Good morning, Alex. Could you please tell me a little about you and HC Group?

Hi Jonathan. I joined HC Group in 2012 in our London office before moving to America to help grow our global agribusiness practice. The practice is focused on leadership assignments across agriculture, animal nutrition and health and food ingredients.

We help companies that feed the world. Playing a small role in that mission keeps me passionate and excited about the industry’s future.

HC Group was established in 2003. We identify business-critical talent for organizations across the global energy, metals and agricultural value chains. We also provide data-informed talent advisory around organizational structure, strategy, and compensation.

How important are ags for HC Group?

HC Group works across the commodities value chain. Ags is one of the three pillars of our business, alongside energy and metals.

Today, the war for biofuel talent has never been fiercer. As energy companies seek to decarbonize their platforms, the demand for vegetable oil procurement, analytics, and trading professionals outweighs the supply. This talent pool is highly specialized and relatively sparse. It is now being recruited by both the agriculture and energy industries, leading to an unprecedented level of competition between these two sectors.

Given the strength of our network in the energy and agriculture market, we have a unique position in the industry. It has helped our contacts and clients pivot from the agriculture to the energy industry.

What are the challenges in getting people to move from ags to energy?

I would say location is often the challenge. In the US this talent pool is primarily located in the US Midwest. People are often reluctant to relocate away from the Midwest to traditional energy trading hubs in the US Southeast or East Coast. Energy companies with flexibility around location will be the best positioned to secure the talent.

How is the ag-employment market now? What sectors are hot – what types of companies are recruiting?

 During 2022, US energy trading firms, refiners, and producers were hiring commercial heads for their biofuel platforms. We worked with them to identify individuals capable of creating the strategy to build the business. It is not as easy as it sounds; it can be challenging to source the necessary feedstocks. These individuals often must educate the energy majors about the ags markets. Oil traders might ask, “What do you mean you’ve lost the crop – where has it gone!” You must explain that growing crops is different from drilling for oil!

This year, in the US, these firms are building their teams and hiring contributor personnel, such as biofuel feedstock procurement specialists – the rung below the commercial head. The demand for biofuel expertise has cooled off relative to traditional vegetable oil feedstocks, with the focus now on advanced feedstocks experience with products such as UCO and tallow.

In the past year, the energy-trading houses have been looking to diversify their revenue schemes by going into ags. The energy trading companies have been relatively agnostic as to the agri-product line.

Energy trading houses such as Gunvor, Hartree Partners and Vitol hired new agricultural trading talent to their platform. Existing hedge funds such as Citadel and Millennium expanded their teams, while more recent entrants such as LMR Partners, Qube and Squarepoint have entered the market.

The significant hedge funds are also looking to diversify into commodities, agriculture included. Millennium is an example. The company recently hired Todd Thul, ex-head of Cargill’s corn desk.

In previous commodity bull markets, hedge funds have hired successful traders only for the traders to crash and burn. How can a hedge fund ensure that a physical trader will be profitable independent of the physical flows and assets and without access to information and analysis?

It is the million-dollar question!

While past performance does not guarantee future returns, it’s arguably the most valuable measurable when hiring talent. The number of individuals the hedge funds are genuinely courting remains relatively small, given how challenging it is to consistently return steady P&L numbers, year in and year out, without having an asset infrastructure behind you.

The hedge funds have more interest in talent that has already left a trading house and proved themselves in an asset-light environment without the information flow and support system to help them make trading decisions. Industry reputation and referencing talent within their peer group is one way we look to understand past performance, which in turn gives a good idea of the top percentile of successful prop traders.

I hear that the market for traders is so hot that hiring firms offer multi-million dollar signing fees. Is that true?

Yes. While some rumours are hearsay from traders, and numbers get inflated, some individuals are receiving million-dollar signing-up fees to move. But that’s also the compensation for the opportunity cost of leaving a safer environment in an ABCD. It’s a risk-reward decision. There is a high demand for agri-prop talent, and traders will look to capitalize on their market worth.

