Author: jonkingsman

Good morning, Alberto, and welcome to Commodity Conversations. Please tell me a little about yourself and your career journey so far.

I’m Spanish, and I live and work in Geneva. I’m 41 years old, married to a Spanish lady, and father of a six-year-old and a five-year-old, both born in Switzerland. They speak French better than Spanish.

I have a master’s degree in electrical engineering from the Polytechnique University of Madrid. When I finished my studies, ABB, a Swiss engineering company, offered me a job in their marine division. One of the conditions of the job was that I should be willing to travel and stay for long periods in the Republic of  Korea, which, at the time, was the biggest shipbuilding country in the world. I’m from Madrid, which is as far from the sea as can be in Spain. I had never been on a ship. ABB is a dream company for anyone involved in electrical engineering, so I signed up.

On my third or fourth day of work, I boarded one of the last ships built in the historic city of Bilbao, a 330-meter LNG carrier. I was like, wow, this is big! A few weeks later, I was a commissioning and technical engineer in the Republic of Korea, and I travelled frequently back and forth over the following years.

Eventually, I decided to move from engineering to a more commercial career. The company supported me and paid for me to do an MBA at the IE Business School in Madrid. I stayed with ABB in Spain, developing the local business and working on what people now call decarbonisation, but at the time, it was commonly called energy efficiency.

My wife was offered a job in 2014 in Switzerland, and ABB transferred my contract to Switzerland, giving me global responsibility for their energy efficiency business. I began in product and solution management and moved to business development and sales, where I’ve spent most of my career. I gained exposure to merchant shipping and travelled extensively.

I then had a couple of kids and realised that travelling 80% of my time wasn’t great with a young family. I left ABB for Inmarsat, where I worked in business development and strategy in their maritime business unit.

I did the University of Geneva’s Advanced Diploma in Commodity Trading while at Inmarsat. Once I graduated, I participated as a guest lecturer on the shipping element. It’s a fantastic programme that gives you a 360-degree view of the commodities business. Most of us sit in a specific area of the value chain – shipping, in my case – and it’s interesting to see the whole value chain together. The programme is a good mix, offering both a practical and an academic approach.

Lloyd’s Register knocked on my door in 2022 and asked me to set up and lead an entity in Geneva to cover commercial maritime markets for non-ship-owning entities, predominantly charterers, financiers, and insurance companies.

How big is the shipping sector in Switzerland? Are there owners in Switzerland, or are they mainly charterers?

MSC, the biggest owner in the world, has their head office in Geneva.

Many merchant ship owners in Switzerland sold their tonnage and now operate as charterers or commercial operators. Shipping is huge in Switzerland, but it’s more related to the chartering.

Could you tell me a little bit about Lloyd’s Register?

Lloyd’s Register, commonly referred to as LR, was founded in 1760 at Edward Lloyd’s Coffee House in London, which in the second half of the 18th century was a meeting place for merchants, ship owners and insurers.

The underwriters, owners, and merchants had no standards or criteria to help them evaluate the risk of insuring a ship. They began to employ technical experts to go to the docks, inspect the vessels and rate them against specific criteria. As a next step, they started to develop shipbuilding rules. They published a book, the Lloyd’s Register of Ships, which listed and rated the ships they inspected.

Lloyd’s Register of Shipping evolved into a technical society, simply known as Lloyd’s Register and expanded into non-maritime areas. The company has undergone a transformation in recent times and continues to evolve as a trusted adviser to its partners in the maritime industry.  Recent acquisitions, including that of Hanseaticsoft, OneOcean, Greensteam and ISF Watchkeeper, have marked a drive towards maritime digitalisation, with LR’s digital solutions now used onboard over 20,000 SOLAS vessels.

We act as a professional services company with predominantly two lines of work. The first is the inspection and rating business, where we do a lot of work on behalf of governments, representing several flag states and doing inspections on their behalf. Our second line of work is ‘advisory’, anything not exclusively related to the certification of a ship.

LR is 100% owned by Lloyd’s Register Foundation, a UK charity. We have a long tradition of public benefit, with charitable aims for the advancement of safety on land and at sea, along with the development of public education and other engineering and technology disciplines. LR does this by investing in research and development and funding chairs at universities through LRF grants.

So that’s what we’ve been doing for the past 261 years, trying to make the maritime trade and the sea safer for all those working there.

How often do you inspect each ship?

There are different types of inspections. There are annual surveys for the class and the flag state. The same inspector typically does both at the same time. Then, there is usually a significant survey every five years, often occurring while the ship is dry-docked for maintenance. In addition, an insurance company will typically require a class survey after an incident or accident.

When you do an inspection, do you take crew welfare into account?

Class inspectors mainly look at the ship’s physical condition, ensuring it is seaworthy and there is no risk to the cargo.

Flag state inspections apply to IMO (International Maritime Organization) regulations on crew welfare. Every ship management company needs to be audited against these rules.

One of the criticisms levied against shipping is that ships often sail under flags of convenience with poor standards. Is the criticism justified?

There was a debate some 30 years ago as some flags had looser standards than the traditional flags. Many countries agreed to inspect vessels when they came into their ports to mitigate this. Port State Control (PSC) has become an essential element of marine regulation. Inspectors have the authority to detain the ships if necessary.

All the information is public. If inspectors find that ships from a particular flag start to present problems, they might grey- or deny-list that flag. It’s the last thing that a flag wants because any ship under their flag will be inspected whenever they visit specific ports. Generally, inspectors always find something wrong, which helps maintain standards across all flags. Shipowners will choose a flag state for tax reasons rather than to get away with lower technical standards.

How many class societies are there?

There are 20 to 25 class societies in the world. Tier one class societies are members of IACS, the International Association of Classification Societies. If you want to trade internationally, your ships must be IACS registered to be insured. The class societies within IACS are aligned in their approach, and we try to keep a very high standard.

I read about Russia using tankers which are not registered. How does that work?

Tanker vessels engaged in illegal or sanctioned activities which are not registered with a recognised flag State will find it extremely difficult to operate and obtain insurance cover. If such vessels are allowed in and out of ports, it is important to note they have many fewer incentives to maintain safety standards. So, you may have an ageing subset of the world’s tanker fleet without a stringent safety performance mechanism.”

 You mentioned decarbonization earlier. What is the solution?

There is no one solution; it will be a combination of solutions.

Ships carry 90 to 95 per cent of the world’s transported goods but are responsible for less than 3% of all GHG emissions. It’s an economically and environmentally efficient means of transport. However, there is room for improvement,  and the IMO  has set a  goal to achieve net zero by 2050.

It will not be easy as alternative fuels do not yet exist in meaningful amounts. It means that the policy will concentrate on increasing fuel efficiency for the next few years. It alone will not solve the problem, but it could reduce it by 20 to 30 per cent.

The goal is to get to a point where most of the ships in the world use alternative fuels. Some of the fuels are carbon-negative; using them will remove atmospheric emissions. By 2050, most of the world’s fleet will be using alternative fuels, a combination of pure synthetic hydrogen-based fuels like green ammonia and methanol, as well as  LNG and biofuels.

Will adding sails to cargo ships help?

Absolutely. By the beginning of next year, we should have 50 ships on the water equipped with sails, commonly referred to as Wind Assisted Propulsion Systems (WAPS). And there is an order book of 200 more. The technology is heading for massive adoption in the next five to ten years. You can considerably reduce the use of your main engine by using sails. We’re talking about high single-digit to low double-digit per cent savings in power.

There’s a shipping regulatory framework starting next year in Europe called Fit for 55, where regardless of the flag and the ship’s ownership, any ship entering or leaving a European port will be subject to EU legislation on shipping emissions. The penalties will be significant. Part of this regulation, in particular, FuelEU, will provide incentives for using WAPS. As a result,  if you operate a five-year-old tanker regularly visiting European ports, retrofitting it with sails is more than likely economically worthwhile.

What is the life expectancy of a ship?

It depends on the ship type, and it is often more of a commercial consideration than a technical one. For ships that trade internationally, it is roughly 20 years for a bulk carrier ship and 15 years for an oil tanker. There are some 30- or 40-year-old cruise liners still operating.

We often see pictures of workers taking terrible risks breaking up old vessels. Is it controlled in any way?

Dismantling ships is considered one of the most dangerous professions in the world, both for workers and the environment. Injuries, fatalities and work-related illnesses are often because of the hazardous materials onboard the vessels in question.

Controls on ship recycling are, therefore, crucial in order to keep the sector operating safely and efficiently. Policymakers and regulators came together to address this and introduced the Hong Kong Convention for Safe and Environmentally Sound Recycling of Ships (HKC), which came into force in June 2023. As part of the convention, ships must have an Inventory of Hazardous Materials onboard, which must be prepared, verified and kept up to date, in line with the IMO’s guidelines.

