Arbitrator?

Voting and Associate Members of the Federation can nominate employees as applicants for the role of Arbitrator for the Council’s consideration for appointment as arbitrators within the FCC Arbitration & Appeal Committee.

The Arbitration and Appeal Committee will then talk to different parties and see if you have the industry support and market knowledge to be recommended for the role, subject to following the compulsory FCC Arbitrator training. You must have at least five years of experience in the cocoa trade and FCC rules.

The recognition of your professionalism and competencies by your peers is essential. Being an arbitrator is not just a title. You must demonstrate the will to better the industry.

Do arbitrators get paid?

Yes, they do. We are paid an hourly amount clearly stated in the arbitration and appeal fees and the arbitration rules of the FCC.

I guess that you don’t become an arbitrator for the pay.

You guess right!

What else are you doing now, Alex, to keep food on the table?

I’m still doing consulting, not only on cocoa. I’m busy even if I’m not making as much money as I used to. I miss trading, but it is challenging to remain in the market when you are 58. It’s a young man’s, women’s game, and you must accept that.

Is there anything else you’d like to add that we haven’t covered?

Only to stress that I love being an arbitrator. It is challenging as many of the cases are complex, but I enjoy the challenge. A bonus is that you meet people from all over the supply chain.

Thank you, Alex, for your time and input.

© Commodity Conversations ® 2023

This is part of the series Commodity Professionals – The People Behind the Trade.

A Conversation with Wouter Jacobs

Good morning, Wouter, and welcome back to Commodity Conversations. Please tell me a little about yourself.

I am the Executive and Academic Director of the Erasmus Commodity & Trade Centre in Rotterdam.

We run two commodity programmes: a commodity elective on our MSc course at the Rotterdam School of Management and a part-time executive programme in commodity trading.

Are you an ex-trader?

No, I’ve never traded commodities. I’m a pure academic. I’ve spent my professional life in academia. I have a master’s in science in spatial planning and economic geography. I did my PhD in management with a thesis on the political economy of port competition between Rotterdam, Dubai, and Los Angeles.

If you grow up in Rotterdam, you live with the port, the cargo, and the ships. It is the DNA of the city. And we’re proud of it. Rotterdam is a place where people talk straight. It forms you. Also, growing up in a big port makes you at a young age aware there is ‘another world out there’.

What is spatial planning?

Spatial planning is about regulating the use of land. And land is scarce in the Netherlands. Strategic planning, where I did my specialization, focuses on using scarce resources broader than land and aligning stakeholders around common objectives. During my PhD, my focus shifted towards more institutional factors shaping differences in regional economic outcomes, such as the level of state involvement or the role of mandates and decision-making structures of port authorities. I travelled to Dubai and Los Angeles for my PhD. It gave me a global focus on the economic geography of trade.

What is economic geography?

In economic geography, you ask why particular activities occur in specific locations. For example, it is logical to situate an oil refinery in a port to reduce transport costs. But why are so many traders located in Geneva? That’s a more complex question to answer.

After my PhD, one of my first commercial projects was studying the relationship between business services and the port economy. I talked with bankers, insurance companies and lawyers, learning about the white-collar jobs around maritime trade, shipping, and port operations. They introduced me to commodity trading as the business that makes things move.

A whole world began to open to me, and I could see everything come together. I began to ask why I didn’t know about this world before – why had no one taught me any of this? Why are the universities not teaching this?

I saw a great opportunity to swing my academic career in a new direction. I love to teach and research. I wanted to transmit my intellectual fascination and newfound awareness of the commodity world to my students. I realized we needed educational programmes on commodities, so I decided to build them.

I designed and set up our executive program, which is, let’s say, an MBA light. I recently told my wife, “It’s, in a way, a gift to myself, which I can enjoy every year and learn from.”

You spent two years in China. What did you learn from your two years in China, and how did that come about?

It wasn’t full-time. I was there as part of a partnership agreement that the University of Antwerp in Belgium set up with a university in Chongqing, China. I taught a course on global production networks. It was a fantastic experience, learning from subtle cultural differences and about different perspectives on world affairs.

