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Louis Dreyfus Company is due later this week to publish their annual report and accounts for 2018. The company’s CEO told Reuters that year-to-date results had “significantly improved;” he suggested an upturn after a first half sapped by a soy price-hedging effect and emerging trade tensions. To put that in perspective, 2017 group net income was $225 million, excluding the now-sold metals business, close to 2015’s decade low of $211 million and well below a record $1 billion in 2012.

In the late 1970s, when he was researching his book, Merchants of Grain, Dan Morgan had considerable difficulty in obtaining any information from the “shadowy and unknown” grain trading companies. At that time they did not publish financial results.

With the exception of Cargill, they provided minimal assistance, or none at all, in the preparation of his book.

They had nothing against Dan Morgan; it was just the way things were forty years ago. At that time a US Senator said of the grain multinationals, “No one knows how they operate, what their profits are, what they pay in taxes and what effect they have on foreign policy—or much of anything else about them.”

In 1976 the French magazine L’Expansion, called Louis Dreyfus, “a commercial empire of which one knows nothing.”  Pierre Louis-Dreyfus invited Dan Morgan to lunch in his private dining room. The fish with cream sauce was apparently superb, as was the wine, but the journalist left without learning anything of interest about the company.

Georges André, head of André & Cie—and the original “A” of the ABCD group of trading companies—invited Dan to “an excellent lunch of brook trout in a village restaurant,” but all he got out of it was some historical data. ADM—the new “A” in the ABCD group—was no more open. When Dwayne Andreas became CEO of the company in 1974, one of the first things he did was to eliminate a 27-person public relations department.

Dan was granted a one-hour interview with Michel Fribourg, president of Continental Grain, but later received a letter from Continental saying, “It has been decided that we choose not to participate in further interviews with you.” The company had been in the grain business since the start of the nineteenth century, had never published a company brochure.

None of the trading houses were more obsessed with secrecy than Bunge. Dan Morgan wrote that, “Bunge was a private company about which nobody knew and nobody could speak…To Bunge officials public relations meant keeping Bunge out of the limelight.”

But then the company’s controlling families had a particular reason for avoiding the limelight. Five years earlier, in September 1974 in Buenos Aires, the Montoneros—an Argentine youth movement—kidnapped Jorge and Juan Born, 40 and 39 years old respectively, the grandsons of the founding partner and heirs apparent of the company.

Juan Born was released six months later, in March 1975, and Jorge in June 1975. No details were even given as to the ransom paid for Juan, but the Montoneros claimed that the Bunge family had paid $60 million for the release of Jorge. Although that doesn’t sound like much now, it was a huge sum in 1975, equivalent at the time to one third of the annual Argentine defense budget.

It should come as no surprise that after the kidnapping, the family withdrew even further behind a veil of secrecy. Dan Morgan “did not get near the Hirschs or the Borns, the ruling families of the Bunge Company.” The closest he got was an hour-long interview with the president of Bunge’s North American division. After the meeting, Bunge’s public relations agent told him that he had “neither the time nor the inclination for further discussions.”

Compare Dan Morgan’s difficulties in obtaining information with the ease with which Daniel Ammann gained access to Marc Rich for his book, The King of Oil, published in 2010.  Daniel wrote, “These oil and commodity traders…shared their thoughts and their memories with me, opened doors and documents, and explained the technicalities of trading and financing. They tried to show me the big picture, and they revealed their little secrets.”

But then perhaps Mr Ammann was just lucky in his timing. Up until the series of interviews that formed the backbone of his book, Marc Rich had systematically avoided reporters and was, “considered the most secretive trader of the notoriously furtive commodities trading community. For years, no one had ever seen a photograph of him. The media had to resort to artists’ sketches for their reports.”

Glencore, the successor company to Marc Rich, is now a public company, as too are ADM and Bunge. Cargill and Dreyfus are still privately owned, but both act as if they are publicly quoted; they publish detailed company reports and actively interact with the wider community, whether bond investors, clients, banks or journalists. COFCO, the new giant among the grain trading companies, is Chinese-government owned.

All of the large agricultural commodity companies are now active on social media, and actively engage with NGOs on issues related to environmental sustainability or human rights.    

This is a significant change since 1979, when Dan Morgan wrote, “The companies…stay in the shadows most of the time. Perhaps it was the ancient nightmare of the middleman-merchant that made them all so secretive—the old fear that in moments of scarcity or famine, the people would blame them for all their misfortunes, march upon their granaries, drag them into the town square and confiscate their stocks.”

