Posts

Good afternoon, Stephen, and welcome to Commodity Conversations. Could you please tell me a little about yourself, Czarnikow, and CZ App?

I’ve been involved in sugar since joining Czarnikow in 2008. At that time, we operated as a traditional sugar trading house, buying FOB and selling C&F. I was fortunate enough to join a highly regarded sugar analysis team. We had Toby Cohen, who led the team and is now at ASR, and Peter de Klerk, who is now at the ISO. It was a great place to learn.

Over time, Czarnikow has evolved. We have de-risked by moving away from the traditional trade house model. We no longer buy FOB to sell C&F but instead look to build long-term relationships with participants throughout the supply chain. For example, we offer services such as vendor-managed inventory, financing support and procurement assistance, working in partnership with many of our customers. The other significant change over the last 5 to 7 years is that we no longer operate solely in the sugar industry. As a business, we now provide a range of supply chain services across a broad spectrum of goods which are used by the food and beverage sector.

CZ’s analysis team has evolved, too. We strive to be as open as possible, sharing our thoughts online. We make data and analysis available for free on our platform, CZ App. We also offer subscriptions to our sugar analysis to help customers manage their price risk.

Let’s get to the heart of the issue: How do you measure sugar consumption?

It’s the most challenging job we face as sugar analysts. Even on an individual level, people often don’t know how much sugar they consume. If you ask me how much sugar I ate yesterday, I couldn’t tell you. I have no idea how much sugar I consume, and I’m in control of what I eat. This is true for everybody.

It’s partly because sugar appears in foods you wouldn’t expect, but also partly because people are poor at recalling what they eat.

And then, in some cases, when extensive scientific studies ask people to keep food diaries, individuals often under-report. Perhaps people sometimes feel embarrassed about what they’ve eaten over the course of a week.

The problem worsens as you gather more data, which is why a top-down approach is also challenging. You can often see how much sugar a country has produced and how much has been imported or exported, but you can’t really see how much is in a pipeline. Is it a large pipeline with a lot of stock, or a smaller one?

You can’t see how much is being spoiled or lost, or if the sugar quality is deteriorating, from a top-down perspective.

In some countries, you can be fairly accurate. For the UK, consumption is about 1.7 million tonnes, which might be accurate within roughly 100,000 tonnes, but there is no absolute precision in that figure. This makes it challenging to monitor changes in consumption in real-time.

You usually only realise that a change has occurred in consumption after a few years, when either your models break, or the sugar price behaves unexpectedly.

Some statisticians use sugar availability as a proxy for consumption. They consider production, imports, and exports to estimate consumption. However, you don’t know how much sugar is wasted or discarded in yoghurts, bread, or pastries, and similar products.

At CZ, we’ve always made the choice to assume that sugar has been consumed when it’s transformed into a finished good, for example, when it is added to a chocolate bar. This means we don’t need to track finished products across borders. However, it’s clearly not the case that the sugar is then consumed, because food is often thrown away.

People say that 20 to 30% of all food is wasted, with half of this happening at the retail or home level. Do you consider this when estimating consumption, or do you think, well, it’s gone, so it doesn’t matter if it’s wasted or consumed?

The latter. We say, okay, it’s gone. It’s been turned into something which can be eaten, so whether it is eaten or thrown away, that sugar has disappeared. Again, this is for simplicity. I don’t want to spend time calculating food waste rates for different countries.

Is global sugar consumption increasing, and, if so, at what rate?

When I started in 2008, Peter de Klerk told me that there was a rule of thumb that sugar consumption increased by 2% annually, with 1% attributed to population growth and 1% to wealth growth. If sugar prices became extremely high, or sugar becomes unaffordable, or the world goes into recession, then you can reduce that to one per cent.

In years when the sugar price is very low or economic growth is very high, you can raise it to 3%.

That rule of thumb held up well until about 2014, remaining effective throughout the high sugar prices of 2010 and 2011.

From 2014, something changed, coinciding with the introduction of the Mexican sugar tax. It received significant publicity, and it was around that time that greater attention was paid to whether sugar or fat was the dietary villain. Until the early 2010s, fat had been the focus, and everything was low-fat. Then, in the mid-2010s, the emphasis shifted, and sugar began to receive increased scrutiny.

Our statistics show that, from 2014 onwards, global sugar consumption has remained stable on a per-person basis. At best, total consumption has been growing at a rate of 1% per year, in line with population growth; at worst, when prices have been high or during COVID lockdowns, it has been below that rate.

I imagine there are many reasons for that.  Are sugar taxes one of them?

Sugar taxes, by themselves, have not caused a significant shift in consumer behaviour.

