A Conversation with Jeremy Reynolds – Trade Execution Specialist

Good afternoon, Jeremy. Could you tell me a little about yourself and your career so far?

I am from Richmond, North Yorkshire, in the UK. I studied business at Nottingham Trent University. When I finished my course, I stayed in Nottingham and answered an advertisement from a company I had never heard of: Cargill.

The job sounded interesting – we called it “forwarding” at that time. I had the interview, and I got the job. Thirty years later, here I am in Geneva.

I started in 1993 in grains and oilseeds – supply chain, plant logistics, off-farm collections, and raw materials planning for the UK crush plants. I also worked on the transportation, distribution, and supply chain management of NGFI (Non-Grain Feed Ingredients).

In 1997, Cargill asked me to come to Geneva for three months to work with the sugar team. The following year, the sugar department asked me to go to Moscow for a three-month assignment. I stayed there for nearly four years working on the supply chain, trade execution, warehousing, and distribution.

From Moscow, I moved to the Philippines for eighteen months to help build out the company’s sugar business. I then returned to Geneva to head up the global sugar operations.

In 2010, I took over responsibility for regional trade execution for Cargill International, which included grains and oilseeds, sugar, coal, metals, and energy, for five years. I then spent four years with Alvean, Cargill’s joint venture with Copersucar, before joining Tereos in 2019.

I am now setting up a new business around consultancy and managed services in trading and shipping.

Would you call yourself a forwarder, logistics manager, or trade execution specialist?

Now, that is a great question. We used to call it “forwarding” – dating back to the eighteenth century in the UK when innkeepers forwarded goods to the next inn. Most companies now call the role “trade execution coordinator”, but that is a bit long, so we tend to use the term “operator”.

It is a difficult job to categorise as it covers so much. Still, the role coordinates all the actors in the supply chain: buyers, sellers, freight suppliers, brokers, agents, document services, and supervision. It is an open system in which the trade execution coordinator manages and coordinates all those different parties to ensure that the right actions are taken at the right time to execute the contract.

The job differs from supply chain management, where you manage supply to meet expected demand. Supply chain management is not the same as contract management.

You have travelled extensively in your role as a trade execution coordinator. Is that usual?

I wouldn’t say so, but the big trade houses often view relocation as talent development opportunities. It can involve working on new projects or covering short-term assignments. These opportunities help an individual understand the activities from origination to destination.

The big trading houses have a pipeline to fill future leadership needs, and travel and overseas assignments are part of that process. My moves to Moscow, The Philippines and then Geneva were pivotal and allowed my career to progress much faster than if I had remained in the UK. I don’t think there’s anything stopping anyone from moving. You need to have the aptitude, and you need to ask.

There are also opportunities if you work for a smaller company, whether in Dubai or Singapore, or the US. However, you must move as an individual rather than relocate with your company.

You’re a Yorkshire boy who worked in the UK, Switzerland, Russia, and the Philippines. Did you find the cultural differences challenging?

Yes, but you must embrace those differences. When I moved to Moscow in 1998, few people spoke English. My Russian wasn’t good enough to hold business conversations, but I soon learned enough to get around and live in the city. And then you turn these obstacles into opportunities. It’s fun. There is something to learn from every culture.

The Philippines was challenging from a cultural and business aspect, but Switzerland was the hardest, possibly because I expected it to be more like the UK. But now my partner and our children are Swiss, so you adapt. You need to approach everything with an open mind and treat relocation as an opportunity.

Where does trade execution sit within a trading organisation?

There are three broad buckets of functions within a trading organisation.

The first is value creation, which is the role of traders. The second is value measurement – a financial and risk process. The third is value capture. Our role in trade execution is to capture the value traders believe they have realised on paper.

If the mark-to-market is $10 per mt, good contract execution can ensure that the company captures $10 per mt. We ensure that every party, including ourselves, meets the contract’s obligations. We can sometimes add incremental value through good execution. However, our primary role is to capture the existing value rather than add additional value.

Could you talk me through the various functions?

Before a trader makes a trade, we will discuss document requirements and payment instruments. We will also discuss any optionality contained within the contract, including origin, quantity, quality, packing, load, or destination port. We will discuss deadlines for when we must declare those options.

As a trade execution coordinator in a smaller organisation, you may need to book the freight and negotiate the charter party. In organisations of all sizes, you must understand the vessel’s location and when it will arrive. You must appoint surveyors to ensure that the ship is in the proper condition to load with the holds clean and the hatches watertight. You also must know what to do if they aren’t.

You must give the correct nominations to your suppliers at the right time so that they can get the goods in the required quality and quantity to meet the vessel.

If you are the vessel charterer, you must coordinate with local vessel agents and the port elevation operators, ensuring that everything is in place for the vessel to arrive and load and that all parties know their obligations.