Whilst ship recycling remains hazardous due to the above points, we certainly see a shift towards safer and sustainable practices for vessels that have reached the end of their lifecycles. LR is committed to working towards a better future for the environment, those involved in ship recycling and the wider shipping community as a whole.

Thank you, Alberto, for your time and input.

© Commodity Conversations ® 2024

• The flag state of a merchant vessel is the jurisdiction under whose laws the vessel is registered or licensed and is deemed the nationality of the vessel. A merchant vessel must be registered and can only be registered in one jurisdiction but may change the jurisdiction in which it is registered. Source Wikipedia

This is an excerpt from my new book, Commodity Professionals—The People Behind the Trade, now available on Amazon.

Good afternoon, Brian, and welcome to Commodity Conversations. To start, please tell me about your journey so far.

I’m Irish and partly grew up in Ireland. I studied law and politics at Galway University but decided to move to Cardiff to study law, particularly maritime law. On graduating, I went to Holman Fenwick Willian (HFW).

I joined Cargill in 1995 after a period at Middleton Potts, a famous commodity firm. Cargill was their biggest client. I initially spent some time in Cobham, where Cargill used to have their UK offices, and then moved to Geneva, where I served ocean transport, sugar, and other areas.

I loved my five years at Cargill but concluded that you either stayed there for life or went off and did something different. All my business in Cargill was captive; I wanted to see if I could build a practice.

Hill Taylor Dickinson gave me a partnership, but it was up to me to build my own business. I was lucky because Bunge was growing and had no in-house lawyers. Cargill remained a client for a while. I slowly increased my client base, benefiting from the absence of in-house lawyers. I became an external in-house lawyer for various shipping and trading companies. It was a natural habitat for me. During that time, I was lucky enough to witness and legally support the birth of Swiss Marine, FIS and later GMI.

I slowly grew and developed. I left Hill Taylor Dickinson, returning to HFW, where I had articled, partly because it was a more prominent firm. I have been with them for almost 20 years, and my business has grown significantly.

The nature of my work has changed over the years. Many companies now employ in-house lawyers. I have had to adapt and change my product. I have had to expand and diversify my practice.

I understand that you have been ranked in Band 1 of Chambers 2024. How does this happen?

It takes time and involves accrediting by your clients and peers. Over the years, I have worked my way up through the ranks. This was quite an achievement for a lad from Ireland.  Nothing was ever given, but the loyalty and kindness of clients are something I have never taken for granted. I have had some momentous periods in my legal career.

Could you give me some examples?

The first was the Red Bean Crisis, when various trading houses found themselves with shiploads of soybeans sitting off China containing little red beans – beans that someone had dyed red. I still have some on my desk. It gave the Chinese buyers an excuse to reject the shipments, and the prices plummeted. It was my first experience of a significant commodity crisis.

My second crisis was the freight crash when the time charter rate for Capesize vessels went from $200,000 a day to zero or minus $ a day.

Can you tell me about that?

It was the only time in my life where I could choose which clients I acted for.

I had co-drafted the legal FFA document – the Forward Freight Agreement – with another lawyer. We built the contract’s architecture together.

When the physical freight market crashed, the forward market also crashed. Everyone knew I had co-drafted the FFA contract and wanted me to tell them how to deal with it. I was overwhelmed with physical and futures freight work in 2008 and 2009.

Since then, we have had various commodity price crashes and other world events, including the Russian invasion of Ukraine.

I said to one of my associates recently that I know it feels overwhelming at times, but this is my fifth crisis, and they all pass. It gets easier every time because you know how to approach the work. You know what matters; you know the priorities; you know the systems.

We are living through the Ukrainian crisis, where initially, some clients had to grapple with a suddenly changed legal world where sanctions had a huge impact on performance. I have been stress-tested and lived to tell the tale, building long-lasting relationships with traders, clients, and in-house lawyers. You are reliant on each other when you are in the trenches together. You learn a lot about each other; these are special professional moments.

I remember going to the Baltic Exchange during the freight market crash. Those attending owed millions of dollars in physicals or futures. It was paralysis. Rule B was in full force, and everyone had their bank accounts frozen. The whole thing was surreal. The owners, charterers, interested parties and brokers had never seen anything like it. The freight market was on its knees. I didn’t think so then, but in retrospect, I am fortunate to have experienced that unique period in market history.

How do you cope with the stress?

I remember sitting at my desk during the FFA crash and thinking that I just wouldn’t be able to cope with the pressure.  Every client wanted my urgent attention. Everyone’s problem was unique and special. You just find great resolve, don’t you? You cope. I had a good group of Partners and associates around me. As I grew as a lawyer, I had more people around me who had similar experiences. I have had great support in the Ukrainian crisis. It was more brutal previously because I had fewer associates. I was still growing as a partner. But you just cope. There were long hours, long days.

I co-drafted the FFA document, and billions of dollars were traded on it. I thought, “Just imagine if we have missed something.” There were a dozen or so court cases that tried to undo the architecture of the contract. The brightest of QCs (Queen’s Counsels) were trying to argue that the contract didn’t work – that the architecture was wrong.

I will let you into a secret. When formulating the FFA contract, I kept a copy in my pocket for about three or four weeks, stress testing it, throwing situations at it, and seeing if it held up. I had done everything I could to make it work. It survived the court challenges, and the architecture proved sound. It was a huge relief.

We built the FFA contract pro bono. I knew it would be professionally fascinating, but it also meant that we had done something special – designed a contract that supported a hugely vibrant trade.  Freight futures have now moved to exchange. I never worked out how many billions were traded on the FFA form.

How do you avoid burnout?

The freight crash was the closest I have come to it. You may have colleagues, but it’s a lonely place because, ultimately, the buck stopped with me.

As always, you must go back to people’s backgrounds and experiences – to their childhood. From the age of eleven, I attended a strong, traditional Irish boarding school. My parents had been in England, and although I was born in Ireland, the other boys saw me as a Brit. I spoke like a Brit. If you survive that without too many bruises, you can survive most things.

Is it tough to keep up to date with the Law?

I am passionate about keeping up to date with the law. Every day, I inject myself with a new matter, a new case. A client expects you to know the current law. You might think it’s obvious, but I am sorry to say that not every lawyer does.

You are the most active litigator in London in the commercial litigation rankings. Does that mean commodity trading has more disputes and litigations than other professions?

Yes, it does. However, the statistics embrace commodities, shipping, and other pieces of commercial litigation.

I have had something like 50 reported cases in my career. One case, for Cargill, went to the Supreme Court. We won.

One of your ex-colleagues at Cargill told me you were a lawyer who solved problems rather than created them. I asked him if he thought some lawyers created problems, and he told me I had to ask you that question.

I come from the Cargill Academy. People at Cargill didn’t enjoy disputes and didn’t want them. They preferred to protect relationships but, at the same time, solve problems.

I believe every legal problem, whatever the sector or subject, is capable of solution.

Years ago, I was lucky enough to go on a mediation course where I saw the early benefits of mediation as a way of resolving differences. Mediation is a slightly more formal structure than a conversation. We ended up putting mediation clauses in Cargill charter parties, probably one of the first in the industry to do so.

Do I think some lawyers create problems? Yes, I think some do. Many colleagues are interested in solving problems, but lawyers sometimes respond to a client’s passion and emotion. Emotion is a dangerous thing because it can make it more challenging to solve problems. This is why divorce can be so conflictual. Commercial problems should all be solvable, however emotional they are.

Clients need to own a dispute and not leave it to the lawyers. Clients should remain invested and interested. The best clients remain interested and invested and play a significant role in the solution.

How does arbitration fit into all of that? Do you put arbitrations in the same category as court?

Arbitration is more hostile than mediation, which is a more informal affair. People regard arbitration as a gentlemanly form of court action. You are judged by commercial people who you respect, and there is a sense that commercial morality will prevail. Contract interpretation is all about the words, but the context does matter. There’s a belief that arbitration often provides a more commercial judgment than a court.

One advantage of arbitration is that it is confidential. If there are embarrassing elements in WhatsApp or emails, they are protected. It’s a less hostile forum. It’s not open; you’re not in the witness box in front of the court. I would argue that it should be mediation, arbitration, and court – in that order.

Unfortunately, enforcement of an arbitration award (or judgment) can be a stubborn issue. You may win the battle but lose the war. Over the years, I have specialised in collecting awards, and we have recovered many millions on behalf of clients.

Where do most problems arise within that agricultural supply chain?