Are there any commodity courses in China equivalent to what you have here?

I’m pretty sure there are. However, I’m not aware of, let’s say, a Geneva or Rotterdam type of approach to teaching commodity functions such as shipping, finance, or execution.

Could you tell me a little about Erasmus University Rotterdam and the School of Management? You mentioned earlier that you are relatively well-placed in the rankings.

Merchants founded Erasmus University in 1913 as the Netherlands School of Commerce. The university has traditionally offered courses on business and maritime trade. The Rotterdam School of Management was founded in the 1970s, inspired by American business schools. It was when prominent Dutch multinationals like Shell, Phillips, and Unilever started to advocate this type of education.

In economics and business, we rank among the top ten in the world. The Financial Times consistently lists RSM in the top ten in Europe. The Financial Times ranked our MSc in International Management as third in the world in 2022.

Why is the Erasmus scheme, where EU students can spend one year in different universities, called Erasmus? Is it because you guys started it, or is it just a coincidence?

Good question. The inter-European subsidy scheme is for students who follow parts of their curricula in other universities and countries. It is named after Erasmus, as is our university. Erasmus was a humanist scholar from Rotterdam, known for his critical essay ‘In praise of folly’ from 1509/11. He was among the first travelling scholars visiting other European universities to learn and share ideas. ‘Open-mindedness’ and ‘world citizenship’ are still core values of our university.

Let’s start with your executive programme. What is it?

The executive program is a leadership program for young professionals with eight to twelve years of experience in the commodity space. Our focus is not on operational trading skills but on learning to navigate in times of uncertainty. All businesses are exposed to uncertainty, but the commodities business is especially so.

We have four core modules where participants learn to understand the driving forces behind the commodity markets: geopolitics, sustainability, risk and compliance, and technology and innovation.

As part of the leadership program, we confront our participants with real-life situations. We teach them what people expect from their leaders regarding ethics, values, culture, and courage.

Participants learn from each other. It’s an integral part of the learning approach. We have a rich ecosystem in the classroom which allows participants to share experience, knowledge, opinion, and valuation of purpose – everything that is required to have long-term continuity in their business rather than, say, meeting the P&L or securing their bonus.

We teach participants to make decisions when they need an intellectual assessment and a social understanding of their company and its business environment. It’s a crucial part of the programme.

We don’t try to teach participants how to trade – they already know how to trade or are familiar with trading. However, the programme is not only for trading companies. We have participants from commercial, functional and risk roles in banking, inspection, and shipping.

How long does the executive program last?

We have a three-and-a-half week physical, full-time class exposure spread over six months and three locations. We start in Rotterdam in the Netherlands. The first three days are onboarding because participants come from different companies with different functional roles. We want first to make them comfortable with each other so they can learn from each other.

It’s different from a purely academic university classroom. There is much more transmission of existing ideas in an executive programme than in a master’s degree. Here you want to facilitate the exchange of opinions and experiences and stimulate inter-generational dialogue with the current business leadership or industry veterans.

We do personality assessments and speed dating for the first three days. It includes a Marine course where participants spend day two in a boot camp solving annoying problems. Professionals from the Marines lead the day, building teamwork.

How many people are there on each course?

We have a small group of about twelve to fourteen people. We could go to a maximum of 16 or 17, but no larger because otherwise, you would get cliques – and we wouldn’t have the bandwidth to give each participant the attention that we want to provide them with.

We then do a whole weekend, moving into the four modules I mentioned. We structure each day as Understand, Apply, Reflect.

How does that work?

If we have a class on geopolitics, we start the morning with Understand. Typically, a university professor would provide some theoretical, conceptual understanding. The second part of the day is Apply, where everyone works on an assignment, business case or role play, applying what they have learned to their business and presenting the conclusions to the others.

The last part is Reflect, where we typically have the C suite in to give a campfire talk, reflecting on their own experience and moral dilemmas. On the fifth day, participants begin work on an integrated business case that will last throughout the programme. They advise on an investment in an asset, considering geopolitical and sustainability risks. They present their progress in a scenario plan for their business line or company for 2040.