When sugar taxes are introduced, the prices of soda and chocolate bars increase. It has a short-term effect on consumer spending, but within a few months, consumers become accustomed to the new price, and their behaviour returns to its previous state. If there’s any effect from the tax on the demand for sugar, it’s short-lived.

Taxes influence consumption when manufacturers reformulate their products to avoid paying the tax. The UK implemented a tiered sugar tax based on the sugar content in a soft drink. Most manufacturers reformulated their soft drinks to reduce sugar and substitute it with alternative sweeteners, leading to around 100,000 tonnes less sugar consumption. The tax led to lower consumption, but not through changes in consumer behaviour.

The media has had an impact, as consumers are now better equipped to understand product labels and the contents of different products than they were 10 or 15 years ago.

In 2010, if I had stopped a consumer in most advanced economies and told them that there was sugar in ketchup or in some bread, most would have been quite surprised. Now, if I stop a consumer in most countries and say, ‘Did you know there’s sugar in ketchup?’ they would probably roll their eyes and say, ‘Yes.’

There has been a rise in awareness of the sugar content in various foods, prompted by media coverage and taxation. It has influenced behaviour.

In 2014, Czarnikow published a report indicating that the per capita consumption in the UK peaked in 1957 at 53 kilograms per person, declined to 48.5 kilograms in 1970, and further dropped to 35 kilograms in 2014. Do you still endorse those figures, and what has changed since then?

I believe those figures are generally accurate. We have been involved in the UK sugar market for over 160 years, which has allowed us to gather extensive data on the country’s sugar industry. Sugar consumption in the 1950s, 1960s, and 1970s was high, mainly through sugar in tea, home-baked cakes, and biscuits, rather than in processed foods. Today, sugar is primarily consumed through processed products.

The decline has persisted since 2014. The UK population is approximately 70 million, with an annual sugar consumption of around 1.7 million tonnes. This results in a consumption of roughly 25 kilograms per person.

In countries such as the United Kingdom and Australia, sugar intake has been falling for several decades and is approaching 25 kilograms per person.  Consumption in developing economies is increasing rapidly and should help offset this decline. They are approaching 25 kilos per person from the other side. For example, in India, sugar consumption is rising to the mid-20s.

In general terms, the eight billion people on this planet consume about 180 million tonnes of sugar. This amounts to 22.5 kilos per person annually.

There is still potential for China, India, Indonesia, and Pakistan to increase their consumption, but if you had asked me 20 years ago, I would have said they could reach 30 or 35 kilos on average; now, I believe 25 is a more realistic estimate.

Per-person consumption is declining in Western countries. Is the EU an exception?

The EU27 has a population of 450 million people and a consumption of 15.5 million tonnes.  It works out at 34 kilos per person. We may be seeing a decline in Northwest Europe that is being offset by Eastern Europe. Or the figure may reflect the high number of processed products made in the EU, which are then exported. For our statistics, that would count as European consumption, even if those products are consumed elsewhere. However, it is not clear.

What about the US, where you have sugar and HFCS? Is total per-person sweetener demand declining?

According to the US Department of Agriculture, yes. They believe that per capita consumption of caloric sweeteners, such as sugar, HFCS, and other syrups, peaked in 1999 at 157 pounds per year and has since declined to 121 pounds in 2024. Interestingly, through the 1990s, sugar consumption was stable, and the growth in sweetener consumption was primarily due to increased HFCS use. Since 2000, the use of HFCS has declined, but sugar consumption has shown a slight recovery. So American consumers are eating less sweetener, but more of that sweetness comes from sugar. President Trump’s recent announcement that Coca-Cola could use more sugar and less HFCS may continue this trend.

In my Sugar Casino book, I stated that the Brazilian per capita consumption was 62.5 kilos, the highest in the world. Was that figure accurate, and if so, why is it so high?

We currently estimate it at 46 kilos per person, down from 60-65 kilos 20-25 years ago. Brazil has always been among the highest per capita consumers.

This issue highlights our inability to accurately monitor consumption. I find it hard to believe, but that is what the statistics indicate. Other analysts have similar figures.

Per-person sugar consumption continues to decline in the developed world, but could it be that wealthier individuals are eating less sugar and exercising more, while less affluent people are consuming more processed foods, exercising less, and living in food deserts where local shops only stock soda and snacks? Is the average per capita consumption figure hiding significant variation across the population?

It’s possible. I haven’t seen any statistics that break it down by income or similar metrics. However, I can imagine that if you have a higher income and more free time, it’s easier to prepare meals from scratch using ingredients. Therefore, you’re more in control of your sugar intake compared to consumers of processed foods.