They have changed over the years.

You have the classic quality, quantity, performance, and force majeure. New issues might be cyber-attacks and force majeure resulting from sanctions. Contract drafting is becoming increasingly sophisticated, with cross-default provisions and termination clauses becoming increasingly common.

Which commodities have the most problems?

Sugar has always been a challenge, and it remains so. Jurisdictions remain an issue. You win the award, but what do you then do about it? Cotton has had its fair share of problems, as has fertiliser, the latter because of sanctions.

How many commodity lawyers are there?

I would say there are around 100 very active commodity lawyers in London. It’s not that many compared to shipping, where there are many more. There is a shortage of talent in commodities. Many trading companies have hired commodity lawyers and are looking to hire more.

Law firms have lost people as a result. If there were a massive crisis again, you’d probably have a shortage of lawyers.

What would you say to a young law student to encourage them to come into commodities rather than something else?

I would say that international trade is fascinating. The best cases result from the buying and selling, the finance, and the shipping of goods. Without commodities, international trade, and shipping, the law reports would be a fraction of the size. Every area of the law seems to have been developed because of the business that we are in.

I would say to young lawyers that they will have to work hard, and there will be challenges and pressures, but it’s a wonderful area if you’re interested in the law and the development of the law.

And what would you say to a trader to try to stay out of trouble?

Realize that you are both masters or mistresses of your contractual destiny. The words you use in your contract will dictate the outcome. I try to get people to realise the power and impact of words and to get it right at the beginning. It usually leads to a happier ending.

Any final thoughts?

Words are my commodity, and the words chosen will almost always dictate the outcome of a dispute. I spend an increasing amount of my time guiding clients appropriately.

Personally, it has been a privilege to experience the highs and lows of the commodity market from a legal perspective. The characters I have met and the professional friendships I have developed have led me to conclude that this remains a people-centric business, where conversations lie at the heart of what I do.

© Commodity Conversations ® 2024

This is an excerpt from my new book, Commodity Professionals—The People Behind the Trade, now available on Amazon.

Good morning, Eliane, and welcome to Commodity Conversations. First, what is your title and role at the University of Geneva?

I am the Executive Director of the Master of Science, Executive Diploma and Executive Certificate in Commodity Trading at the University of Geneva.

I am responsible for the whole program regarding faculty members, courses, contents, exams, etc. I’m on the student selection committee and organise the program advisory boards. I’m also the contact person for SUISSENEGOCE. I have two people working with me.

Please tell me a little bit about the MSc course.

UNIGE created the Master of Science in Commodity Trading in 2008 following a request from the commodity trading industry in Geneva. The city is a trading hub, and, at that time, the trading companies here had to import talent, particularly from London.

The commodity trading companies approached GTSA, the Geneva Trading and Shipping Association – now SUISSENEGOCE – about the idea. The association worked with the University to set up the programme.  SUISSENEGOCE has been involved from the beginning. Thanks to them and the commodity trading industry in Geneva, we are now in our 16^th intake. We have more than 1,000 course alumni.

The course is constantly evolving to adapt to the changing market conditions. It is not the same course now as in 2008!

I understand you’ve 33 students coming from 15 different countries this year.

Yes, that is correct. Of those, 27 per cent are Swiss, 55 per cent other European, and 18 per cent non-Europeans. I am proud that the program is recognised locally and internationally.

What’s the average age of this year’s intake – and what type of work experience do they bring to the course?

The average age is 25 years. The programme is for young people with a bachelor’s degree.

We are open regarding bachelor’s degrees. We have students who’ve studied finance, management, accounting, law, international relations, and all the scientific backgrounds such as mathematics, chemistry, physics, etc. This year, we have someone from a naval academy. We quite often have people with a shipping degree, often from Greece.

How does the selection process work?

It’s a two-step process. A committee initially selects the best candidates based on their academic results. Those candidates then go through a second phase where they apply to companies linked to the commodity trading industry, such as commodity trading, shipping, inspection, audit companies or banks for a traineeship.

Do other universities offer similar courses?

The CASS – now Bayes – Business School in London and Erasmus University in Rotterdam offer similar courses, but they are not linked to traineeships. Some US universities, such as Houston, have commodity programmes. But as far as I know, our programme is the only one where students simultaneously work for a company and study for the course. From Monday to Thursday, they work in their companies; on Friday and Saturday, they’re in class.

Is it challenging to find a traineeship in a company?

It’s not easy, but we help. This year, we have 33 students, which means 33 traineeships.

Together with SUISSENEGOCE, we have set up a platform whereby students upload their motivation letter, CV, and a short video presentation of themselves. Once all the candidates have uploaded their profiles, the companies access the platform and contact the students that interest them.

We also do online speed recruiting.

This year, we had a record 170 applications, of which we initially selected 100 candidates. We had  18 companies attending the Speed Recruiting event. Each candidate had nine minutes to convince a company to give them a second interview. Candidates also have to search actively for a traineeship.

The companies love it because they see a maximum of people in two afternoons. For students, it’s an excellent opportunity to meet a company, be ready, and try to convince the company to give them a second interview. We offer all the candidates a two-hour coaching session to help them prepare.

So, out of the 100 students you selected for the course this year, only 33 were offered a traineeship by a company.

The companies invest time and money in their trainees. It’s an investment, but most stay within the company, so it’s worth it. I know people from the first three or four intakes still with the same company. Companies hire again year after year. Some companies have graduate programmes but still take trainees from our programme.

What’s the limiting factor here? Why do you only have 33 students? Is it because you don’t have enough companies willing to participate, or you don’t have enough space in the University to have more than 33 students?

Thirty-three students is a considerable number. We usually like to have around 25-30, not much more. Forty would be too big.

The ratio between applicants and people in the class is about 20 per cent, approximately the same as in other masters.

Do the companies pay the students? Geneva is an expensive place to live.

Yes, they do.

Do all the graduates end up in commodity trading and shipping?

We want our students to have an overview and transferable skills they can use in many different areas and businesses.

Commodity and shipping are a broad space incorporating many professions: audit, trade finance, legal, inspection, shipping, risk, and compliance – middle, back and front office. The sustainability aspect is essential. Energy is not just oil and gas. It is electricity, whether wind, solar, or hydro.

We are teaching all the aspects of the business.

Who teaches the classes – people from the companies themselves or full-time professors?

We have professors and PhDs from the University of Geneva or other Universities, and we have a few professionals. We have experts who are professionals coming from the commodity industry. They come for an hour or so to explain to the students how their learning is applied within the company or the business.

It’s a one-year course, isn’t it?

It’s a one-year course. It was initially 18 months, then it became two years, but we have shortened it to two semesters of courses. The traineeship runs over a year, and it’s up to the company to decide whether to employ the student when he finishes his courses or wait while he writes his thesis, usually in the third semester.

The course is a 90-credit program under the European Credit Transfer and Accumulation System.

How does a student apply for the course?

Through the university website. Admissions are open from 15^th January to 28^th February.

How would a potential student know whether this course is right for them? In your experience, what sort of students succeed with these courses?

Our program tends to attract students interested in a master’s degree with an academic and a practical side, students interested in what’s happening in the world and how geopolitics or the weather affects commodities. It also attracts students interested in the environment.

Is there a dropout rate?

No, because I think we are detailed and transparent about the program.

It is an intense program because you need to be 100 per cent at the office when you’re at the office and 100 per cent at the University when you are at the University. It’s every weekend for a year. Students know that presence is mandatory. There’s no recording. There are no online courses; students need to be present. All this is clearly explained, so nobody is surprised. We never had someone who said, this is not what I expected. I’m dropping out. We never had that.

And as I said, it is a two-stage process. When the companies interview potential trainees, they are also looking for specific skills, more and more soft skills.

Women make up 42 per cent of the class this year. Do you know what the percentage was in 2008 when you first started?

I have it in front of me – in 2008, 31 per cent of our students were women. However, we have had years – 2015 and 2020 – when the percentage dropped to 5 per cent.

Commodities and shipping remain a male environment, but you would have a similar situation in other sectors, sometimes the other way around. If you go to psychology, 80 per cent of the students are women, and 20 per cent are men.

What would you say to a young woman to encourage her to take this course?

I never had a woman come to me and question whether the program is for her because she is a woman. I never had that question. The sector offers so many opportunities, whether you’re a man or woman, I don’t think there is any constraint.

Trading companies want to hire women. They need women. They want gender balance.

The program covers ags, metals and energies, but does it focus on one in particular?

Energy is slightly denser because of all the renewables, but metal and ags are the same.

Thank you, Eliane, for your time and input.