Traders typically look 12-18 months ahead, but our participants are working towards taking leadership positions in their companies. They need to have a long-term perspective and take a strategic approach. It’s not about their daily P&L. They learn to strategize around uncertainty. And we force them to mobilize knowledge. Have they talked with their risk guy? Have they had coffee with their strategic suppliers or customers? How are they looking at the world in the future?

To become a leader in a company, you need to have a long-term, strategic perspective, and you need to have the courage and drive to mobilize assets within your organization and convince others to move in a particular direction.

How is the executive course split geographically?

This year, we did the Rotterdam portion in January and the Colorado, Denver portion with the JP Morgan Center in March. Denver has the same four topics but with an American perspective. We conclude in Singapore with an Asian view.

I can understand Singapore, but why Denver?

Denver is not an international commodity place, but it’s a domestic one with renewables, oil, ags, and mining. Most commodity professionals know New York or Chicago. These international places are lovely to party in, but if you want to understand America, you need to penetrate deeper into the heartland. And the partnership is with an established centre at the University of Colorado, the J.P. Morgan Center for Commodities and Energy Management, with strong business ties across North America. The Rocky Mountains add to the scenery.

Is the course multi-commodity?


How is your gender split?

It’s typically about 40 per cent women and 60 per cent men. Our supporting companies are outspoken about gender balance and are keen to have women in the programme.

Who pays for the executive course? Do companies typically sponsor their employees, or do individuals pay individually?

Companies overwhelmingly sponsor their employees and meet their costs.

Do new people join in Denver and Singapore?

No, participants follow the programme from beginning to end. It’s the journey together that matters.

How many different nationalities are on the course this year?

This year, we have participants from Kenya, Nigeria, Italy, Germany, the Netherlands, the UK, and Switzerland. I think that’s it, about five or six nationalities.

What is an example of something you learned while doing the programme?

I once asked one of the programme’s contributors, an international trading company COO, about his best trade. He told me that he remembered the worst trade he had made but couldn’t remember the best trade because he was still looking for it. The best trade was still to come, but the worst rate he will never forget. For me, this was an excellent message.

So that is your executive learning course. Tell me a little about your master’s programme.

We offer a commodity elective for our MSc students in our business school.

Like elsewhere in Europe, we operate the Bologna system in the Netherlands. Students do a three-year bachelor’s degree and a one-year master’s degree. They can then do an MSc in a business school. The average age of our MSc students is around 23 years old.

Within our business school, we provide an elective course. It is what the name implies; students need to choose it. It is an introductory course in commodity, trade, and supply networks.

Everybody in the business school follows their own MSc programme. They can pick their verticals, for example, supply chain management: finance, marketing, strategic management, et cetera. They also need to choose horizontal electives.

For the last seven years, we have had around 50 to 60 students per year who do the commodity elective. We dive into the mechanics of the commodity business and the culture. What does it take to be a trader? We tell them they won’t become a trader just like that. We also tell them that trading is not for everybody, but plenty of opportunities exist other than trading. Trading companies need analysts, operators, finance, et cetera.

We want to transmit to them that there is a mechanism – commodity trading – in the world economy that impacts their daily lives but is poorly understood. We teach them how it works and explain the skills they need to succeed in the business. It’s an enormous eye-opener for them.

We bring in outside practitioners to share their experience. It’s not a business you can learn from a textbook. Each year some of the students say, “This is the business that I want to be part of.” And then, I have achieved my goal.

Why not a full master in commodities; why an elective?

A couple of years ago, when I addressed the option of a full MSc in commodity trading, the Dean of the Business School said, “Wouter, this is not so straightforward. You need to build content and a reputation of excellence while at the same time doing your own marketing and recruitment and navigating university politics. To be accredited as a full master is an intense and cumbersome process. My advice is to start building content and align with faculty through our elective system”. It was valuable advice, as formalizing a university education is not easy. Indeed, I can tell.