Has the slowdown in consumption growth impacted production growth? Are banks and international agencies less inclined to finance sugar production facilities than they were 20 years ago?

Not to my knowledge.

However, global sugar production has remained relatively stable for nearly 15 years. We have been producing about 175 million tonnes of sugar, give or take 15 million tonnes each year. The highest was 189 million in the 2017/18 crop year, and the lowest was 160 million. During this period, fluctuations have occurred in yields, acreage, and other factors; however, the overall trend has remained relatively consistent. Production has increased in Brazil, while it has decreased elsewhere.

Meanwhile, the world’s population has grown by a billion people, and global trade has expanded.

To what extent is ethanol responsible for that?

It has made a difference in some countries. India, for example, can now redirect 5 or 6 million tonnes of sucrose into ethanol production instead of sugar. However, Brazilian cane production has remained steady at around 600 million tonnes for a decade.

You might also argue that having 175 million tonnes of sugar production 15 years ago was simply too high. We faced overcapacity, and it took 15 years to eliminate it.

GLP-1 drugs appear to not only suppress appetite but also shift dietary preferences towards high-fibre, low-sugar foods. How will they influence sugar consumption? 

GLP-1 drugs diminish sensations of hunger and curb impulsive human behaviour. One study showed that people on Ozempic were 30% less likely to become addicted to nicotine. Another found that individuals on GLP-1 drugs have a lower risk of developing alcohol use disorder. From a sugar perspective, this means people binge eat less and prefer foods that are lower in calories.

It doesn’t seem to work only through metabolism. It also appears that these drugs involve the brain’s reward centres.

Weight loss can have a puritanical streak. Some argue you’re approaching weight loss incorrectly if you depend on GLP-1 drugs. They contend that one should eat less and exercise more, rather than relying solely on medication.

However, for at least the last 40 years, the standard advice for overweight people has been to eat less and exercise more. It is good advice, but just because it is good advice doesn’t make it easy to follow. Obesity has increased significantly over time. Yet, we now finally have a drug that seems to overcome the willpower barrier.

With patents expiring in some countries, it might be more economical for health authorities to provide free GLP-1 drugs to obese individuals rather than covering the costs associated with obesity-related health complications. I also observed that one company is developing a pill instead of an injection. I expect people will favour pills over injections, which could boost their usage.

We will probably reach a stage where the drugs become significantly cheaper, and you will be able to take them in tablet form.

The UK’s National Health Service estimates that obesity costs £11.4 billion each year. However, determining the exact figure is challenging due to related health conditions. Being obese doesn’t necessarily mean you will become ill, but it does raise the risk of developing type 2 diabetes, heart failure, joint problems, and other health issues.

There are an estimated 10 million obese adults in the UK, so providing these drugs free of charge would likely become more cost-effective as GLP-1 prices fall. I wonder if any government will implement this, but the cost-benefit analysis suggests they should. It’s worth considering, at least, whether patents should be bought out and these drugs made widely accessible.

Have you lowered your sugar consumption forecasts because of GLP-1 drugs?

We’ve made a small allowance for some countries, but there are still many aspects of GLP-1 drugs that we remain unaware of.

We estimate that around 5% of Americans are on GLP-1 drugs at any given time. However, this figure is fluid, as people start and stop them. We also know that the US is the world’s largest drug market, making up about 50% of global drug sales.

However, obesity is not just a problem for affluent countries. There are other countries, such as Malaysia, for example, which have high rates of obesity and type 2 diabetes.

Predicting the adoption of these drugs is difficult. Will we see a future where 10% of most populations are on them at any point in time? It’s possible. However, it’s equally likely that they are not widely used for some reason.

I haven’t seen any solid statistics indicating that when someone is on a GLP-1 drug, they consume a certain percentage less sugar. That research doesn’t exist. All we know now is that there will be an increased uptake of GLP-1 drugs in the future, and they might have some negative impact on sugar consumption; that’s about it.

However, we can’t ignore it. We must make some allowance. But all I know is that whatever allowance we make will be wrong. So, it’s just an indication now, a guide to what we think is happening.

We have reduced our US sugar consumption figures by 1% in 2024 and by 2.5% in 2025.

We will adopt a similar approach for Western European countries and Australia from 2025. If GLP-1 generics are produced in India and China at considerably lower costs within the next five years, we can then begin implementing reductions in consumption more widely across the globe.

