Five Questions for Ivo Sarjanovic

If I remember correctly, Ivo, you always wanted to be a teacher. How did you end up as a trader?

I have always had a vocation for teaching. Although I pursued accounting in Argentina, my focus lay in economics. I commenced a PhD program in economics at New York University, but unforeseen circumstances thwarted its completion. Consequently, I returned to Rosario and embarked on a career in trading. I have no regrets about this shift; I perceive striking parallels between the intellectual rigour of market positioning and the pursuit of scientific inquiry. Moreover, it proved to be a prudent economic decision.

Nevertheless, I always intended to return to teaching upon retiring from trading. Lacking a PhD, I am more akin to an industry practitioner—someone equipped with experience to impart rather than a purely academic figure. I enjoy teaching, but it is more of a hobby.

Some of my colleagues at Cargill affectionately dubbed me ‘the Professor.’ In collaboration with a colleague, Dave Buchanan, we established a Grain Academy within Cargill. Although I am uncertain of its current existence, it was an exceptional program complementing what you learn in your daily roles.

Cargill’s culture weaves teaching into one’s responsibilities, eliminating the dichotomy between work and education. In addition to learning technical tools, it fosters an environment rife with brainstorming, diverse perspectives, and open forums for discourse.

I’ve always viewed trading as an intellectual challenge. As a follower of the philosopher Karl Popper, I find his ideas particularly applicable to trading. Your game plan serves as a hypothesis you present to address the problems you encounter in the market structure. Subsequently, you test this hypothesis through the mechanism of profit and loss. Profit validates it, whereas a loss falsifies it.

Could you talk me through your current teaching activities?

I have been teaching at the University of Geneva since 2008 and recently became a fellow at the Erasmus Commodity Centre in Rotterdam. Additionally, I instruct a class on Agri-commodities in the Master of Finance program at Di Tella University in Buenos Aires and the Master’s program in Agri-business at Austral University in Rosario. Apart from these commitments, I am predominantly involved in seminars and lectures. Furthermore, even in more informal capacities, I coach and mentor individuals within the industry.

Preparing for classes, creating presentations, and keeping them current demands considerable time. It extends beyond the hours spent in front of the class. When presenting a class for the first time, I may invest up to 10 hours in preparation for a one-hour session. Once I’ve created the slides, updating them for subsequent classes typically requires one to two hours per session. However, developing a new theme from scratch consumes significant time.

Recently, I compiled a presentation on population dynamics and its future implications on food demand. This endeavour entailed extensive preparation, including reading many books and articles, conducting research, and verifying information by contacting the authors of relevant pieces.

Occasionally, I deliver presentations virtually, which offers the advantage of saving time and transportation costs. Nonetheless, I prefer teaching in person; it facilitates a stronger connection with my students.

Navigating diverse skill levels among students poses a challenge. There’s a risk of speaking at a level that may be too advanced for some while too basic for others. The key is maintaining a balance, ensuring everyone can understand the material while occasionally introducing concepts that challenge the more adept learners.

Furthermore, adjusting the teaching approach when transitioning from instructing young students one week to addressing executives the next presents its own set of complexities.

What makes a good teacher/educator?

Practical experience holds significant value in the realm of commodities. Students become highly engaged when they perceive their instructor has practical expertise. For many, studying commodities isn’t purely academic but a way to advance their careers.

Remaining current with the subject matter, such as incorporating recent real-world examples, is essential.

A dynamic presentation style is crucial to maintain student engagement. Occasionally, introducing surprising or even controversial concepts can stimulate lively discussions.

Drawing connections between commodities and various disciplines such as economics, politics, geopolitics, agronomy, meteorology, and new technologies enhances understanding.

What else? When discussing commodities broadly, it’s imperative to transcend specific geographies or products, ensuring a comprehensive approach. It is especially true in Geneva, where students have different perspectives and origins. You need to avoid falling into the trap of being a hyper-specialist.

Reflecting on my transition from trading for Cargill, where my focus was intensely narrow—mainly dedicated to predicting soybean and later sugar market movements—I now embrace a broader perspective. I derive satisfaction from forging connections and appreciating the larger picture.