Also, students who have finished their bachelor’s degree are typically 20 years old. Most don’t yet know what they want to do in life. They may know they want to do something with supply chain or finance but aren’t yet committing to a niche business like commodities.

Our commodities elective is one of the most popular in the business school. About 60 of our 400 students choose it each year.

How would a student in France or Spain who has finished their bachelor’s degree apply to the Rotterdam School of Management – and take the commodity elective?

You must apply and be accepted as a full-time MSc student in the business school. You can then choose the commodity elective.

How much does a master’s degree cost? I imagine the students must finance it themselves.

Yes, they do. However, the EU subsidizes MSc programmes for EU citizens. If you’re an EU citizen, you pay less than €3000. If you’re a non-EU citizen, it costs around €25,000. You must pay your living expenses on top of that.

Do many of the Rotterdam School of Management flow from Erasmus University, or does the majority come from other universities?

If you do your bachelor’s degree here, it’s logical to continue with your master’s here. However, we have students from other European universities who join during the Bachelor of International Business Administration. Our business school and the university are well-ranked.

In addition, there are a lot of exchange students who are full-time students in universities in Brazil, Hong Kong, Shanghai, or Canada that have an exchange structure with Erasmus University. It’s a peer-to-peer exchange. All universities have them.

When I started at Cargill, they wanted people straight from bachelor’s degrees. It didn’t matter what bachelor you did – it could be music, divinity, or ancient Greek. Cargill wanted to train people themselves. Is that still the case, or are the trading houses now looking more for MSc students?

I can resonate with this line of thinking. I advocate making Batchelor students aware of possible careers in this great industry. And there are always people that already have an appetite for commerce at a young age. And the younger recruits are, the more you can form them.

But I also think it is changing. The commodity trading business has become more complex. Companies will never refuse a candidate just because he has studied ancient Greek, but they are increasingly looking for candidates with a more analytical and commercial bent.

Do you receive financial support for the master’s programme from trading companies?

The academic programme is subsidised, so we cannot monetize the course. The trading houses provide educational support by giving classes on trading, hedging, shipping, or what it’s like to be an operator.

In addition, we launched the Erasmus Commodity & Trade Centre (ECTC) in January. We formalized our activities into a dedicated centre within the Erasmus family. Our mission is to nurture ideas and talent for tomorrow’s trade. We do this through education and applied research and by building a community and an international learning platform. As I mentioned, merchants founded Erasmus University, and an endowment from industry partners enables us to achieve our mission and ambitions.

Who are your partners?

Cargill, Cefetra, Count Energy Trading, Eneco Energy Trading, ING Bank, Interfood, VARO Energy and Vitol.

What would be your elevator speech about why a) somebody should do an MSc with you and b) choose the commodity elective?

We are hands-on and business minded. Our course is theoretically informed but practically driven. We aim to give our students real-world exposure to commodity trading, from pre-trade analytics to contract execution.

We are ideally placed to do that because we have the entire ecosystem in Rotterdam. We can show students the port operations, the tanks, the storage facilities – warehouses full of metals or soft commodities. We can give our students the look and feel of a physical trading operation. And we are internationally connected.

We have been running the commodities elective for MSc students for seven years, and it has built a solid reputation. Students now come from all over Europe.

Are the courses in English?


What about sustainability?

Sustainability is an essential element of our business school philosophy. We look at how to measure and monitor sustainability and guide sustainability into future leaders’ strategy, taking a more systemic, planetary boundaries approach.

We also look at the moral and ethical questions that crop up. There is sometimes a conflict between the trader and his company. A trader might want to do a deal to maximize his P&L, but a company will take a more comprehensive view to ensure the trade complies with all the regulations. It will also want to protect its reputation and brand.

At the same time, we emphasize that hunger for commerce, risks, and adventure drives the business and defines the business culture.

What do people typically do when they have completed their MSc?

Many of our graduates go into commodity-related companies, although most will not go immediately into trading. Operations and execution in physical trade are what this port city is most about. It depends on the employer, of course, but the old idea of “sink or swim” is less prevalent than it used to be. Most companies now initially put graduates into support functions such as analytics, finance, shipping, or contract execution.