Agricultural merchants are still being dragged into the town square of public opinion, and they are still regularly being blamed for varying misfortunes, but they are now very much out of the shadows.

I hope to publish my new book, “Out of the Shadows: The New Merchants of Grain” this autumn.

I have just finished reading The King of Oil by journalist Daniel Ammann, a book* that tells the story of the legendary and controversial trader Marc Rich, whom the FT once described as “one of the wealthiest and most powerful commodity traders that ever lived”. I would recommend the book to anyone that is interested in commodities.

Daniel Ammann writes,

Marc Rich, born Marcel Reich, the Jewish boy-refugee from Antwerp, barely escaped certain death in the Holocaust…Penniless and unable to speak a word of English, the young Reich fled (with his parents) to Morocco by freighter and, with a great deal of luck, finally reached the United States.

In 1954, at the age of 20, Marc Rich started in the mailroom at Philipp Brothers, at that time the world’s largest trader in raw materials. He worked his way up on to the trading floor in New York, before moving to head up the company’s Madrid office where he started trading oil. Some observers credit Marc Rich with inventing the spot crude market; previously all oil was traded on long-term fixed-price contracts. However, as Daniel Ammann writes,

“The notion of taking risks was as foreign to him as for the entire company, and this was reflected in Philipp Brothers German motto…” It is better to sleep well than to eat well”. The principle was drummed into employees that it was better to avoid a lucrative deal if the risks involved were high enough that they might endanger the entire company.

Marc Rich felt that Phibros was not aggressive enough. He left in 1974 to set up his own trading company, under his own name, in Zug Switzerland. He chose Switzerland because of the low tax rates and the fact that Switzerland was a neutral country;  at that time, it was not even a member of the United Nations. As Marc Rich himself said, “The only bad thing about Zug is the fog.”

Marc Rich & Co was spectacularly profitable from the start, and by the end of the 1970s had thirty offices around the world. The five partners divided themselves between New York (where March Rich himself worked), London, Madrid and Zug.   

In 1983, however, U.S. authorities charged Marc Rich with evading taxes and trading with Iran during the 1979/81 hostage crisis. Rich fled to Switzerland where he lived as a fugitive for 17 years.

Marc Rich admits buying oil from Iran during the embargo, as well as to supplying oil to apartheid South Africa and bribing officials in countries such as Nigeria. However, he argues that all this was legal at the time. For example, the bribing of foreign officials was legal in the United States until the passing of the Foreign and Corrupt Practices Act of 1977. In Switzerland, it remained legal until 2000. And as a non-US company based in Switzerland, Marc Rich & Co was legally (if perhaps not morally) exempt from the embargoes on Iran and apartheid South Africa.

Bill Clinton officially pardoned Marc Rich on the President’s last day in the White House in January 2001. The pardon was highly controversial, but, according to Daniel Ammann, it was the result of heavy lobbying by Israel. Throughout his career, Marc Rich had given large sums to the country, as well as working closely with Mossad, their security services.

For some, Marc Rich was,

 “The capitalist without a country who makes deals with the enemy. The speculator who creates nothing of his own but only acts as an intermediary while profiting from others. The “bloodsucker of the Third World” as he was once referred to in the Swiss Parliament. The perfidious profiteer, who would rather leave his own country and give up his citizenship rather than pay taxes.”

But Ammann takes a more balanced view. He writes,

“Most commodities come from countries that are not beacons of democracy and human rights. The “resource curse” and “the paradox of plenty” are the terms economists and political scientists use to describe the fact that countries that are rich in oil, gas or metals are usually plagued by poverty, corruption, and misgovernment. If commodity traders want to be successful, they are forced—much like journalists or intelligence agents who will take their information from any source—to sit down with people that they would rather not have as friends, and they apparently have to resort to practices that are either frowned upon or downright illegal in other parts of the world.”

He adds,

“The commodity trade is a hard, capital-intensive business with tight margins. Profits of 2 to 3 per cent are considered quite satisfactory during normal times. It is only during unsteady times…that profits are significantly higher.”

The author describes an interview that he conducted with an ex-Marc Rich trader in a New York bar.