Do you also teach people how to trade?

I’m uncertain whether one can truly teach someone to become a trader. However, it’s possible to refine and enhance the skills of those with a natural trading aptitude. Specific innate capabilities, such as risk appetite, are essential for success in trading and cannot be taught. While some individuals possess a high-risk appetite, others may have little or none. Beyond risk appetite, there are other qualities required for trading success. Once you have identified these abilities, you can nurture and develop them through training and education.

The analogy to a sportsman is a good one. Much like you can’t create a player like Messi out of thin air, you can improve Messi’s skills through proper training, discipline and nutrition.

Economics plays a pivotal role in equipping traders with foundational knowledge. I utilise a triangular framework to elucidate how commodity prices are determined. Microeconomics constitutes one angle of the triangle, with supply and demand as the primary price determinant. Macroeconomics forms the second angle, explaining how macro variables such as growth, inflation, and interest rates influence price dynamics. Investment funds represent the third angle of the triangle. They are the catalysers of price movements but not the determinants.

When futures markets are well designed, prices always converge to fundamental values. A recent example in the coffee market illustrates this phenomenon: over the past two weeks, funds drove prices higher in anticipation of a trend similar to that seen in cocoa. However, once their buying momentum waned, prices corrected lower, as the underlying fundamentals did not support the rally.

The interplay among these three realms—micro, macro, and funds—accounts for the dynamics of price movements. Microeconomics elucidates the fundamental factors driving price trends, while macroeconomics illustrates how external economic conditions influence this trajectory. And the funds act as the catalysts for price movements.

What educational advice would you give young people looking to enter the agriculture commodity sector?

When I began my career in South America, companies typically required candidates to hold degrees in economics, accounting, business administration, statistics, or agronomy to enter agricultural trading. However, upon relocating to Europe, I was surprised to discover that some of my colleagues held bachelor’s degrees in art, languages, psychology, law, and international relations. This diversity enriched our discussions, adding depth and richness to our perspectives.

The landscape has evolved since then. Employers now seek candidates with additional quantitative knowledge and basic programming skills.

While having a master’s degree may be advantageous, it’s not a prerequisite for entering the trading profession. However, the Master in Commodities program at the University of Geneva offers a unique advantage—a blend of practical work experience and academic learning. With students spending 70 per cent of their time gaining hands-on experience in a company and 30 per cent attending classes at the university, this program offers a potent combination, particularly when the sponsoring company has a well-organised training system.

Once you embark on a trading career, trading a diverse range of commodities, especially those with varying delivery mechanisms, is beneficial. Or if your company is not involved in different markets, it’s always interesting to have exposure to different qualities or distinct origins.

The delivery mechanism significantly impacts trading dynamics. For instance, in my experience trading soybeans, where delivery primarily occurs along the Mississippi River, you learn how the delivery mechanism affects premiums and spreads in a certain way. In the sugar market, where delivery occurs worldwide on a Free on Board (FOB) basis, futures serve as a source of origination, creating a completely different trading dynamic. Delivering sugar around the globe at a uniform price makes premiums more stable but time spreads much more volatile.

My last piece of advice is to ‘Choose your boss wisely.’ A supportive and inspiring boss fosters motivation, curiosity, and continuous learning. While you may not always have the luxury of selecting your boss when given the opportunity, prioritise not just the job but also the individual you’ll be working under. It will have a significant impact on your career.

The following schools offer courses on commodity trading:

University of Geneve

Masters: https://www.unige.ch/gsem/en/programs/masters/commodity-trading/

Diploma: https://www.unige.ch/gsem/cours/commoditytrading

Certificate: https://www.unige.ch/gsem/cours/cas-commodity-trading

Bayes Business School – City University of London

Masters: https://www.bayes.city.ac.uk/study/masters/courses/energy-trade-and-finance#accordion-v23-570233-header470242

Erasmus Commodity and Trade Center – Erasmus University of Rotterdam

Executive education: https://www.eur.nl/en/erasmusctc

University of Luzern

Certificate: https://www.hslu.ch/en/lucerne-school-of-business/continuing-education/cas/ifz/commodity-professional/

University of Fribourg