© Commodity Conversations ® 2024

This is an excerpt from my new book, Commodity Professionals—The People Behind the Trade, now available on Amazon.

Good morning, Indrek. Could you please tell me a little about grain brokerage at Copenhagen Merchants?

We were initially a Northern European grain brokerage company, mainly involved in wheat exports through the Baltic Sea. We have historically identified ourselves as an origin broker. Today, Copenhagen Merchants is present in the Black Sea, so we are involved with the region’s four exporting countries. We have an office in Sao Paulo, Brazil. We have six offices in all, mainly positioned according to exporting origins.

The markets are constantly changing. Destinations now accept more origins, which brings an element of competitiveness and creates a function for companies like ours. We must have a geographically wide footprint to preserve our value to the market.

The broker’s function is also changing. Price discovery, historically the broker’s job, is less important now as markets are more transparent. Our value now is in the intelligent delivery of market information, execution, and logistics.

Torben Christensen founded Copenhagen Merchants in his basement in 1977. Is he still involved in the business?

Torben officially retired in 2016, but he’s in the office three or four times a month, so it hasn’t been a complete exit. Torben’s son, Simon, took over the CEO role from his dad, and the Christensen family still own the company.

How long have you been with the company?

I joined in 2007, so close to seventeen years.

What are your responsibilities – your day-to-day role?

If you ask a broker or a trader to identify themselves, they will reply that they are a corn, wheat, or beans guy. I’m a wheat guy. Wheat is close to my heart. I’m originally from Estonia, and when I joined the company, it was natural that I looked after the markets in the emerging Baltic States. Nowadays, I’m responsible for brokerage overall. I still broker for a small portfolio of loyal clients, but my job is mainly developing new offices, products, and markets. Our world is changing super-fast, and we need to adapt to those changes.

How do you manage the communication between the different offices? Getting everyone to talk to each other and share information must be challenging.

It’s challenging for a company like ours to maintain and do well, especially given the time zones and cultural differences.

We have around 30 brokers in six different offices. If everybody calls everybody even once a day, it’s hundreds and hundreds of phone calls. You can’t do that. You need to be more innovative as today’s markets are such that business opportunities appear and disappear much faster than when I started seventeen years ago.

We invest heavily in digital tools and have developed a platform – CM Navigator – for both internal and external use, where we keep our bids, offers and vital analytical data. Everybody has access to it.

It’s like in sports when you train a football team to become perfect for a match, where everybody can read each other well. To succeed, we must have the right tools, the right people and the right attitude.

We’ll return to the digital part in a minute, but let’s first talk about the individual competition between the brokers. How do you get around that problem?

It is one of the core challenges and is why brokerage companies tend to be small. It is a barrier which restricts growth. At some stage, brokerage companies often split up, and people go on their own. We see that happening a lot.

Copenhagen Merchants is one of the few brokerage companies that acts like an organisation. I would attribute this mainly to our culture and our values. We try to think with 30 heads but talk with one mouth. We do not cherish individual achievement; we cherish group achievement. Nobody in our company is valued according to what they do individually. Business often happens between different brokers or offices. The more business transacted between brokers and offices, the better it is because it shows how our team benefits from the structure around them.

We are getting into uncharted waters today because of our size. We don’t see many similarly sized brokerage companies, which means we cannot follow any given examples. However, we strongly believe that combining our digital platform and shared culture allows us scalability.

Brokerage requires drive and competitiveness, but it should never be destructive. It comes down to the value set of people. I don’t know if we have been lucky or intelligent, but when we recruit brokers, we place more weight on their value set than their skillset or the tonnage they have brokered in the past. They must be a cultural fit for us.

Let’s go back to brokerage. Why hasn’t it moved online? There have been many attempts to move brokerage onto platforms, but none has worked. How are you progressing on that issue?

I don’t think any company is strong enough on its own to drive or disrupt the business, but we must stay on the frontline to see what is going on – which direction the wind is blowing.

Why hasn’t the business moved online? There are several reasons.

The number of transactions is relatively small, and the number of standardised contracts is even smaller.

There is always a lot of discussion about terms when you trade physical goods – load speeds, documentary instructions, etc. They often depend on the destination. Morocco, Algerian, and Tunisian terms are all different.

The contracts are significant – a cargo of beans or corn is worth tens of millions of dollars. It is not the same as buying a plane or train ticket.

Nobody has been able to standardise contracts enough to digitalise them. Even if you take the most standard flows, say, Brazilian beans to China, it is billions of dollars of flow in a relatively standardised format. The number of contracts is small enough – and the contracts are big enough – not to incentivise you to click and do the business.

Why does a market need brokers?

It’s a good question. The market needs brokers for different reasons now than twenty years ago.

Historically, a grain broker gave you price discovery to tell you the value of your goods at a certain point and time. The broker also helped build trust between counterparts by saying that this is a good buyer; you can trade with them. Sometimes, the broker’s function was to offer execution and post-trade services.

Brokers must look in the mirror and ask what value they can deliver in five or ten years. Price discovery is no longer a broker’s primary function. The markets are so transparent anybody can find out the value of their goods. The execution services are becoming increasingly automated, both with blockchain solutions – where the ABCDs have invested heavily in Covantis – and AI.

First, we believe that the primary function of a broker will remain the intelligent delivery of information. We have tens of thousands of data points on prices, analytics, S&Ds, line-ups, freight, etc. Choosing the five relevant data points for a client and delivering them at the right time is a significant value-add.

Second, people often look at a broker’s execution service as passing on emails between buyers and sellers. However, that is not the core of the service, and it can be automated relatively easily. The core of the execution service is to avoid disputes and arbitrations. It starts with designing and constantly improving the contract standard to leave the minimum room for interpretation. It is about offering advice to counterparts in case of differing opinions and mediation to find a solution.

GAFTA arbitrations do not take commercial interests into account. Sometimes, one counterparty needs the other one more than the other way around. We have access and visibility to the value of the continued trade relation in addition to the legal standpoint. Our execution service is more about consulting than just passing on emails.

The third angle is visibility into freight and freight’s visibility into brokerage. We have a multimillion-tonne trade book ahead, traded but not executed, plus we hear what the others are trading. We have a relatively good visibility into the next six months’ trade in certain areas. It offers some unique insights into the freight market and how to evaluate the freight rate correctly.

In our opinion, this is what the market will need from the brokers in the future.

You offer a kind of informal mediation service.

When we conduct the business and issue the contracts to both parties, we take control of the execution service and the post-trade processes, starting with the vessel nomination and ending with payment. During this process, something often needs solving – big or small.

The money is not made in catching the last quarter of a dollar per tonne in the port. The money is made by executing efficiently and minimising or avoiding demurrage. We try to control the process thoroughly and then give our opinion as a neutral counterpart in the transaction.

The freight brokerage side you offer dovetails into the physical grain brokerage. Has it always been like that at Copenhagen Merchants?

Copenhagen Merchants began as grain brokers in 1977, and we started freight brokerage one year later. We have been in freight for 45 years. We evolved from freight brokerage into freight trading. We own and manage a fleet of vessels, some in joint ventures. We are principal traders on freight, but we preserve our neutrality on grain. There is synchronised value in both.

So, there’s no conflict of interest?

I don’t see any conflict of interest. Yes, we may have a long or short position on freight, but I don’t see how that could conflict with our service on the grain brokerage side.

Neutrality on grain is paramount for us because it allows our business model to live. I have only once been short barley, and that’s when my colleague thought he sold wheat to one client, but accidentally, I bought barley from mine. We needed to perform and cover in. It’s the only time we held a position on the grains.

Do you give risk management advice, even informal, to your grain clients?

We don’t. Some companies offer consulting, but it involves increased compliance, possibly even a banking license. We haven’t found the synergies there.

Copenhagen Merchants offer a lot of market information, but the conclusions are yours to make. Two people looking at the same data can arrive at two different conclusions depending on their unique situation or position.

We provide daily market reports and live data on our digital platform – news that others haven’t yet published.

Do you publish prices?

We do but in an anonymised format. We group prices to specific base ports. But we also publish physical bid and offer data you can’t get in typical market reports. You can usually get indicational values of the goods, but it’s much harder to access genuine bids and offers you can trade on.

Copenhagen Merchants owns terminals. How do they fit into the brokerage?

We have terminals in the Baltics, Poland, Denmark, Sweden and the US. Although they are often owned in joint ventures with other companies like, for example, Viterra or Bunge, we are the majority shareholders and manage them. They are independent and service the free market on a competitive basis.

The synergies to the grain brokerage business are regional. Our terminals in Poland execute Polish and Ukrainian grains. There is a brokerage element, there is a freight element and identifying synergies is part of our job.