I sometimes wonder why a high-performing leader would leave a trading leadership role to move to a hedge fund. Typically, the number two and number three trader on the desk will make that move. (1)

What advice would you give to a traditional trading house in this environment – how can they keep their teams together?

 Trading companies must expect a certain level of attrition as they cannot compete with hedge funds and energy trading houses in terms of potential bonus upside. If individuals leave the business purely for compensation, that’s not something I would spend time worrying about.

High-performing organizations require people strategies. Engagement, retention, and growth are all intertwined and should be essential business strategies. Ultimately, engagement is about employee discretionary effort; they can give or withhold it at any time. Leaders need to know their employees well and react to their needs.

Communication is vital in any organization, and it is what underpins everything. To retain talent, focus on skillset development and leadership development. Better leaders create better teams, which creates higher retention. Focus on employee development. It’s a manager’s responsibility to grow your team’s skillsets and help them achieve their goals individually and as a whole.

If you are a big trade house, you must ask yourself why other people who are not necessarily or exclusively motivated by money are leaving. Maybe you don’t have clear succession plans in place.

The line manager should not underestimate the importance of one-to-one meetings to engage and retain employees. They give line managers a clear line of sight about what the employee needs to do and where they are going. They enable the line manager to have individual time with the employee, understand if they are OK, and detect any early signs of any changes that need to happen. Do they know their future career path and the succession plan for their leaders?

Succession planning is a serious issue for the industry. The ag industry is cyclical, and you see that in hiring and firing. Four or five years ago, the ag sector was depressing – the margins weren’t there, and companies were laying off traders. The problem was that they let go of the mid-career traders – the 25- to 35-year-olds. The trading houses have gaps in their succession plans. In addition, structures flattened during the lean years, and people don’t now have the rungs to move up the ladder.

Ask yourself how you engage with your traders on their career plans. How often do you sit down with them and map out their future? What are their pain points – their frustrations? The talent pool is in tight supply at C Suite succession planning and for mid-level bench strength. There is a missing generation of 40-55-year-olds, and everyone is struggling to fund succession planning solutions. The reality is young talent earlier will be pushed up faster into leadership roles than ever before. (2)

Looking at the other side of the coin, what advice would you give someone approached by a hedge fund employer?

 First, you must ask yourself where you want to be long term. Some people like to stay in an individual contributor role – to stay as a trader on a desk, and some want to move into leadership positions. These are two different paths. If the latter, you should probably stay.

Second, you should do your due diligence on the platform you are joining. You must understand their mindset and their expectations – are their expectations realistic? You know the returns you can achieve – would the new platform be comfortable with those returns? You must also evaluate their risk appetite. Traders must take risks to make money, but some employers may not be comfortable with those risks.

Third, you must also ask yourself to what extent the new platform understands commodity markets – particularly the ag markets. It may be riskier if you join an equity hedge fund with no experience in commodities.

Fourth, you must ask to what extent the new platform is investing in building its commodity trading capacity. For example, Citadel has built a first-class commodity research team that will help traders analyze their markets, but it also shows that they are investing in the sector long term.

Fifth, you must balance the risk and reward because a fund will pay you more than a trade house when you get the market right but will fire you quicker when you get it wrong. And traders always get markets wrong at some stage in their careers.

Last, you must ask yourself, what if they fire me within two years? Have I burnt my bridges? Is the risk worth it?

Hedge funds are fantastic places to make money as a trader if you are successful, but it is a challenging environment if you have a bad run. An equities hedge fund may not understand the commodity business. I would feel more comfortable recommending someone to join an energy trading house that understands physical flows and how the commodity markets work. There are tremendous opportunities, but you must be selective.

Commodities have a reputation for being male-dominated and macho. To what extent is that reputation warranted?