A final consideration is that there are individuals who are superusers, highly dependent on processed foods. For example, 20% of consumers account for around 65% of American ice cream and chocolate sales. If you consume a lot of ice cream and chocolate, you may be overweight and more likely to be on GLP-1 drugs. If five per cent of the US population takes a GLP-1 drug, they could represent more than 5% of US sugar consumption. It’s not a direct one-to-one relationship. Even with a relatively small number of GLP-1 users, their impact on overall consumption can still be substantial.

Thank you, Stephen, for your time and input.

© Commodity Conversations® 2025

A Conversation with Joe Busichio

Joe recently retired from the sugar business after nearly 50 years. I connected with him over a Zoom call from his home in New Jersey. For my first question, I asked him how he got into the business.

I landed a job by responding to a Help Wanted ad in a newspaper that read, “Trading Assistant Wanted – No Experience Necessary.” I graduated in June of 1976. I hadn’t found a job after graduating from college, so when I saw this ad, I thought, ‘Well, I graduated with a BS in business and took some economics and stats courses, and Trading Assistant sounds like something that might utilise those courses.’

I called, and the receptionist answered. It was a retail office of Shearson Hayden Stone (which no longer exists) in an upscale New Jersey shopping mall that’s still there to this day. I now live only 25 minutes from there.

The office was all stockbrokers, except for one corner room with a bunch of guys trading something called “commodities.” These guys were trading their own stuff, making money for themselves, and the commissions went to Shearson. They also had a few small clients.

I interviewed with them in November 1976, and the interviewer asked me how much I wanted to be paid. I told him I could start at $165 a week, and he replied, “I’ll start you at $175 a week.” And to save you reaching for a calculator, that’s about $9,000 per year.

I started the first business day of 1977, and three months into the job, they gave me a $1,000 bonus. I thought, well, this is a pretty good deal.

My role involved managing and tracking their trading positions, as well as answering phones when clients called. I didn’t have my Series 3 license at the time, so it was more of a clerical-type job and an opportunity to learn the business. When I got my Series 3, I was able to start taking and handling customer orders, passing them down to the floor. We had an open outcry system at the Exchange, at the old NYBOT.

What was the atmosphere like at that time? Was it frenetic?

Anything but. The big trade at the time was the London / New York sugar arbitrage with the London contract trading in sterling.

The daily volume in the sugar number 11 market was around 4,000 to 5,000 lots. I recall the day in 1979 when the No. 11 open interest surpassed 100,000 contracts for the first time.

To put that in perspective, what’s the open interest now, and what’s the average trading volume?

The open interest is currently around 900,000 lots, but it usually runs at around a million. Daily volumes average between 75,000 and 125,000 lots, but can reach 250,000 lots on busy days. We have seen some bigger days. The daily trading volume first broke 300,000 lots on September 12, 2018, when the contract traded 419,822 lots. The current record daily trading volume is 542,699 contracts, set on February 12, 2020.

One high-volume day was when the Copersucar export terminal caught fire in October 2013. The fire caused extensive damage to the terminal at the Port of Santos, Brazil, destroying six warehouses and a large amount of raw sugar.

I cannot recall the volume that traded when the Cubans declared force majeure in June 1993, following the 1992-93 crop, which fell to 4.2 million tons—a sharp decline from previous years. The poor harvest highlighted the deteriorating economic conditions in Cuba during the “Special Period” that followed the collapse of the Soviet Union.

I’ll tell you a funny story about that. The market went ballistic. It must have opened 100 points higher at the time, and one of the floor brokers called me. I love this fella to this day, but the floor traders knew very little about the market themselves. They traded based on emotion, much like the movie Trading Places. That movie hit it on the head.

The floor trader called me up and said, “I hear the market is up because Cuba has declared soupe du jour. “Do you mean force majeure?” I asked.  And he answered, “Yeah, right, whatever.”

That is what this market misses most of all, Jonathan.

The characters?

The human interaction and the people who made it such a fun place to be on a day-to-day basis. And that is very much gone for good. Now it’s methodical.

I know more about my clients’ personal lives in the sugar business than I would in many other industries. I’m not sure if you experience the same personal connection in different sectors. I have always been in the commodity space, and specifically sugar. Still, I have found the people I’ve dealt with over the years to be some of the most honest, forthright, and personable individuals, very bright, and eager to talk, not just about business.

Can you walk me through the transition from open outcry to electronic trading? What impact did it have on your role and the market as a whole?

It certainly diminished our role. When I started, everything was over the phone. The market would move, and you would make a series of phone calls to tell the clients the market had moved in some way, shape, or form. If we were doing the London / New York arbitrage, we’d be on two phones, one to the London floor, one to the New York floor, barking orders down to the runners or the clerks on the two exchange floors.