Once the vessel is loaded, you must manage the documentation. Most people believe that commodity traders trade commodities. They don’t; they trade documents. Buyers pay against documents, usually without seeing the goods, so those documents must be accurate and in accordance with the contract. You must ensure that the documents are in order and you can get paid. It sounds simple, but it’s not!

There is an old rule that 80 per cent of trades go smoothly – and take 20 per cent of your time, while 20 per cent of your transactions require more attention and take 80 per cent of your time. The quality may be off; the vessel may be late; the vessel master may want to clause the Bill of Lading etc. – all great opportunities for learning the business!

You will then present the documents through the agreed channels and coordinate payment. After the buyer pays, you must finalise matters such as laytime, quality premiums and any open claims.

What happens when things don’t go well?

As a trade execution coordinator, you are part of a team that would typically include a trader, controller, legal and compliance. Together you work on a solution.

I always tell my teams that we seek a pragmatic, not perfect, solution to problems.

What do you mean by that?

Everybody wants to achieve the same goals. The seller wants to be paid, and the receiver wants to be happy with the goods they receive. We can spend days trying to find a perfect solution, but it may cost you hundreds of thousands of dollars in demurrage. Instead, we look for a pragmatic solution where parties say, “Well, that’s not ideal, but let’s mitigate the costs and get things moving.” No one wants to let a ten-thousand-dollar problem become a hundred-thousand-dollar problem.

What makes a good operator?

You must have a good knowledge of UK law in contracts and understand the function of a Bill of Lading or a Letter of Credit, for example. However, it is the application of that knowledge that is the real skill.

You take decisions contextually. Applying your knowledge to the business in different contexts makes you a great operator.

What do you mean by “contextually”?

How you approach a problem may depend, for example, on your contract price and whether it is lower or higher than the market.

It may also depend on whether the customer is strategic to your business or a “price buyer”. You may treat each differently. That ambiguity may sometimes be challenging to accept. You must be good at dealing with ambiguity. The pure ‘contractual’ approach or solution may lead to a short-term benefit but not be best for the business long term.

Remember, one of the critical roles of a trade execution specialist is to anticipate where issues might arise so that they don’t happen.

Could you give an example of that?

Suppose you sold a vessel for March arrival, and you realise it will arrive in April. The earlier you start working with your buyer, the better. You don’t wait until the vessel arrives at the discharge port before talking to your buyer.

The same applies to quality issues, particularly around the condition of the cargo. The vessel master may sometimes seek to clause a mate’s receipt or B/L (to note that the goods are damaged). The earlier all parties get together and resolve the issue, the better. It may make sense to pause the load and clean the cargo load belts or to offload the portion of the cargo that is in question. Again, it is a question of pragmatism, moving things along to protect your company’s interest and reduce its risk.

How important is trade execution to a trade?

A customer may not buy from you because of your company’s trade execution, but they will certainly not buy from you if your trade execution is terrible. There is a base level of expectations. If you exceed them, you won’t always get plaudits, but your customer will think twice about trading with you again if your execution is terrible.

What’s the most challenging thing about being a trade execution specialist?

The sheer quantity of information that comes across your desk can be challenging. I have seen organisations where people get 20,000 emails a month. You can’t control what people send you, but you can control what you choose to read. You must distinguish between what is and is not important and act accordingly.

It’s not abnormal in our industry to have 120 people on copy of an email about a vessel’s arrival date or a contract performance issue to be resolved. You can’t act with speed and agility when 120 people think they have a voice.

The best organisations will have procedures as to who is involved in what. The execution coordinator, the trader, the trading manager, and the controller may need to be part of a decision-making process – that’s four people, not 120!

It sounds as if there are inefficiencies in many companies’ systems.

I have been in managerial roles for the past few years and concentrated on organisational transformation – leveraging scale. When you look across an organisation, you see silos of operations which duplicate tasks three, four, five, and six times. There is a lot of productivity to be gained and value extracted.

If you improve productivity, you reduce costs and improve team engagement.

In 1999, Cargill bought Continental’s grain trading operations, and you were responsible for merging their trade execution operations in Russia. Were they very different?

The skillsets were the same, with highly skilled individuals in both teams, but the two groups worked differently and had different systems, processes, and procedures. It was the same when Cargill Sugar merged with Copersucar to form Alvean.

You have the organisational context, but you also have the cultural context when integrating two teams. The Cargill internal culture is strong and can often transcend national culture in some workplace contexts. From that perspective, Continental’s Moscow operations could be said to be culturally more ‘Russian’ than Cargill’s – and Copersucar’s operations more ‘Brazilian’ than Cargill’s.

Some conflict is inevitable in these situations as the change can impact individuals directly and bring additional stress. The challenge is making people feel comfortable and part of the team. It’s not a question of who is taking over whom but of getting the job done smoothly and efficiently.

Relationships will build if you create the right environment and culture. They don’t happen overnight. There’s often a feeling that if you put two teams together, they should be perfect from day one, but it takes time.