 That is a fair assessment, but it is starting to change. It’s changing at the junior level as organizations now hire different profiles out of college. The biggest challenge lies in middle and senior leadership because all the companies have the same profile. We recently ran a position for a senior economic analyst for the global ags landscape, and only eight per cent of the candidates were female.

HC Group has launched a Diversity Champions series for its content hub, HC Insider. The series will feature senior-level talent representing various backgrounds and experiences to promote and drive inclusion in the commodity markets. Most recently, we interviewed Jaime Goehner, Commercial Manager at ADM, about her career journey, what has been critical to her success, and how she is helping to develop talent.

If you would like to be interviewed in the Diversity Champions series, please contact Heather Falgout to discuss.

Suppose your best friend’s daughter wanted to get into commodities – would you advise her to go into energy, metals or ags? Do the different sectors require different profiles?

The skillsets you acquire are transferable between the three sectors, but I recommend agriculture. I love the industry and its people, so that is probably a biased answer!

And education levels – Bachelor, Masters, MBA, PhD? When I began in the business, the big companies liked to recruit people after a BA degree and train them themselves. Is that still the case?

 Yes, graduate development programmes are a must. However, companies need to be aware of changing desires of the next generation, particularly around energy transition and sustainability. Companies need to engage in how they are part of the solution.

That said, and why HC Group exists, companies always need external talent to take on new markets and regions. The same applies to building a vision for these individuals, given the increased opportunities out there. That messaging is critical and a significant part of our work for client partners.

Do you see a change in capabilities required to be a successful trader?

Much remains the same. Curiosity, commerciality, and relationship building, but added to the mix now is the need to be technologically savvy. Digitization and the velocity of the market mean traders need to understand risk management much more and be literate when it comes to developments in analytics and modelling. We recommend everyone tries to get a basic understanding of coding and statistics.

How do you imagine AI will change future trading desks?

 The most significant advancements are taking place in the pre-trade space for AI. Companies are increasingly looking at more advanced ways to analyze and interpret the vast quantities of structured and unstructured data aggregators provide.

 What advice would you give young people thinking of getting into the sector?

First, invest in yourself. Your only competitive advantage is your ability to learn faster than your competition. What are you doing to support your career? Investing in yourself is the best investment you can make.

Second, build relationships within the industry. The people we hire are typically the ones recommended to us by their peers, their managers from years ago, or their competitors with whom they trade. Build networks.

Thank you, Alex, for your time and input.

(1) I may be able to add a little to that. Many successful traders don’t know if they are only successful because they work for an ABCD+ company. You sometimes see top traders moving from the big trade houses to test themselves – to find their true worth.

You also have top traders who feel too restricted by their VAR limits. Their companies may have stopped them from a position, only for the market to turn and move in their favour. Fausto Felice – the ex-head of Cargill’s wheat desk – mentioned this when I interviewed him for my book Commodity Crops – And The Merchants Who Trade Them.

(2) In The New Merchants of Grain, I asked CJ Van den Akker, then head of Cargill’s trading activities, how he felt about people leaving. He replied:

I have mixed feelings about that. In one sense, it bothers me. Through our training, we’re feeding our competitors with talent. But at the same time, I’m proud that we recruit and train people so well. That tells you a lot about this company and how we invest in our people. I think that’s a good thing.

But frankly, there is no choice at the end of the day. We’re a pyramidal structure. People are promoted on merit and will fall out of that system. Our objective is to maintain our strongest talent. We don’t always succeed. But not everyone can reach the top, so people will always seek other opportunities. I think that’s OK. It’s the way the system works; it’s inevitable.

 © Commodity Conversations ® 2023

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

I was born and raised in Sofia, Bulgaria. After earning my bachelor’s degree, I completed an MBA with SDA Bocconi in Milan, focusing on international business. I then moved to Belgium, beginning my career with DHL, working in logistics.

In 2009, I joined Cargill in Belgium as a trade execution operator – what people used to call forwarding. Operators ensure the correct execution of contracts. The function involves coordinating the various links in the supply chain from vessel nominations, supervision etc. and ensuring that the documents are in order.