The synergies are there. For example, if you supply Ukrainian corn to our Gdansk terminal, you want to sell it for the maximum price, load it out quickly, and then get paid. We want the same as a terminal owner, broker, and freight trading company. Our interests are aligned.

Remember, the geographical scope of our brokerage is much broader than our terminals.

What is your earliest point of intervention on the brokerage side? Is it ex-farm or ex-terminal?

We don’t trade with farmers except in countries where farmers have 100,000-plus hectares and are also trading companies. Most of our business is FOB or C&F, but we also deal in rail cars. We sometimes trade containers, and we occasionally trade trucks. We do railway business in countries where rail dominates, like Ukraine and, increasingly, the EU. We previously brokered cargo and rail cars in Russia. It is a question of liquidity. If there is enough liquidity, we broker it.

How many different hands does grain go through before it ends up on the ship?

The domestic market is usually two-tiered in exporting countries like Denmark, Germany, the Baltics, or Romania. The farmer produces the grain and sells it to an originator, who then transports it to the port, loads it on the vessel, and sells it FOB to an international trader. In some countries, like Poland, it’s a three-tier system, with the originator selling it to a local trader who loads it on a vessel and sells it FOB.

The Northern European markets are over 90 per cent FOB business because the originators don’t want to go to destinations. Their function is to identify their first liquid logistical point, usually FOB, and sell the grain FOB to a trading company.

Sometimes, an end consumer will buy the grain and ship it directly to its destination, where the buyer distributes it to the local processors, feed compounders, flour mills, oil crushers, etc.

We have recently seen a regionalisation process where global trading companies have lost market share because of compliance requirements and other issues. Some second-tier trading companies are becoming more assertive in specific destination markets. For example, some focus on West Africa or Iran, while others focus on wheat marketing in South America. Not everybody can do everything.

Sometimes, a trader sells to another trader and then on again. We can see strings of six to ten companies before the grain is lifted and delivered to the destination. It varies.

Do you find that brokers and traders add more value when supply chains are disrupted? There’s less need for traders and brokers when everything’s going well.

I would add three elements to this disruption.

First, you need a healthy amount of volatility in the market. If the markets are flat, traders find it hard to identify trading opportunities. But too much volatility paralyses the business. Unfortunately, we are dealing with a growing amount of volatility in today’s markets.

Second, you need healthy prices. Ukrainian farmers are selling corn today for $85 ex-farm. It’s unhealthy. We need a healthy supply chain. It is not sustainable if prices are too low. It starts disrupting the business. The markets are more straightforward for everyone if prices are not too soft and not too high, combined with healthy volatility.

Third, wars, pandemics and weather disruptions are becoming more frequent. Traders analyse markets, but analytical thinking does little good when trends break. People trained to think analytically – to approach their markets analytically – might be disappointed if a black swan turns up.

Apart from wars and weather, what is your biggest challenge?

Recruitment is one of the biggest challenges for brokerage companies. There is a global shortage of people. The younger ones are not curious about agribusiness and are more interested in consulting, finance, and start-ups. The problem is acute in Sao Paulo, where demand is growing fast. I hope your blog and book stimulate young people’s curiosity about our business.

Thank you, Indrek, for your time and input.

© Commodity Conversations ® 2024

This is an extract from my upcoming book Commodity Professions – The People Behind the Trade.

A Guest Blog by Ivo A. Sarjanovic

One year after publishing Commodities as an Asset Class with Alan Futerman, the tranquillity of the year-end holidays provides an excellent opportunity to review data and literature regarding commodities and inflation.

In summary, our book’s thesis argued that contrary to the “conventional wisdom” of some financial advisors, the concept of passive-static investment in a commodities index as a hedge against inflation does not always prove effective.

For instance, Goldman Sachs projected for 2023 a 43% return for the S&P GSCI TR, but the index closed at -4.27%. The more traditional S&P GSCI closed at -12.55% for 2023. The Credit Suisse Commodity Index closed at minus 10.5 %, despite the bank’s advice at the end of 2022 that commodities were a good hedge against inflation, especially when invested across a very broad and equally weighted portfolio of different raw materials (not actually available in any existing index given that the different degrees of liquidity in many of the suggested markets would make it unsuitable for investing purposes).

The Bloomberg Commodity Index ended the year at -12.55%, and the Dow Jones Commodity Index finished 2023 at -8.7%. By any measure, these performances were far from impressive. But if you were seeking to diversify your portfolio, you have undoubtedly succeeded, considering that equities gained 24.2%, as measured by the S&P 500. The debate about the correlation, or lack thereof, between commodities and equities or bonds is endless…

Adding to the challenge, when factoring in the 3.1% US CPI inflation for the 12 months ending November 2023, which investors initially sought to hedge, the real return for each index becomes even more dismal. Consequently, the capital invested in these indexes not only failed to keep pace with the annual inflation rate but actually depreciated further, as commodity prices did not consistently align with the various price indexes used to gauge currency purchasing power losses.

As expected, commodity prices took divergent paths throughout the year, as illustrated in the graph, thanks to Peak Trading Research. Despite the overall weakness, notable opportunities arose on the long side, particularly among certain soft agricultural commodities.

Seeing the richness of the wide menu of price moves, one cannot help but notice that commodities are assets to be actively traded, not to be invested in passively. As outlined in our book, there are years when micro and macroeconomic conditions align in a bullish scenario, causing commodities to overshoot and generate compelling results—sometimes surpassing the originally targeted inflation rate as a hedge. However, these same conditions often trigger reactions that reverse the rally, causing commodity prices to lose momentum and struggle to maintain gains.

When prices deviate upwards from their long-term fundamental trend, the dynamics of price elasticity shift, leading to a decline in demand and an expansion of supply. Economic authorities, concerned with general price increases, tighten monetary policy, and financial investors, realizing that their bet exceeded rational bounds, often reevaluate their positions. This cycle demonstrates the need for dynamic management and a nuanced approach to trading commodities, as passive investment strategies may prove inadequate in navigating the complex and dynamic nature of commodity markets.

It’s essential to bear in mind that commodity prices are ultimately shaped in the long run by the microeconomic fundamentals of supply and demand. While macroeconomic conditions, especially those of the US and China, can undoubtedly impact their price trajectories, fund activity also has the potential to catalyze price movements in either direction, accelerating but not distorting the manifestation of fundamentals, revealing their effects at a pace different from what might be anticipated under normal circumstances.

This graph tries to summarize it:

Commodity supercycles occur when both micro and macroeconomic conditions align within the Very Bullish quadrant. In 2023, monetary policy progressively tightened, pushing real interest rates into positive territory and decelerating inflation and growth. China’s reopening proved to be disappointing, yet supply chains began to exhibit more normal behaviour, and stocks rebounded, transitioning from the Very Bullish quadrant to both the Gradually Bullish and Very Bearish quadrants, contingent on the specific commodities in consideration.

For a summary of how different macroeconomic conditions affect commodity prices:

Observing the evolution of commodity prices in 2023, some analysts are beginning to adjust their opinions, acknowledging that commodities may underperform when inflation is slowing down. Conversely, others propose that commodities serve as an effective hedge only when inflation experiences an unexpected surge.

This perspective implies that the recommendation for a suitable hedge against inflation remains valid solely during periods of rising inflation and not against any level of inflation. However, such an approach challenges the notion that commodities are a reliable long-term hedge and reinforces the argument that commodities are assets meant to be dynamically traded. This involves capitalizing on precise entry-exit levels and strategically employing both long and short positions.

For those interested in going deeper into this subject, let me recommend three recently published works which reach a similar conclusion to ours:

“The Inflation Commodities Cycle: A Regime Switching Approach to Inflation Hedging” (June 2023) by Fredrik Findsen from the Copenhagen Department of Economics, where he warns against the idea of commodities as a long-term hedge Vs. inflation and also highlights how different commodity families react to the erosion of value in money inviting investors to rethink the conventional wisdom about inflation hedging with commodities, proposing a dynamic, regime-driven strategy in place of a static asset allocation.

“Are commodity futures a hedge against inflation? A Markov-switching approach,” International Review of Financial Analysis, Elsevier, vol. 86(C) by Liu, Chunbo & Zhang, Xuan & Zhou, Zhiping, 2023, where they find that total commodity futures fail to provide a hedge against inflation over the sample period between January 1983 and December 2021. However, industrial metals and precious metals are able to hedge against inflation. Other sub-indexes, including energy, agriculture, and livestock, do not have a significant inflation hedging ability.