There is a high demand for our MSc graduates. The sector is short of talent. Our students will not end up unemployed at the end of the course.

The business school is delighted with student demand, and the business is delighted to have a pipeline of new talent. It is a win-win.

Is there anything you would like to add?

People underestimate the relational aspect of making things happen. It fascinates me. In a company or team, you have a bunch of people who need to engage with, understand, and trust each other fully. These relationships are the essence of business. They spur the exchange of ideas, cultural understanding, and awareness about different parts of the world.

Money is a reward, but relationships drive businesses forward. It holds for me in setting up the Erasmus Commodity & Trade Centre. I had to deal with business executives, university executives, and professors and align around a common objective while building meaningful learning content. People matter. They give you reflection, trust and can push you in the right direction.

Finally, I would like to thank Reinette Sluijk, our programme manager in the Executive Programme Leadership in Commodity Trade and Supply Networks. She has been foundational to the programme, bringing ideas into execution, and has made a tremendous difference!

People – and personalities – matter.

That’s all the questions I have. Thank you, Wouter, for your time and input.

© Commodity Conversations ® 2023

A Conversation with Charles Funnell 

Good morning, Charles, and welcome to Commodity Conversations. After an initial experience working in Paris as a broker in the inter-trade physical sugar market, you moved to Durban as the South African Sugar Association’s export manager. SASA was, and I believe still is, the central selling desk for South Africa’s sugar industry. What did the job entail?

It entailed selling about one and a half million tonnes a year of raw and refined sugar to the world markets. We had close relations with some Far East raw sugar refiners, and we gradually built up a white sugar sales book to East Africa, particularly in containers.

It was an exciting role because it combined both futures and physicals. Those are the best roles for a trader because you see how the two interact, giving you a good insight into price discovery. During my three years at SASA, we exported almost five million tonnes. It was fascinating developing new markets and new relationships with the trade and with the destination.

Cargill headhunted you, and you moved, I think, to the Philippines. Is that right?

Yes, I did – as a physical sugar merchandiser and to manage the company’s sugar business there. Cargill wanted to develop their sugar operations in the Philippines with domestic distribution, imports (when the country needed them), and to be involved in some of the US Quota exports. I was there about a year and a half before Cargill brought me back to Geneva as their Structured Trading Manager.

What is structured trading, and how did you manage it?

Cargill had sugar terminal facilities and elevation in Brazil. My job was to develop a downstream sales book through long-term structured contracts to provide the material for the trading team to leverage between origin and destination. Most contracts had quite a bit of optionality on both physical and futures. It’s an extended value chain with plenty of risks to manage.

It was a fascinating job because it linked origin to destination. We had some great customers; visiting their countries was an authentic cultural experience – and insightful into doing business the right way.

Was it more of a merchandising role or more of a customer relations role?

It was both. You must open doors to be able to trade. You need customer skills to develop credibility with customers for them to say, “Yes, let’s become trading partners.” The first cargo is often the hardest. It’s about getting your foot in the door with that first cargo, creating the access and then bringing in the trading cavalry.

My role for the first year and a half initially focused on opening doors and developing longstanding relationships. The subsequent years were more focused on trading around the contracts. It was the best role I could wish to have because it combined the people contact with some good usage of trading skills. Structuring a contract took time and energy, but it was exciting.

How long was an average long-term contract?

It could vary between one year to three years, primarily for three.

Cargill is famous for training their traders. What did you learn from Cargill?

I came to Cargill at a slightly later stage than most. I had done a reasonable amount of trading at SASA. I honed those skills at Cargill. Improving my trading skills and learning new ones was the best part of Cargill.

Cargill taught me the value of optionality. It taught me to always look at a trade from a risk-reward perspective, to take out the emotion, and to seek out value.

I sold to many end users – some of them wealthy families or family-owned companies – who didn’t have to trade. As a trade house, you must trade to exist. It makes a trade house creative in a positive way, seeking out trades that have an optimal risk-reward profile and then following through on the opportunities. Developing the proper risk-reward mentality was crucial to being successful.