I was at Prudential Financial when ICE switched to electronic in 2007. We offered every client direct market access through a trading platform where they would trade directly into their own account. About half of our clients took advantage of it, but several of them chose not to use it. They thought the risk was too much. They were happy to pay brokers like me a voice execution fee to handle their orders. And if we made an error on one of their orders, well, it was our error. And we had to deal with it.

We have a back office that manages and supervises the direct activity, but the voice activity business keeps us busy enough during the day.

I can’t speak for every FCM or bank out there, but I would say that at Macquarie Group, at the sugar desk, 70–75 per cent of the business we did on a clearing basis or execution was direct market access.

Do you also talk to the clients who execute directly?

Yes, we keep them informed. I call them and they’re happy to chat. We receive good feedback from wherever they are in the world, and, unless they’re sharing something confidential, we’re able to share that information with others. Within legal limits, obviously.

People tell me that algorithms now handle most of the execution on the electronic platform. Is that correct?

A lot, yes. These systems have emerged over the last 5-10 years.

To what extent is the market now computers trading with computers and AI trading with AI?

We’re certainly seeing a diminishment of the human component in these markets. We have often been asked the question of what percentage of the daily volume is fundamental, commercial, hedge fund, or algorithmic. So far, we haven’t got an answer. However, others have estimated that on any given day, 70 per cent of any market’s volume is computer-driven.

Was ICE’s purchase of NYBOT a turning point for the sugar futures market?

The switch to electronic trading for the No. 11 Sugar futures market, which took place after ICE acquired NYBOT, changed everything. It opened the market to a broader range of participants and enabled faster trade execution and order matching compared to traditional open-outcry floor trading, thereby reducing transaction costs.

However, going electronic meant longer trading hours. When I started in 1977, the sugar market was open from 8:30 to 12:30, or from 9:00 to 1:00, so you’re talking 4 hours a day.

Once it became electronic, ICE wanted the sugar market to be open 23 hours a day. They finally compromised. At one point, it was open 13 hours a day, and now it’s open 9.5 hours. Our days have become exceedingly long.

When I first started in the business, the commission rate was $20 round-turn. What are they now?

When I started, commissions were fixed (non-negotiable) at three sugar points, or $33.60, round-turn. But when you’re talking about a daily volume of 4,000 or 5,000 lots, and a client’s trading 50 or 100 lots, that’s a busy day for that client.

Clearing rates are now negotiated on an individual basis and vary from client to client, depending on their anticipated volumes and the services provided. Rates generally range from $0.75/side to upwards of $4.00/side.

Clients sometimes pay more in exchange fees than they do in commissions, which never sat well with me in terms of the value that the Exchange provides compared to the value that brokers like me deliver to a client.

When the floor was active, you could get the feel of the market just from the noise coming over the phone.

Right. You’d know who was bluffing, who had a real order, who was doing what, etc., because you knew the characters and how they traded. You also knew who they traded for, so you’d get a feel for the type of orders they had. You would be able to guess if they had a massive scale-down order.

The locals made money hand over fist back then; they did themselves a disservice when they sold their souls to ICE. They all received cash upfront, but the transition to electronic trading ultimately ended their careers. Many tried to trade for themselves, but not being on the floor made it challenging.

When the floor disappeared, the training ground vanished as well. Many of the best traders I have met, whether in trading houses or funds, began their careers on the floor.

Do you think that’s what younger people most undervalue, the human element?

I do. People don’t talk as much on the phone anymore, and you can’t get the sense of someone’s view or feeling in an electronic chat room. The absence of the human factor in these markets has significantly changed them. But you can’t unpeel an egg, nor can you un-ring a bell. It’s here to stay, but I believe it’s to the detriment of the industry.

I learned more from talking to people over the phone than I ever did in a chat room. When you speak to someone, you have the opportunity to learn more about the market and their thoughts on it.

That’s why conferences like the Dubai conference are highly beneficial. You’ve got to interact with people. It’s still a relationship business.

What was the best day and the worst day of your career?

The best day was when I got the job. Far and away. As I said, it set me on a path that I never would have envisioned, either when I was growing up or even in college.

The worst day of my career was 9/11. I live in New Jersey, so I took the PATH train into the World Trade Centre each day. That day, I came off the PATH train about 15 minutes before the first plane hit.

I got off the elevator at the old Prudential building on 1 Water Street, and somebody said, “Oh, a plane just flew into the World Trade Center.” At that time, we just thought it was a private plane that had gone off course. We watched the rest of the day play out on television as the Exchange was down. Communications were cut. My daughters were old enough to know that I worked in New York, having visited the office a couple of times when they were young. However, there was no way to get a message to them that I was okay. It was brutal not knowing if you’re gonna see your wife and children again.