Remember that commodity traders don’t trade commodities; they trade documents! Buyers pay for their goods before they receive them – often weeks before they receive them!

In 2010 I relocated to Geneva, Switzerland. In 2011, Cargill acquired the Australian Wheat Board, and I moved to Melbourne, Australia, where I spent two years working on merging the trade execution functions for the two companies.

I returned to Geneva in 2013, where I worked myself up to become the global head of execution for the Cargill agricultural supply chain.

How did Covantis come about?

As I moved into management positions, I found that my biggest challenge was to attract and retain talent. People would join the team and quickly master and manage the routine work. They got bored and moved on to more exciting parts of the business, like trading, analytics, or IT.

I increasingly tried to digitalize the trade execution function. I became passionate about the potential for new technologies, such as Blockchain or Artificial Intelligence, to take over the routine part of trade execution. I knew we had to modernize the sector and make it more attractive to the younger generation.

I also knew we couldn’t just do it on our own. Digitalization had to be a cross-industry initiative, pulling together like-minded professionals from other trading organizations.

All trading companies are spending a lot of effort and investments in innovation and IT – but we knew we couldn’t do the job alone. The industry is interconnected. It is a complex ecosystem that includes banks, supervision companies, agents, vessel owners, governmental organizations, and chambers of commerce. These participants work together to ensure that the supply chain operates smoothly and efficiently.

We wanted to create a project that was “by the industry, for the industry.” So, in 2018, we joined forces with ADM, Bunge, and Louis Dreyfus Company to start working on the project. COFCO and Viterra (then Glencore Agri) joined shortly afterwards, and Marubeni joined in 2022.

Our initial challenge was deciding on which sections of the value chain to focus. Should we start with farming and move through to retail, or should we narrow the scope? Should we concentrate on grains and oilseeds or broaden the range of commodities? Should we focus on origination – and if so, in what geographies?

As you can imagine, setting up an organization that at that time brought together six of the world’s largest agricultural trading companies, we had to ensure that we would be 100 per cent compliant with international anti-trust legislation.

We worked this all out, and, in 2020 – in the middle of Covid – we set up Covantis SA as a legal entity in Geneva, co-owned by its six founding members. It was effectively a technology start-up.

As I mentioned, I was part of the project team from day one and one of the initiators of the idea. I applied for the position of CEO, and I was selected.

I am excited and passionate about both my role and the company. I have a fabulous board of directors, including G-J van den Akker, an Independent Board Advisor.

Could you give me your Covantis elevator pitch – how would you explain what you do in a few sentences?

Covantis aims to accelerate global trade transformation by solving industry challenges through technology. Our vision is to create a fair, trusted platform that brings better efficiency, transparency, and information exchange for everyone working to feed the world.

How many employees do you have?

We partnered with  Consensys, an external supplier who initially developed the software for our network platform. Our original idea was to have a relatively small in-house team. In 2020, there were 18 of us: the leadership team, product development, commercial, training and onboarding. We were a core group of experts, setting the direction for our vision, strategy, and scope.

We always knew that we would gradually move our software development in-house. To be a high-performing tech company, you must build the bench and knowledge inside the company to create a legacy and leverage these capabilities to expand to new processes and scope.

We started working with our partner Consensys in 2021 to see how we could develop the necessary capabilities in-house, and we are now pretty much an entirely in-house organization.

We are a team of sixty people, although we plan to increase that number by a little, perhaps to seventy.

Covantis is incorporated in Geneva, where we have considerable commodity trading talent locally, but it is challenging to find software engineers or specific product design and development roles here.

In 2022 we established a wholly-owned subsidiary in Bulgaria. We have an engaged team in Ukraine who continues to deliver high-quality work despite the war. We have people in Romania, Poland, Germany, Spain, the UK, the Netherlands, Malta, Italy, and Brazil.

We partner with an outside organization to provide global customer support to our users, and we have service providers who help us adjust to the workload.