After seven years with Cargill, you joined Aisling, one of the most significant and successful commodity hedge funds at that time. What was it like moving from a trade house to a hedge fund?

You can apply the skills you learn in a trade house to a fundamental hedge fund. Most of the people at Aisling were from Cargill, so we shared the same language and way of looking at markets.

At a trade house, you have long-term contracts and a physical flow. You arrive on day one at a hedge fund with a blank paper. You don’t have assets, so you can’t trade around them. You must create value in your own space, which for me was soft commodities, specifically sugar.

I was fortunate in that I moved there in 2009, the start of a bull run. Sugar had been flatlining between twelve and fourteen cents per pound (c/lb). Between 2009 and 2011, the price rallied to 30 c/lb, fell to 14 c/lb, climbed to 36 c/lb, crashed to 20 c/lb, and then retraced to 30 c/lb.

At a hedge fund, you must do your analysis. You must have contacts and put on risk, even though you could be wrong and lose a chunk of money. Once you’ve put your pillars in place, put on that risk, and made a positive PNL, you gain confidence. A hedge fund allows you to do things you wouldn’t be able to do in a trade house. You’re given a lot more risk to manage.

Some top traders from Cargill and elsewhere have recently moved to hedge funds. Would you recommend a physical trader move to a hedge fund?

I would recommend it on two conditions. First, they have at least 15 years of experience in a trade house where they have learned the ins and outs of trading. You don’t want to go to a hedge fund at 25.

The second element is that you must put on risk. Doing that in a trade house is usually a team decision, and you get pulled along. If you put on risk in a hedge fund, it’s all on your shoulders. You must accept that level of responsibility where it can go wrong, and it can go right, and it may be a volatile ride.

You must have a significant risk appetite and sense of independence to be the right fit for a hedge fund. Someone once asked if I could ever relax, to which I replied that it was only stressful when the markets were open. I always slept well at night!

Your next move was to Dubai to head up risk management at Savola. Could you tell our readers about Savola and what commodities you managed?

Savola is the largest food company in the Middle East. It is a Saudi company, well organised and well-established in its markets, particularly in Saudi Arabia and Egypt. Savola buys about two million tonnes of sugar annually for their refineries and about a million and a half tonnes of edible oilseeds. My role in Dubai was to manage the price risks in those flows.

Were you responsible for procuring those two commodities, or did you oversee the hedging and risk management?

Savola has a professional procurement team. I was involved in procurement, but we didn’t do it directly. I managed a separate risk management team.

You stayed in Dubai for a year and a half before returning to Switzerland. Was that move back a personal or professional decision?

It was a bit of both. Savola decided to close the Dubai office and move everything back to Jeddah. I liked Dubai, but in my mind, it always had a time limit to it. It’s a fun place, but I missed Switzerland.

Would you recommend young people to move to Dubai for part of their trading career?

I would, and the younger, the better. It’s a young person’s town like Paris is a young person’s town. Dubai is suited to a sort of 25 to 40 period in your life. It’s a place where you have fun and work hard.

Dubai is a meeting point between East and West, and culturally, it’s fascinating. There are different nationalities, different things going on, and different ways of doing business.

In August 2014, you moved to Schaffhausen in the German-speaking part of Switzerland as director of Commodity Risk Management at Unilever. It must have been quite a cultural shock moving from Dubai to Schaffhausen and from a trading to a risk management role in a Fast-Moving Consumer Goods (FMCG) company. How did that move go?

It went very smoothly. Schaffhausen is a lovely place to live and work. Commodity markets are stressful, but Switzerland allows you to have stress in the day and a more relaxed environment in the evening. It is an excellent combination.

Moving to Schaffhausen and a large multinational suited me well. Unilever has less trading appetite than a company like Cargill but is close to commodity markets.