“Essays in Liquidity, Monetary Policy, and the Commodity Market” (September 2022) by Miruna-Daniela Ivan, from the University of Essex, where she expounds how the level of liquidity of different commodity markets make them react in a non-homogeneous way to changes in monetary policy.

Lastly, I recommend these two pieces that I came across in 2023 and thoroughly enjoyed. As someone who values the insights of myth-debunkers, these articles resonated with me.

The Roll Yield Myth by Hendrik Bessembinder from Arizona State University  (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3011634 ) where he writes:

“A futures investor does not earn or pay the difference in futures prices across contracts on the date that contract positions are rolled, or on any other date for that matter. Gains and losses on futures positions depend only on changes in the prices of individual contracts during the time an investor has an open position, never on differences in prices across contracts. Assertions that a futures trader can “pocket the difference” between the futures prices for two different contracts so as to generate a “steady income” or that “buying” a futures contract with a “more expensive” futures price (as compared to the contract simultaneously sold) involves a loss of investor monies reflect a fundamental misunderstanding of how gains and losses on futures positions are determined.”

“Speculation By Commodity Index Funds: The Impact on Food and Energy Prices” by Scott H. Irwin, Dwight R. Sanders (https://www.cabidigitallibrary.org/doi/book/10.1079/9781800622104.0000 ) where, among other things, they explain that:

“We then used exhaustive empirical tests across numerous markets, time frames, and data sets to show that there was no consistent evidence that positions held by index investors caused large changes in commodity futures prices. Batteries of time series and cross-sectional tests failed to find consistent temporal causality between index positions and futures prices. This body of work conclusively demonstrated that index speculation was not the main driver of the great commodity price spikes that occurred between 2007 and 2013.”

Happy 2024 to all, hopefully learning more about commodities!

Good morning, Laia, and welcome to Commodity Conversations. Please tell me a little bit about your role at ADM.

I work for ADM’s Global Trade team in Rolle, Switzerland, managing vegetable oil trading in 20ft containers. I have a team in the Netherlands and Singapore, and we move crude or refined vegoil from ADM or third-party plants to customers across the globe.

Are these containers tanks?

You can fill a container with anything from televisions to dry bulk or with what we call flex tanks for moving liquid products. A flex tank is a type of bulk liquid pouch or bag that allows shippers to fill dry containers with liquids.

You mention that you trade both crude and refined vegoil. Why would somebody want crude oil? Would they refine it themselves or use it in their food processes?

We sell vegoil to food manufacturers like FMCGs and mom-and-pop shops, but we also sell to biodiesel manufacturers and vegoil refiners. A food manufacturer will refine crude oil before using it.

Is shipping refined food-grade oil more challenging than shipping crude vegoil?

The challenge in shipping refined oil is freshness. For example, we ship to New Zealand, which is almost two months of transit time. Some parameters, for example, peroxide values, increase over time. It’s still edible, but the quality deteriorates.

What types of vegetable oil do you ship? Is it mainly soybean oil?

We do mainly soy and rapeseed because that’s what comes out of our crush and refinery, but we can supply a variety of veg oils.

Do different customers want specific types of oil?

It often depends on the region and its intended use. There are regions where they might prefer soybean versus sunflower oil. Other regions prefer rapeseed. Some regions are more price-sensitive and want the cheapest oil available. It depends on the region and the specific application of the customer.

You must handle thousands of containers every year. What are the main challenges involved in managing all those containers?

We have hundreds of containers moving around the world each day. It is challenging as anything can go wrong in a shipment. A container may miss a ship or have the wrong documents. It may have quality issues. Sometimes, we must export containers from a war zone. Every container is a potential source of problems, but we work with excellent partners, freight forwarders and shipping lines. They know where our containers are. They track them. We do not have many scares.

Is the process digitalized?

We can access the shipping line’s digital platform. We know the location of each of our containers at any time.

Are they intelligent containers with GPS tracking?

Not as far as I know. We don’t need it. We use the shipping company’s platform to keep an eye on where the container is, and which ship it is on.

Container rates increased dramatically post-COVID. How did that affect your business and the trade flow?

It was a challenging period. Rates increased, and reliability decreased. Trades continued to happen; our customers still needed oil, and the flow continued despite the spike in freight rates.

On our side, we developed more intra-regional supply chains. It allowed us better control of the supply chain and container freight.

Are you a trader, or are you a supply chain manager?

I call myself a trader, but a significant portion of my role is managing a supply chain.

ADM is super strong in managing complex supply chains for customers. I can give you a couple of examples. We supply customers in the middle of Africa or the Pacific Islands who have been buying from us in containers for years. We have been strong in exporting oil in containers from Ukraine during the war. We have a robust global footprint and a network of ADM people working with customers at destinations.

What do you like most about your current role?

I like my job because I see the sense, the need, and the purpose of it. It’s a job full of stories. It could be a Caribbean mayonnaise manufacturer or a Pacific fish canner without a refinery in the country or a neighbouring country. They need to import a container of oil to their facility.

Another example could be a food manufacturer in a market with only one supplier that wants to import oil to lower their ownership price. Or a small crusher in Ukraine that wants to export its oil but doesn’t have enough capacity to fill in a big vessel. They all rely on us.

I find this is very satisfying. It is what I most like about my job, that I see the purpose of it.

How do your friends react when you say you’re an agricultural commodity trader? Do they say, oh, that’s terrible, you’re a wicked speculator, or do they say, you’re helping feed the world?

They usually ask a lot of questions. I explain my vital role in moving oil from surplus to deficit areas. I do have friends who are critical, but I think I have more supporters than critics.

I was keen to talk with you there because you started as an analyst and moved to procurement and trading. You’ve covered the whole gambit. But how does procurement differ from trading?

Procurement is about price risk management, negotiating, and cost savings. It’s not an income-generating activity by itself. If you manage cost savings and price risk management well, and the brand is selling well, then you see the returns of your job. What I like about trading is that you see your PNL daily; it’s a business by itself.

Which do you prefer? Procurement, analysis, or trading?

They all have their charm, and a nice link exists between them. I’m happy to have gone through the three.

Was it a shock to move from analysis to procurement? Was it a difficult step?

None of the steps I have taken in my career have been a piece of cake. But I think it should be like this, right? If you move, you move to stretch yourself. I was lucky enough to have people that believed in me and trusted and supported me. I would be lying if I said it was not challenging, but that’s what I like as well.

How do you see your career developing from here?

I see myself trading for many years ahead, eventually moving to another product or managing a destination office.

How many people do you manage?

Four – in the Netherlands and Singapore. And we are hiring two more.

COVID-19 led to a broader acceptance of working from home. Do you work from home, and if so, how has it changed your life?

I enjoy the flexibility of working from home, but I still prefer to go to the office and interact face-to-face with people. My team is remote, so I trust them to do their job independently of where they sit.

Do you work one day at home on a regular basis, or do you just work from time to time from home?

I sometimes work from home, but I’m in the office 90 per cent of the time. Occasionally working from home has improved my work-life balance.

Is commodity trading still a 24/7 job? And if so, how do you manage your work-life balance?

I have an intense job in terms of watching the market, my position, and my shipments. But I’m a mom of two children. I don’t know if it’s because of them, but I know when to stop before being overworked.

I also make sure I do things outside work and family. So that’s how it works for me. I think we work a lot and are always alert, but I still want to keep time for myself.

Do you find that more women are joining commodity trading firms? And, if not, how can we get more women into the commodity trading world?

We have a traineeship program at ADM for young graduates, and we see more women joining. I don’t think the issue is with attracting women to the sector but with how we retain, develop, and promote women within the sector.

I don’t see any reason why women should not be interested in trading, nor why they should not stay in the industry.

What advice would you give to a young woman seeking a career in ag trading?

I would suggest you find a woman who inspires you. Ask her to mentor you – and then to give it back to the industry, your company, and women in general. Be a mentor to another woman.

Thank you, Laia, for your time and input.

© Commodity Conversations ® 2024

Good morning, Romina, and welcome to Commodity Conversations. Please tell me a little bit about yourself and your journey so far.

I’m originally from Argentina. I grew up and studied there but had itchy feet, and an international career was always on the cards. I always thought I would return to Argentina, but it became increasingly unlikely as I got older and had a family.

I had two defining parts in my career. I spent the first ten years with Shell, an incredible company with high operations standards. I then had my agri commodities decade-plus, coinciding roughly with my time in Switzerland. I began in sugar with Cargill and then moved to coffee, molasses, and derivatives with EDF Man. I then joined Noble, later COFCO, and spent five years with Bunge in Geneva, finishing as their EMEA HR VP.

I have since moved to natural resources with mining and now am with a technical consulting firm supporting all the B2B markets I used to work with. In the last five years, I have focused more intensely on the Americas with experiences in Chile and Canada.