“Ethics,” he laughed. Then he pointed to my Diet Coke. “Your Coke can is made of aluminium. The bauxite that is needed to make it probably came from Guinea-Conakry. A terrible dictatorship, believe me,” he said. “The oil that is used to heat this room probably comes from Saudi Arabia. These good friends of the USA hack the hands off thieves just as they did in the Middle Ages. Your cell phone? Without coltan, there wouldn’t be any cell phones. Let’s not pretend. Coltan was used to finance the civil war in the Congo.” Do the people who criticise our work want to know any of this? Or would they rather just pick on us so that they can feel better about themselves”.

By the early 1990s, the legal case against Marc Rich was taking its toll. A difficult divorce and the death of his daughter added to his woes, and the partners began to worry about their company’s future. Marc’s legendry feel for the markets deserted him, as did many of his key traders. A failed attempt to corner the zinc market left the company with $172 million in losses and the firm was struggling. After at first resisting, Marc Rich finally sold his 51 per cent majority share in the company in a managerial buy-out for an eventual total of $600 million.

The first thing that the new owners did was to change the company name to Glencore. The company went public in May 2011 and now has a market capitalisation in excess of $42 billion. 

Marc Rich himself died on 26^th June 2013 at the age of 78. Despite his pardon, he never returned to the US.

But I leave the last word to Daniel Ammann,

“You must be a lucky man,” I said to the most successful and controversial commodities trader that the world has ever seen. Rich…remained silent for some time. Then, almost as if he were talking to himself, the King of Oil quietly replied, “Sometimes.”

*Available on Amazon

Three Strategies for Success

By Patrícia Luís-Manso – Head of Sugar and Biofuels Analytics at S&P Global Platts

Women are underrepresented in the commodity trading business, in particular in sugar trading. Amongst the top trading houses that control 85 percent of the total sugar traded in the world, less than 10 percent of physical traders are women; and none of them holds a senior trading leadership position. This has led to me to ask whether differences in the way women and men develop and use their career networks could explain this underrepresentation.

Networks are essential to career development because they give access to information and knowledge, as well as to decision makers, influence, endorsement and reputation, emotional support and recognition.

Both male and female traders that I interviewed acknowledge that developing and nurturing career networks matter, and both invest in significant effort in doing so. Based on the interviews, I identified the structure of male and female traders’ networks and their networking behaviours.  I concluded that career networks of men and women sugar traders are similar in terms of size and diversity. Moreover, female sugar traders tend to engage in networking behaviours to a similar extent (frequency) compared to their male colleagues.

However, they differ in other aspects—ways that may be deterring women from accessing and ascending in this profession. Key differences refer to the proportion of high-status individuals and to the proportion of strong ties. Women sugar traders’ networks tend to have less high-status individuals than men’s and to have a lower proportion of strong ties.

Moreover, even though female sugar traders engage to a similar extent as their male colleagues in professional activities (conferences and seminars, for example), and in community projects, other differences came to surface. First and foremost, female sugar traders engage in activities that increase internal visibility less often than their male colleagues. This could be going to lunch with their supervisor, or being on highly visible committees at work. Instead, women tend to engage more often than their male colleagues in maintaining contacts and socializing activities. 

Based on these findings, how can women close the wide gap in the trading profession? I recommend three strategies.

STRATEGY ONE: Nurture strong ties to strategic partners. 

Female sugar traders’ networks have a smaller proportion of very strong ties compared to a male network. In today’s highly connected world, weak ties may be less relevant for career advancement.

The intensity of the relationship with other individuals in the network does matter enormously as a source of social capital. For career advancement, resources like endorsements, validations and sponsorships that come from emotionally strong ties may prove more effective for female career advancement than access to novel information from weaker ties.

STRATEGY TWO: Participate more in high-visibility activities.

Other studies have highlighted the fact that women need high visibility to build legitimacy. Excellent performance and solid human capital are necessary, yet not sufficient, conditions for women to advance to managerial and leadership positions.

STRATEGY THREE: Be more selective in terms of networking: quality over quantity.

Time is limited and women already engage in several networking behaviours. The key is to become more selective, and to think more about impact. This means that every time you participate in a network you should be prepare in advance to maximise impact.

Note: These findings are based on my final project presented as part of the Diploma in Organizational Leadership from the Saïd Business School at the University of Oxford (October 2018) The title of the assignment was Social capital and career development: is there a gender gap? Evidence from the Sugar Trading industry.