I enjoyed the broader range of commodities. Until then, I’d done sugar and edible oilseeds, but I handled other things like dairy, cocoa, and some metals at Unilever. It was intellectually stimulating to learn new commodities and meet new people. I managed about eight or nine commodities for the company globally.

Which was your favourite commodity?

Sugar is my favourite commodity, partly because of the people. You might be surprised to hear that the dairy sector is my second. It is fragmented and global, with various international exchanges. It’s a lovely industry with great people, and so quite like sugar. You can also have lots of fun in cocoa if you pick the market right.

What is the difference between a trader and a risk manager?

For me, a trader and a risk manager are similar; if you trade, you must know how to manage risk. Risk is at the heart of it all. You start with risk, and then off you go. To be a successful trader, you must understand and appreciate risk to create a positive and consistent PNL by mitigating the bad trades and maximising the good ones. It uses a more offensive approach.

As a risk manager, you also focus on risk and reward either for hedging decisions or putting on a trading position. It is more of an approach to assess what can go wrong with either decision and put a plan in place to limit losses and capture gains. As a risk manager, I would say you have a broader appreciation of market risk, which in today’s volatile environment, is a more suitable way to approach trading. It uses a more defensive approach.

Okay, what’s the difference between procurement and risk management?

There’s a big difference. The risk manager knows the commodity markets and appreciates risk. The procurement manager knows the process but often has no notion or appreciation of risk.

At Unilever, the risk management team were part of procurement, but the company separated purchasing procurement from risk management. It was sometimes difficult for a procurement manager to understand the risk manager.

To be clear, when you’re talking about risk management here, Charles, you’re talking about commodity price risk management.

Yes. We weren’t responsible for other risks, such as counterparty risk. That was the procurement manager’s job.

FMCG companies are structurally short of commodities. Are the FMCG companies forced to trade the markets?

As a risk manager in an FMCG company, you look for price certainty and to mitigate price volatility. It is a very different mindset from a trader in a trade house who seeks out risk in price volatility for profit maximisation.

The objective of a risk manager in an FMCG company is to provide as flat a price line as possible, so the business can lock in margins over the medium and long term while at the same time using the volatility in the market to make the company more competitive.

An FMCG company wants you to flat line, but to be competitive, it needs the bumps – the ups and downs of volatility – to pick the right timing to cover hedges. It’s a delicate balancing act.

Commodity risk management isn’t just about beating an internal forecast. Nor is it about ensuring there’s no inflation from last year’s cost price. Inflation is the same for everybody. If wheat or sugar prices have gone up from last year, they have gone up for everyone.

To look at it from a pure procurement mindset is missing the point that it’s crucial to mitigate costs by buying at an opportune time, irrespective of inflation.

Consumer companies must have a strategy and build governance around it. They must have a mindset as to what is making them competitive. Beating last year’s price or the end-month forecasts is insufficient.

How do FMCG companies trade the market? If they thought, for example, that the wheat or sugar price would go up, do they buy further forward than they would otherwise do? And if they thought the prices would fall, they would buy more hand-to-mouth. Is that how it works?


I suspect FMCG companies are not as fast-moving as the name implies. How quickly could you get your senior management to take the trading decisions?

It would be quicker and easier to get approval when prices are low. It is difficult to convince senior management to put on hedges when the market is rising. It’s challenging for FMCG companies to understand why they need to pay up – and why the price might not revert to mean. It can cause delay, and a delay in an upward-trending market will mean additional costs. It can be challenging, but people trust you once you have a good track record. It speeds up the decision-making process.

The challenge is often with the structure itself. FMCG companies are heavy on people. It can take time to get everybody’s buy-in.

Companies must trust their risk management teams as they trust their finance teams. It’s an area of development in many FMCG companies.

How do you know when a price risk manager is doing well? What are the benchmarks?

It’s easy if you are a risk manager in a trading company – you look at the P&L.

A risk manager in a procurement function doesn’t have a clear PNL. You can look at it in various ways, but you typically base it off a market average versus where you hedge. You can also look at it versus the cost of the additional inflation or deflation that occurred because you made those decisions.