During your nine years with Shell, you worked in Argentina, the UK, Brazil, and the Netherlands. Since then, you have worked in Switzerland, Chile, and Canada. That’s a lot of different geographies– more than anyone I know. What motivated these moves, and did they help or hinder your career?

It was easier to move in the early part of my career. Since I am now part of a dual-career couple, it’s sometimes challenging to coordinate two senior careers. However, we have managed to lead or follow at different times depending on the opportunity and family impact.

Despite being sometimes challenging from a career perspective, there is a silver lining, and everything is an experience from a life satisfaction perspective. Living in various countries makes me a more culturally aware individual and is far beyond what I could have dreamed of in my early years as a professional. It has also been great to raise a family with a multicultural perspective. We juggle four languages at home!

Where is home?

After 14 years in Switzerland and becoming Swiss, we call Switzerland home. When we say we miss home, we mean Switzerland. It’s our anchor. My oldest son will start university in Lausanne. We all agree that finding a better quality of life is challenging once you have lived in Switzerland. Though I have lived in some other great places, Switzerland is very special, and we have grown to love it. Argentina will always hold a place in my heart; my mum, sister and the rest of the family are still there, and I follow its news daily. And that is undoubtedly a country that is never short of news!

You started in energy, moved to ag commodities, and then to mining. What specific challenges do ag companies present in terms of managing talent? Are they different than others?

Yes, I think so, more and more. Given the food element component, agribusiness is more global than the other sectors you mention – not in every role, but in many roles. You need a global mentality from a supply chain perspective and an interest and understanding of geopolitics and economics. I see that in pockets in other industries where I worked, but one of the things that I miss from the ag business is the daily global conversation.

That’s on the positive side. On the opportunities side, agribusiness companies, in my experience, are less structured when it comes to career opportunities and management. I have found that other industries provide better career visibility. The ag business has an incredible career to offer. Still, in my view, it has not done as much as it could to market what it can do for people’s careers, particularly for those with a talent for an international perspective.

Did the different ag companies you worked for have different cultures – and to what extent does the CEO set the culture?

Each one of them has a distinct personality that partly depends on size. In a company as big as Cargill, for example, the heritage, to an extent and not just the CEO, helps shape the culture. I experienced its culture as robust and well-defined. The other companies I worked for had more of an entrepreneurial flair, and the culture was somehow more linked to the personality and approach of the CEO.

The CEO plays a role in fine-tuning a company’s culture, but it has more to do with its history and whether it grew organically or through acquisitions. People often define culture as ‘the way we do things around here’. I find culture plays a crucial role in successful integrations after a merger. A strong culture that aligns with a company’s strategy is a considerable asset and challenging to replicate.

What about managing all the different types of professions in the ag supply chain? Is that a challenge?

It is the same in the oil and mining or consulting industries. You have a wide variety of different profiles and skills needed. I know that people in the ag industry like to say they are unique. They are unique in certain aspects of what their roles require. That is true, but not necessarily in the diversity of skills needed to succeed as an industry.

What I think is different in ags, at least in my experience, is the stardom of the trader. The trader used to play a protagonist role. I think it’s starting to subside a little. People realise this is a team game, and you need everybody in the chain to execute their part to the best of their abilities. I started to see a more conscious recognition of corporate functions during my last years in agribusiness.

What about compensation? Traders get royally compensated, but operators don’t. Is that a problem?

Ag trading companies tend to pay quite competitively; their people are generally well-paid compared to similar roles in other sectors. From a human perspective, the challenge is that people do not necessarily compare themselves with what they would earn in the market. Instead, they compare the different job families in the internal ecosystem.

That can create some internal friction, but it’s the same with other industries relying on different kinds of top-notch technical talent. The rainmakers can be highly paid, but they are also the ones who assess and carry the risk and eventually make the call. It’s probably more acute in the trading industry, but I think it’s an accepted fact.

But let’s be clear: it’s not all the traders. There’s a category of handsomely paid rainmakers – certainly the most significant bonuses I have been involved with in my career. Still, there’s a relatively small number of people on those big figures.

You mentioned that trading is becoming more of a team operation. It is a theme that’s been running through many of my interviews. It brings me to my next question as to the role of women. Women tend to be better as team players and networkers rather than as lone wolves. Is the future of trading female?

I don’t know if the future of trading is female. From a demographical perspective, the future and present of work is becoming more female. Industries that don’t consider women forego a big part of the equation. In my time, there were very few female traders – maybe one out of ten. To be on a trading desk as a female, you really must be outstanding. The ones that made it were exceptional.

Other sectors have been more active or at least more visible in being inclusive in general, not only on gender. Agribusiness will, unfortunately, miss out on a lot of talent if they don’t become more proactive. However, having been in other industries for the last five years, perhaps that is already happening.

How can agribusiness attract top-quality candidates, both male and female?

We haven’t done as good a job as we could around marketing what it means to work in agribusiness. That is slowly changing, particularly in Geneva, with Suissenegoce and the MSc in shipping and trading. People are getting a better insight into the industry and what sort of a career path that could lead to.

I see the difference as Gen Z comes into the workforce. Without going into the stereotypes, mental health, the work/life balance, and the ESG impact are all important. Gen Z has different priorities, and purpose seems to play a significant role in how they select their future employer.

Also, big corporations are generally less appealing than they used to be for those in their early careers.

You currently work for an engineering company that, through acquisitions, is going from 1,100 to more than 5000 employees. How do you align and manage the different cultures? I’m thinking here of Bungie’s acquisition of Viterra.

It’s been an intense ride, and we are still putting it together. Aligning culture is a long, long road. From a communication and engagement perspective, we’ve done a lot of work making the cultures explicit, but there’s no magic wand. It will take us a couple more years, and it requires everyday effort and leadership to set the right tone, which I believe we have done. These last few years, working intensely on Mergers and Acquisitions and integration will be one of my career highlights.

Remuneration is one of the critical pain points of integrations and acquisitions. You must ensure you hold on to the critical talent. Before considering strategy, you must look at the people and skills you can’t afford to lose.

What about different nationalities and cultures? With a global footprint, you must manage these nationalities and cultures in different geographies. Is that a challenge?

It is a challenge that requires patience and curiosity, which makes it interesting. It is one of the distinctive features of agribusiness. And a positive one in my view.

You need to understand where people are coming from. Why do they react like that? There’s an interesting book by Erin Meyer that talks about the different perspectives of each culture and how those translate into the workplace.

I’m hoping that in 20 years, when I look back, I’ll say that I’ve enriched myself with all these fantastic nationalities I was fortunate to work with; all of them taught me something.

You recently completed the FT Board of Directors program. What did you learn?

The course put a lot of focus on how people dynamics make or break a board.

The most important takeaway is that board members must be vested in the company and not just be there for the public recognition side of it.

The other thing I learned is the sheer complexity of it all – the number of challenges a committed board and executive team faces is no joke. You must be agile and active in scanning the environment for where the next risk to the company might come from.

Can conflict be a good thing?

There is a perception that conflict should be avoided and that we should behave and be friends. I don’t have that perspective. Conflict can be positive if you split the problem from the person. I know it sounds easier than it is, but you need creative tension; if there’s no tension, there’s no creativity, and groups gravitate towards group thinking.

Conflict becomes problematic if it turns into institutionalized friction. Permanent friction and unresolved conflict create an unhealthy environment.

What about pessimism and optimism? Do you need a pessimist in every team?

I think you do. You need a mix. The same goes for extroverts and introverts—or any other personality trait. You need a mix of different personalities to challenge, again in a healthy conflict, yourself, and your team. You need it in trading, but you also need it in any business decision.

What nationalities would make up your ideal board or team?

I don’t think it’s only about nationality. I think it’s about personalities, experience, and attitudes. Board members must be sufficiently diverse to challenge each other, but not to the point where you live in permanent conflict and cannot decide. But that is the same for every team.

What advice would you give to your 18-year-old self?

Don’t take life so seriously. Focus on what is essential in the long term. Things will eventually sort themselves out. That’s what I would probably say to myself, with the hindsight of a long career and adult life.

Would you have listened?

Unlikely. I was quite a determined 18-year-old!

© Commodity Conversations ® 2023

This is an excerpt from my new book, Commodity Professionals—The People Behind the Trade, now available on Amazon.

Swithun Still is an old friend. I included an interview with him in my Commodity Conversations book, An Introduction to Trading in Agricultural Commodities, and he kindly wrote the preface to The New Merchants of Grain.