The world changed that day in ways that we could only contemplate. To this day, I have not visited the Ground Zero Memorial. It’s too personal. We’re coming up to the 25th anniversary of that tragic day next year, and it just hits too close to home. Too raw.

And your worst day professionally?

It’s all ancient history now, so I can tell you a story about how I was called to testify before the CFTC just a couple of years into my career.

Our London brokers introduced us to a client of theirs in Switzerland, who, unbeknownst to us at the time, turned out to be the Colombian coffee cartel. They took a liking to me, and my boss at the time said, “You stay on the phone with them, and I’ll give you a dollar for every lot they trade through us.” I didn’t know a thing about coffee, and to this day, I still know only a little bit (LOL). We started doing 50 or 100 lots a day, and I’d go home and tell my dad, “Oh, I made $100 in commissions today.” And he went, “Oh, that’s good.”

And then they started trading multiple hundreds, and one day they traded over 4,000 lots, where they took the market from limit down to limit up. I went home that day and told my father, “Dad, I made $4,000 in commissions today. “I remember to this day, his exact words to me were, ‘Is this legal?’

To cut a long story short, the CFTC investigated, and I appeared before a CFTC committee, where they asked me numerous questions. It went on for about an hour and a half, and I’m thinking, ‘I just got this job two years ago, and I’m about to lose it over this.’

Traded volumes have increased massively, but some argue that extending the hours meant that physical traders were no longer concentrating on the futures market, and therefore, trading less.

A commercial client will do whatever it takes to cover his physical business and some jobbing along the way. Extending the trading hours only benefits the Exchange because computers drive so much of the volume, and computers don’t eat or sleep.

The longer you keep it open, the computers keep running, the Exchange generates more volume, more volume is more exchange fees, and a better stock price.

For us, it doesn’t matter. The commercials are gonna do what they have to do. They’re not going to trade more just because they have more market access.

Options trading in agricommodities was illegal when we first started in the business. Not many young people believe me when I tell them that. But do options trade a lot now? How do they contribute?

Most of the volumes are related to volatility, involving market maker-type activity that tries to buy cheap and sell expensive volatility.

The trade guys use options a little, but not as much as, for instance, the market makers and or the funds. The funds are significant players in the options. The trade to a slightly lesser extent.

With a daily futures volume of around 100,000 lots, you might have an option volume of 20 – 30,000 lots on top of the daily futures volume.

Are there still retail traders, doctors and dentists?

They’re probably trading through CTAs, Commodity Trading Advisors. During my time in the business, we’ve had only one or two retail clients. They’re not worth our time. They require too much handholding and take you away from the core of our sugar business, which has been 90 per cent commercial over the years.

The largest traders now are hedge funds, whether they’re macro funds driven by fundamentals or those using algorithms.

Can you explain to the young audience what a CTA is?

A Commodity Trading Advisor is a broker handling small retail-type orders. CTAs are regulated by the Commodity Futures Trading Commission (CFTC) in the U.S. and must register with the National Futures Association (NFA). They provide advice directly based on clients’ trading accounts or more general market insights. Their trading strategies can be technical, fundamental, or quantitative in nature.

They’re significant. The funds and the trade houses track their activity because they are significant players in the markets.

You know as well as I do that fundamentals don’t change day to day. You have the odd event, but the technical picture is changing constantly, and many of these guys are now driven by technical trading.

What about the index funds? Are they still massive?

Not as massive as they once were. I’ve been plotting the Commitment of Traders report every Friday for more years than I care to remember, and I seem to recall that the largest index fund position was a net of 250,000 or 300,000 long. Now it’s probably 130,000 or 150,000 lots.

A discussion has arisen within the industry because it appears that the Commitment of Traders index fund does not strictly represent an index fund. An index fund is a relatively static investment, but you see these big week-to-week swings, which makes me think that there’s trading going on under the index fund category that is not strictly an index fund. The index fund position should be relatively static and only move significantly on the re-weight or rebalance when money comes in or comes out of a particular market. However, there are some significant changes week to week, which make me think it’s not purely index activity.

We’ve discussed hedge funds and AI, but are trade houses still significant?

Still significant, but certainly not as much as they were when I started in the business. Over the years, the importance of the trade houses has diminished because many of their clients, the producers or end-users, now have their own futures trading accounts. All that business used to flow through a trade house. The trade house would then push it directly to the floor or upstairs brokers like me.

It began with Copersucar in the late 1990s, when they started doing their own hedging, and has grown since then.