What is the most challenging part of managing your teams?

We are a remote organization that has been scaling up very fast. We have attracted fantastic talent, but the commodity trading industry knowledge and challenges are new to most newcomers. We need to constantly invest our time in learning and development and stay up to date on the latest industry trends.

What about managing the different geographies and cultures?

It has been challenging, particularly with Covid. We recently held our first face-to-face meeting since 2020, where an important discussion point was how to build a high-performance organization when everyone works remotely. It is standard in the IT sector for people to work from home or shared offices, but they must be connected, collaborate and be up to date on the product direction and strategy.

 In preparation for this conversation, I watched a webinar from this time last year. At that time, you said that your biggest challenge was to choose whether to concentrate on building the network or the platform. How did you resolve that?

We are still working on it. It is a well-known complex problem for early-day network start-ups, with no easy solution.

Can you explain that?

Our value depends on our network. We lose value if participants are absent from our platform. We have spent a significant amount of our time and energy building the network. A trade house cannot use the platform to execute a trade if its counterparty is not on it. Successful networks are considered those that have at least 80 per cent of the market participants using the platform.

It will be challenging to get to 100 per cent. Some people will always want to continue doing things as they have done in the past, but we have successfully onboarded most of the trading companies in the markets where we are live.

You cannot build a network if you offer a limited scope of capabilities. You must start with a minimum viable product, get feedback, and then consistently, quickly, and incrementally improve the value proposition. It is what we call continuous delivery or continuous iterations. We must be careful not to spend time building something our clients don’t need or want. It is why continual feedback is essential.

Building the network goes hand in hand with building the capabilities.

At the same time, we must plan our product roadmap and backlog well. Each time we introduce new functionality, our clients want more. They say, “What you are doing is great, but I also want this and this – and I want it now!”

Can you give an example?

To increase the value for our clients and enable them to communicate and exchange information with companies that are not on the platform, we developed a capability that allows traders to communicate, send and receive data, documents, and instructions in a structured way to non-platform participants. It was complex to develop, but it added considerable value. We are consistently working to improve its functionality.

I saw on your website that the number of legal entities and teams active in the Covantis platform grew by 73 per cent in 2022 and now totals 130. Where are they mainly based?

In 2021, we launched our service in Brazil, focussing on the export market from Brazil. Most of those initial participants were in Brazil.

In 2022, we launched our services in the USA and Canada, onboarding exporters and charterers from those countries.

Now our network consists of entities from all over the world acting in different roles – Fob exporters, Fob/Fob traders, Charterers, and CFR Buyers. Covid has slowed our network expansion, but we are now also focussing on building capabilities for CFR (Cost and Freight) buyers, many of whom are in Asia.

Covantis executed 519 million mt on the platform in 2022, its second year of operation – an increase of 246 per cent versus 2021. What has driven this increase?

As I mentioned, when we first started, we were only active in the export of soybeans from Brazil. We now cover grain and oilseed exports from Brazil, US, and Canada. It has significantly increased our volumes. We will soon be launching Argentina, our fourth origin.

The 519 million mt figure includes the exported cargoes plus the FOB/FOB (Free on Board) inter-trade transactions before the cargo was loaded onto a vessel.

Your website says that your platform executed 74 per cent of Brazilian and 50 per cent of US bulk exports of grain and oilseeds in 2022. Those are significant percentages. How do you calculate them?

We look at how much each country exports and then calculate what percentage of those exports went through our platform. We call this an “adoption share.”

It is indeed a significant adoption number.

How do you define “executed”?

“Executed” refers to the contractual volume nominated to be shipped on a vessel. The ship’s charterer typically sends the nomination to the seller. In some situations, there may be multiple commodity forward purchases and sales where goods are bought for forward delivery and sold through a series of subsequent buyers. It is what we call “strings”. As the network of Covantis continuously expands, many of these contracts can be executed from start to end, i.e. from the first seller/shipper in the chain to the end buyer at the destination.