I was due to meet him for lunch on a Monday at La Maison d’Igor, his favourite restaurant in Morges, Switzerland. It is a forty-five-minute cycle ride along the lake shore from my hometown of Lausanne. I knew Swithun would also want to cycle to our meeting, but a massive storm over the weekend had transformed Lake Leman into an ocean; white-crested waves were still crashing onto the shore. We compared notes during the morning and decided that I should take the train instead.

But then the sun came out, and I went on my bike. It was a fun ride as the storm had, in places, washed away the lake path, and I found myself cycling through foot-deep lake water. I got to the restaurant just as Swithun arrived on his bike.

Once at our table, I was disappointed that our waiter wasn’t called Igor. He explained that the restaurant and hotel were named after Igor Stravinsky, who had lived there for a few years at the beginning of the last century. “And, no,” he added, “the food is not Russian. We don’t serve caviar.” I was relieved; it was my turn to pay.

Swithun was President of Gafta, the Grain & Feed Trade Association, in 2019. The Association traces its history back to 1878 and has several roles, including education and training. Grain traders initially set it up to promote standard contract forms and provide an arbitration mechanism to settle disputes arising from these contracts. As much as 80 per cent of the global grain trade now transacts under Gafta terms and conditions.

I wanted to talk to Swithun about arbitration. He is one of Gafta’s seventy-five (or so) qualified arbitrators. I wanted him to explain the role of arbitration when things go wrong. Perhaps more importantly, how should counterparties avoid things going wrong in the first place? We had agreed that he would speak to me in a personal capacity.

He had brought along a Gafta brochure showing the scope of their arbitration service. Between October 2020 and September 2021, Gafta’s arbitration department received 310 claims. Over that period, Gafta ruled awarded nearly four million euros under 125 rules and just over one million dollars under 126 rules. Arbitration is big business.

“Gafta 125 arbitration rules are used for most dispute resolution under Gafta terms and are heard by three arbitrators”, Swithun explained. Gafta 126 Rules are for minor claims requiring expedited arbitration and involving parties agreeing to a Sole arbitrator. Both have the right of appeal, in which case Gafta will appoint a Board of Appeal consisting of five qualified arbitrators”.

“There are generally three exchanges at the first tier. There are first the claim submissions, then the reply submissions by the Respondent. The Claimant then replies to the defence’s submissions. The Claimant will always have the last bite of the cherry.

“What frequently happens in complex cases is that there are rejoinder submissions and clarifications as to what’s gone on. If the Claimant introduces new evidence in his reply to the defence, then the Respondent will frequently ask for the opportunity to respond to those new bits of evidence.

“It usually takes about three and a half months between claim submissions and the finalisation of closing of submissions. In the best-case scenario, the arbitration ruling takes four months, but more often, six.

“The arbitrators then assess any award, or quantum as it’s called. The claimant may claim an amount, but the respondent will inevitably argue with the amount or say there’s no valid claim. The arbitrators then convene over email and video conference to decide the merits of the arguments.

“All contracts under Gafta terms are as per English law, so the juridical seat of the arbitration is the law of England and Wales. It’s not British law because there is no such thing. It is thus not Scottish law but the law of England and Wales.

“Sometimes, companies dispute the jurisdiction or deny they traded on Gafta terms, even if they have traded under Gafta terms previously. Sometimes, there are Preliminary awards made over jurisdiction or other matters such as Time Bar, where the Respondent might argue that too much time has elapsed for the claim to be valid.”

Our non-Igor waiter brought us our pumpkin soup. It was delicious, even if it could have been a bit hotter. I asked Swithun what the most common reasons counterparties ended up in arbitration.

“They usually occur,” he told me, “When someone defaults because the market price has moved between when the contract is agreed and when it is executed. If the price goes up, the seller may think twice about performing their contract – or try to find some way out of the contract. If the price goes down, the buyer thinks twice.

“It is especially true if the counterparties are not first-class buyers or sellers. If there’s a price differential for a seller and he doesn’t care too much for his reputation, he’ll walk away and resell the goods.  He knows it will go to arbitration, but it might take a year between the first tier and the Appeal. If the Award is defaulted, the defaulting party might simply liquidate his company, and the Claimant might be chasing shadows when seeking to enforce.”

“There have been quite a lot of arbitrations in the last year due to force majeure because of the war in Ukraine,” Swithun continued. “There can be various reasons behind force majeure cases – and it is not always on the supplier side.”

I asked him how a buyer could claim force majeure.

“Lots of reasons, such as export bans, war, strikes, extreme weather, or so-called Acts of God”, he replied. “Since the start of the war, traders of Ukrainian grain have declared Force Majeure because of the war, FOB Buyers or CIF sellers have found it difficult or impossible to charter a vessel willing to go to the loading ports. There have also been cases where a vessel started loading but could not finish, or finished but could not sail.”

“Is there a list of companies that have not honoured an arbitration ruling?” I asked.

“Yes, there is a list,” he answered. “Gafta posts arbitration awards on their website and circulates them to members after the council meetings held three times a year – in January, June, and October. All members know when a company is a defaulter.

“Smaller companies may continue to trade with a defaulter, but multinationals won’t. It’s a no-go.

“And before you ask the question,” Swithun continued, I don’t know how many companies are on the list. I do know that many companies on the list are defunct. They disappear and often reappear with a new name, like a phoenix from the flames.

“The system can be ineffective if you’re up against someone who’s not acting in good faith in the first place. They’re going to do everything not to respect the award.”

The waiter bought us our main courses: chicken for Swithun and baked cauliflower for me. Swithun asked me why I didn’t eat meat, but before I could reply, he told me that he had asked his twelve-year-old nephew the same question. He answered, “I like animals. I don’t want to eat them.”

“Sounds like a good enough reason,” I replied.  My baked cauliflower was as delicious as the soup but also lukewarm. Shame.

Swithun told me he entered the grain trade in 1999 and did the Gafta Foundation Course in 2001. It is a week-long residential course where you learn the rudiments of contract types like CIF and FOB, and Gafta procedures and all the various elements of the grain trade, such as superintendents and fumigation. In 2006, as its first student, he started a six-module two-year online course, Gafta’s Distance Learning Programme. He then took a trade diploma exam, and Gafta invited him to become an arbitrator in 2008.

“You must have ten years’ experience to be an arbitrator,” he added. “I had just passed the cusp of 10 years. At the time of my appointment, I was GAFTA’s youngest-ever arbitrator.

“I thought it would be an interesting second career – a paid hobby – and it was. I found – and still find – it fascinating to learn from the mistakes of others and see the things that can happen when simple mistakes are made.”

“What sort of mistakes?” I asked.

“An example would be not giving notices on time – or not asking for an extension on a shipment period when a vessel is delayed.”

Swithun finished his chicken and looked at his phone, checking the time. I could feel that he was busy and that his attention was wandering.

“How do you find the time to be an arbitrator when you have a full-time job?” I asked him.

“It’s a dilemma,” he replied. “I didn’t take on many arbitrations when I was working full-time at Solaris, maybe one or two a year. But earlier this year, I was in a hiatus professionally and did several. I’m now trading again; fitting them in during the day is impossible. I do my arbitration work in the evenings and weekends.

“I think it’s possible to do four or five arbitrations a year – maybe six at a push – if you are prepared to work evenings and weekends. It’s challenging because you don’t know how much work each one will involve before you accept them. Some arbitrations are open and shut cases; others are more complex.

“The other tricky thing is that it can take some time between my appointment as an arbitrator and seeing the first submissions. Arbitrations can be like London buses. None will come for a while, and then lots will all turn up at the same time.”

Our waiter asked us if we would like dessert, and I was surprised when Swithun said yes, tempted by pain perdu and baked apple. “But bring the coffee at the same time,” he told the waiter. I knew my time was running out, but I had one last question, perhaps the most important one: What would he advise people to be careful about to avoid ending up in arbitration?

“Know your counterparty,” he replied, “be it the seller or the buyer.  Be aware that if you’re buying from a supplier that is not first-class – or deemed to be first-class – you have a significant and often unhedgable risk if the market moves. Many counterparties don’t hedge their transactions and can sometimes find they can’t perform if the market moves against them.

“One case I had was when a company defaulted on the purchase of wheat, claiming that the market price had dropped so much that they would have gone bust if they had executed their purchase. They called it “economic force majeure.” We had to explain to them that there was no such thing – and suggested that maybe they should have hedged their purchase.

“If you’ve sold something and the market plummets, your buyers may try to find a way to extricate themselves from the contract – by hook or by crook, by fair means or foul.”

Outside, the weather was still foul, and the wind had picked up. I took the road, rather than the lake path, back to Lausanne.

© Commodity Conversations ® 2023