The increase in speculative money in these markets has been, in many ways, unmanageable. The money overpowers the physical markets and the trade houses. That has been the most significant change in the markets over the past half-century – the amount of speculative money.

In my last couple of years in the markets, everybody was excited about high-frequency trading, arguing that it was making it harder to hedge.

HFT firms spent millions of dollars to install fibre optic lines and locate their servers closer to the various exchanges to gain nanosecond advantages for their algorithms.

The Exchange labels them as liquidity providers. I think they’re more liquidity takers because they’re scalping for ticks. And their activity sometimes comes perilously close to “spoofing” when their trading is orders quickly going in and out of the market.

Are they the modern-day equivalent of locals on an exchange floor?

Yes, but they operate at the speed of light. How can you beat them?

Do they help or hinder price discovery?

They hinder it. Over the last six months, you’ve had times where the market has gone up 50 points one day and down 50 the next. You cannot tell me the fundamental picture turned bullish one day and bearish the next. It’s technical.

Due to algorithms and high-frequency trading, these movements tend to amplify and feed on themselves, resulting in distortions.

I recently spoke with a trader who mentioned that three players — Copersucar, Raizen, and Wilmar — dominate the physical sugar market. He argued that they have too much market power in the physical flows.

I don’t think a producer would have that much influence on a market. Producers are price takers rather than price makers. On the trade house side of the business, Alvean and Wilmar are probably the biggest, followed in no particular order by ED&F Man, the Sucden group, Louis Dreyfus, and COFCO.

What qualities make for a great sugar broker, and how have those changed over time?

As we mentioned earlier, the role of brokers has diminished due to the advent of electronic trading and direct market access. For a broker, again, it’s about relationships. It involves establishing a rapport with a client, earning and maintaining their trust.

I would somewhat jokingly tell the young people who work with us that Rule Number One is that the client is always right. For rule Number Two, when the client is wrong, go back and read rule Number One (LOL).

What about physical traders – how do you envisage their future?

They will always be needed, but their job has not gotten easier over the years.

The trade houses have significant overheads, including offices and personnel spread across the world in various producing and consuming countries. Their profitability has been pressured over the years, as they no longer have the same level of market control as they once did.

Back in the day, the trade houses had greater control over the market. They had all the producers and end users feeding their business through them. They saw their books and knew if an end user had to buy or if a producer still had a lot of pricing to do. They had a broader perspective on the world, including the pricing to be done one way or the other. Now the trade houses have been overrun by speculative money and algorithms.

We have in common that we both wrote daily market reports.

My daily report was a labour of love for 20 years. No one has yet taken up that mantle. I hope they do, because I got so many emails when I left asking, “Is somebody going to write that report because it’s the first thing we read when we wake up in the morning?”

I enjoyed writing it. It helped me organise my thoughts for the next day. I’m sure you found the same thing. When you start writing something, everything coalesces for you a little bit better, rather than just turning off the machine and thinking about it the next day.

What would you have done differently at the age of 22 if you knew then what you know now?

As I mentioned earlier, I stumbled into this business by accident, but it’s taken me to places I never would have imagined travelling. I never would have even heard of Dubai, let alone been to Sao Paulo, Hong Kong, or Singapore.

I’ve met an incredible cross-section of people over the years that I have truly admired for their honesty and their willingness to work hard.

I wouldn’t have chosen another career path. The last few years have been challenging. The trading hours have gotten a lot longer. Working at a bank has been a revelation, good and bad. But, no, from a career perspective, I’ve enjoyed 98 per cent of this business.

Would your 22-year-old self be proud of what you’d achieved?

Absolutely. I received many nice emails when I retired. I’m proud of what I’ve accomplished, and when I hear from people I respect and admire who take the time to call me or send an email to congratulate me, it truly means a lot to me.

How do you see the sugar market evolving in the next decade? Will trading become even more automated, or is there still a place for human relationships and experience?

The trend over the years has been an increase in computers and a decrease in people. I think it will plateau. It may have already plateaued.

When computers trade with computers, they’re all running similar programs and using the same data. The computers require commercial participation. This involves the guys who will place resting scale orders, resting buy orders, or spreads that they can then trade against, with, or whatever.

I don’t think it’ll go much beyond the blend that we have right now, but we’re never going to turn back the clock to the days when the commercial players dominated the market. The commercials must continue to react to price movements driven by managed money. As we have already discussed, there has been a sea change over my career – speculative money has overpowered all these markets.

Thank you, Joe, and I wish you a long and happy retirement!