Traditionally, the front office is glamorous and highly paid with large bonuses, while the back office is less glamorous, less well-paid and with fewer bonuses. Is that an old-fashioned view, or is it still the case?

It is still the case, but although it pains me to say it, I think it is probably justified.

Physical commodity merchandisers drive a trading company’s profitability. They bring the clients to the table, negotiate the deals, and manage the price risk. They get paid more because they create more value. It’s as simple as that. If they create value, they get well rewarded. If they don’t, they get fired. It comes with the territory.

We’re not taking risk in the back office. We work with the traders to help them manage their risk.

Trading companies do recognise the value that good execution brings and reward trade execution operators well. They have traditionally viewed it as a differentiator in terms of their business.

However, I don’t know whether that will continue to be the case with the major trade houses joining a consortium to digitalise their operations and pool their trade execution knowledge.

You’ve managed several trade execution teams. What profiles would you look for when hiring somebody for one of your teams?

Good communication skills: People don’t need to be extroverts, but they need to be able to communicate what is required when it’s needed and be willing to share knowledge and information.

Determination and resilience: Things don’t always go your way. Executing a contract has its frustrations, and you need to be able to manage that.

Intelligence: The ability to absorb, process and apply information in different contexts.

Curiosity: You need to be curious to learn and ask questions.

Adaptability: The world is changing, and you can’t assume that something you knew yesterday will still apply tomorrow.

Proactivity: The ability and willingness to grab opportunities. Don’t sit back and wait for things to happen. An operator needs to know when to let things happen and when to make things happen.

What is one piece of advice you would give to someone starting as a trade execution specialist?

Others (involved in a transaction) will try and put their operational problems onto you, but you don’t have to take them on. Their problem is not your problem.

Now we’re going on to the elephant in the room – digitalisation. To what extent can trade execution be digitalised?

It depends on the context. FMCG – Fast Moving Consumer Goods – companies have successfully digitalised their supply chains. Also, look at Amazon or DHL – their digitalised logistics are superb.

Can you expect the same when you ship a cargo of soybeans from Brazil to China? Yes, you can create value in tracking and visibility, but documentation is more challenging.

The more vertically integrated you are, the more digitalisation can add value. Digitalisation can add significant value to the ABCD++ group of traders (ADM, Bunge, Cargill, Louis Dreyfus, COFCO, Wilmar, Viterra, Olam).

However, the agricultural commodity trade has multiple actors along the supply chain, from the farmer to the distributor. Getting them all on the same platform and following the same processes is challenging. It applies particularly to containerisation.

Digitalisation is easier in origination and transport, but you must get the buyers on board. It may add more value on the sell side than the buy side.

I believe that trade finance will be the next catalyst to drive trade digitalisation. When trade financiers fully buy into digitalisation, everyone else must follow. But it will require a common platform. The banks now each run their proprietary systems. Trade execution will digitalise when the banks and non-bank financiers align on data standards, and inter-operability between different systems and platforms is more broadly achievable.

There is a tremendous amount of productivity to be gained, but it will be a long and expensive process.

Given digitalisation, would you recommend a young person to take up a career in trade execution?

Oh yeah! Even if digitalisation becomes a driver for shared services and takes 80 per cent of the work out of trade execution, most of that work is the routine, less-interesting stuff. It will leave the remaining 20 per cent – the challenging, exciting stuff. The industry is too complex to be digitalised entirely, but digitalisation will take the pain out of that 80 per cent.

Remember also that trade execution is not just about passing documents down a string. Traders will always need operators, not just for execution but also for advice.

If you’re pushing outside the boundaries the right way, people will help you. If you’re working for a smaller organisation, you may have to become a specialist in areas outside of pure trade execution.

If you like problem-solving, if you like logistics and if you want to work in a dynamic and international industry, then absolutely I would recommend a young person to take it up as a career. It’s a great place to be. I have loved my career so far – and I still love it!

Could you tell me what you are doing now?

I consult for various companies and am setting up a managed services operation – Crest Trade Services – for companies to outsource their trade execution operations in addition to consulting and training. It will be a similar model to how companies now outsource their IT or HR processes. We hope to launch in the second quarter of 2023.

Crest will primarily target SMEs –Small and Medium Enterprises – who don’t have access to the same resources and capabilities as the major trade houses. The goal is twofold. First, to provide clients with a level of expertise to which they currently don’t have access. Second, to reduce the cost of their operations through economies of scale and digitalisation.

In addition, by doing this, SMEs can mitigate their business-continuity risks. If a small company loses an operator, they are dead in the water – it must pass on opportunities or, worst case, can’t trade. Outsourcing removes that risk. Attracting and keeping talent is a challenge for smaller trading companies. There is a lot of demand out there for operators.

Thank you, Jeremy, for your time and input! I wish you every success with your new venture!

© Commodity Conversations ® 2023

This conversation is part of a series I call “Commodity Professions – The people behind the trade.”

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