Why have you not included sugar or palm oil so far – and when will you add them?

We are working with the major players to launch bulk sugar exports from Brazil, hopefully in the second quarter of this year. Palm oil involves an entirely different network of participants which we hope to start covering in 2024-2025.

We aim to cover all bulk agricultural commodities within the next three years. Once we have succeeded, we will look at non-agricultural commodities, not necessarily in bulk.

What are your most significant identified risks? What keeps you awake at night?

The first is the risk of cyberattacks to which any tech company is exposed. We must be exigent and put a lot of effort into security. The first question anyone asks is, “How can I be sure that you will protect my data from other platform users and from outside the platform?”

The second is reliability. There are financial and legal implications if our system goes down if, for example, a Notice of Readiness goes missing. Our platform must be 100 per cent reliable.

Can Covantis add value in terms of traceability?

We can add value by making the document flow more transparent. It helps visibility regarding environmental and social sustainability certificates.

However, most end-buyers want to trace their agricultural inputs back to the farm while our system starts at the loading port. One possible solution might be to partner with someone who already covers the flow from farm to port.

Does Covantis have a role in finance and payments? Does its transparency facilitate commodity trade finance?

Absolutely, yes – and that role will grow!

Most of the international trade in agricultural commodities is conducted under UK law. In October last year, the UK officially introduced into parliament “The Electronic Trade Documents Bill”, which enshrines the idea that electronic trade documents such as bills of lading, warehouse receipts, and promissory notes are capable of being “possessed” and exchanged. Once passed, the bill will provide the legal basis to transition to a digital trade document environment and will likely provoke other jurisdictions to follow suit. We are considering allowing our clients to present electronic documents to the banks for payment and discharge the cargo.

How does Covantis generate revenue – and how do you measure the return on investment for your shareholders?

We charge all participants – including our shareholders – a fee for using our platform depending on their role, the volumes they transact and the value they can extract.

We have been modest in our pricing to encourage adoption. We want to make Covantis the industry standard, but that will take time.

The investment to date has been significant, and our revenues are not yet providing a return on that investment. Building the infrastructure and the network is a front-end load investment that will pay off over the next few years. We believe that our shareholders will see a good return on their investments in terms of money and cost reduction (from using the platform).

ADM, Bunge, Cargill, COFCO, Louis Dreyfus Company, and Viterra are founding members. Marubeni joined in 2022. Have other companies asked to become shareholders – and how would you react if they did?

We are not exclusive to having discussions with other interested investors, especially if there is a strategic fit.

I know that competition is ferocious between the big trading companies, but this is not the general belief among the public. How do you manage the optics of having seven trade houses “controlling” the food supply chain through Covantis?

“Controlling” is not the right word. We use “equal ownership” instead. Covantis is independent of its shareholders, with its own governance, organization and decision-making structure. Covantis is established on a type of governance known as a “shifting alliance model”, where no shareholder can veto strategic business decisions. Our mission is to build a fair and trusted platform.

Covantis was never intended for the exclusive benefit of the large commodity trading houses. It is for all the actors in the value chain, no matter their size or geographic location.

One of the main reasons why the competition and anti-trust authorities gave us approval was that no one has access to data other than their own. There is no sharing of information stored on Covantis, nor can Covantis JV be used as a forum for the prohibited information exchange between shareholders.

We do not favour – or privilege – shareholders above other users, including in our pricing approach.

That’s it, Petya! Thank you for your time and input!

© Commodity Conversations® 2023

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Where does trade execution sit within a trading organisation?

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

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

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

Could you talk me through the various functions?

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

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

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

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

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

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

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

What happens when things don’t go well?

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

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

What do you mean by that?

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

What makes a good operator?

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

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

What do you mean by “contextually”?

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

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

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

Could you give an example of that?

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

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

How important is trade execution to a trade?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Could you tell me what you are doing now?

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

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

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

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

© Commodity Conversations ® 2023

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