In all honesty, the area is ill-defined. We looked at it from different angles over the years, but there’s no correct method because there’s no P&L per se. You’re trying to beat the market and to keep it all as flatlined as possible for the business.

The rest is about whether you communicated well and involved the right people in the decision process.

What was the most challenging part of your role at an FMCG? Was it getting the markets right or explaining how commodity markets work to your colleagues?

Considering their volatility, we had a good run on most commodities, particularly dairy, cocoa and sugar. The challenge was more the education process, getting the teams to understand the markets.

In most FMCG companies, people move around every three or four years, so you start again each time someone new comes along. It can be frustrating to rinse and repeat, having built up a certain amount of knowledge and buy-in. FMCG companies like to move their employees between different roles and geographies. Traders tend to stay in their markets for many years. I think FMCG companies should look at more longevity in specific positions.

After over seven years with Unilever, you established your own consultancy company – CFCommodities – in January 2022. Could you tell me a little bit about that?

I had wanted to do it for a while, and I had the backing of some long-time customers. There are three aspects to what the company does today.

The first is to offer a boutique risk management advisory to industrial clients in sugar, grains and dairy. I provide insights into managing risk, pricing, and physical flows. Not all commodities trade the same way, so understanding the dynamics of each (volatility, liquidity, fundamentals) is essential to provide insightful advice.

Second, I offer a consulting service to some large management consultancies who want to understand how commodity price risk management works in the consumer segment.

Third, the company trades on the markets and provides a trading service to customers. It’s been a busy and active time, and the commodity markets have provided plenty of volatility and opportunity in the last 15 months.

So, the company takes positions on the market? Doesn’t it take away your independence as an advisor?

I don’t think it does. As Scott Irwin mentioned in your recent conversation, you must have some skin in the game to be a good advisor – but not enough to get flayed. I tell my clients what positions I take, my rationality for taking them, and my estimated risk reward. As Ralph Potter emphasised in his comments, trading is risk management. It is my speciality, and I don’t see any conflict of interest—quite the reverse.

Isn’t it difficult to follow multiple markets and be an expert in everything?

The best traders and risk managers know how little they know. As Socrates, one of history’s greatest philosophers, famously said, “All I know is that I know nothing”.

I like to think that I understand markets. I also have hands-on experience in the physical flows of the commodities I follow. There are some excellent, expert market analysts out there, and I buy in their services. I like the structure I have. It works.

To sum up, you started as a broker in Paris but moved on to become a sugar exporter in Durban and a merchant in Manila. You were a structured trade manager and a hedge fund trader in Geneva before becoming a commodity risk manager, first in Dubai and then Schaffhausen. You now have your own company. Which part of your career did you most enjoy?

There were three roles I particularly enjoyed before starting my company.

I liked my experience in South Africa. I was young to have that responsibility and exposure to the markets and combine futures and physicals. It was nice having a good industry behind you.

The second role I liked was being the structured trade guy at Cargill. It had everything I would want in a job: customer contact, analysis, and trading. I also loved learning more about managing risk and optionality. It ticked all the boxes and was in Geneva, a lovely city.

Finally, the hedge fund was challenging, exciting, and rewarding. A thrill a minute, and we even took delivery off the exchange twice!

Right up there is what I do now, running my own company. I can decide what to do and how and where to do it. I felt positive and happy from the day I started. It links everything I enjoy: trading, some excellent and reliable long-term customers, advice, analysis, and travel. I couldn’t ask for a better job.

I talked with Jeremy Reynolds a while back. He recently set up a shared-service company offering trade operations and contract execution. It seems you are doing the same but with a price risk management service. Is this move to shared services a coincidence, or is it a general trend?

It makes sense for some companies to outsource rather than hire. Using shared services, you access experienced and credible people. It is perhaps something the large consumer companies should use more, particularly in today’s environment where the markets are getting more volatile. It could be in their interest to buy in some of this off-the-shelf expertise.

Thank you, Charles. I wish you every success with your company.

© Commodity Conversations® 2023

This is part of a series Commodity Professionals – The People Behind The Trade.