© Commodity Conversations® 2025

 Join the International Commodities Show in Geneva, 6 November 2025

The world of commodity trading is coming together in Geneva this November—and you’re invited. The International Commodities Show is more than a conference: it’s a movement to bring the whole commodity ecosystem—energy, grains, metals, and all trading sectors—under one roof during Geneva’s legendary Commodities Week.

What Is Commodities Week?

Commodities Week is the annual gathering for the world’s leading traders and bankers, featuring a range of exclusive, “invite-only” events in Geneva. Until now, access has been limited, especially for emerging talent and students, despite high demand for new faces in the sector. The International Commodities Show sets out to change that—making the industry more inclusive, affordable, and open.

Our Vision: A Connected, Democratic Marketplace

This event is built on three pillars:

• A vibrant networking space where all corners of the commodity world meet—making connections, exchanging ideas, and sparking deals.
• A platform for discussion on careers, trading strategies, and the future of the market. Whether you’re a student or a seasoned veteran, discover how industry leaders are shaping talent pipelines, workplace culture, and career development.
• A celebratory gala dinner open to sector professionals, with an atmosphere designed for genuine connection—not just business card exchanges.

Commodity Conversations with Jonathan Kingsman

During the event, Jonathan Kingsman, author and founder of the acclaimed Commodity Conversations series, will host a compelling series of discussions with top professionals. These sessions will focus on the latest trends and challenges facing the commodity sector, as well as explore how trading companies may evolve in the near future. This unique opportunity offers attendees direct insight from one of the industry’s most knowledgeable voices.

Who Should Attend?

• Young professionals and students: For just CHF 50 (CHF 30 for students), step into the heart of global trading, meeting top names usually out of reach.
• Industry veterans: Find fresh perspectives, reconnect with your network, and help shape the next generation through workshops and idea-sharing.
• Trading companies, HR & finance teams: Present your programs, discuss AI and technology’s impact on jobs, and showcase career opportunities.

Capacity is capped at 400-500 for the day; our much-anticipated gala dinner and afterparty are limited to 150-200 guests, so booking soon is essential.

More Than Just a Career Fair

While career development and industry trends will be front and centre, this is not a typical job market event. Expect high-level discussions on:

• The influence of geopolitics on global energy and agri trades
• How artificial intelligence may reshape the sector
• The future of work and talent in commodities
• Company presentations on career pathways and growth
• Universities showcasing top master’s programs in the field
• Personal career stories from senior industry leaders.

Why Geneva?

Geneva is the capital of international commodity trading—by joining this event, you’ll tap into a network that drives 35,000 Swiss jobs and fuels global trade. Meet leaders from the world’s trading powerhouses, connect with peers, and take part in a truly democratic event celebrating Geneva’s unique spirit.

Final Thoughts

The International Commodities Show is a celebration of what makes this industry dynamic, diverse, and forward-thinking. Don’t miss your chance to be part of the next chapter for commodities. Book your ticket today, and be ready to join us on November 6th at the InterContinental Genève.

Be part of something greater—connect, learn, and help shape the future of global trading at Geneva’s International Commodities Show this November.

 

Jordi Costa joined Bunge in 1999 and is Vice President of the company’s European Softseed value chain. We discussed his career over lunch in Geneva.

How did you get into agricultural commodities? Do you come from a farming background?

I’m a civil engineer. I studied bridge design and construction, and worked in the field for five years. I designed three bridges; they were built and are still there. I enjoyed the engineering work, but my future father-in-law introduced me to the agri-commodity world and told me about an opportunity at Andre & Cie in Spain. He suggested I try something more dynamic than engineering!

Andre was interested in my math background. I accepted their offer and worked on positions, risk management, and options. In engineering, we frequently encounter second derivatives and nonlinear models, particularly in the field of structural vibration. Derivatives were pretty easy for me. I began with the technical aspects of the business, including exotic options, regular vanilla options, and so on. A few months later, I moved to Rome, Italy, where I worked for Pedro Ritter.

I recently spoke to an ex-trader, and he said he would only employ engineers if he were still in the business.

Engineers have a practical mathematical background. As traders, we must make decisions based on imperfect information. Engineers do that all the time. They have incomplete information, but must build things with safety nets. They must consider the worst-case scenarios and assess the associated risks. In the case of a bridge, it might be due to a severe flood, an earthquake, or a ship colliding with it.

You must make quick decisions in commodity trading, whereas I imagine you’ve got more time to think and analyse in engineering.

Exactly. The beauty of the commodity business is that the market environment is constantly changing. That’s quite different from regular engineering work. Things change constantly, particularly in volatile environments like today, and we must adapt quickly.

 What’s the most challenging part of your current position? What keeps you awake at night?

Like all commodity traders, we must stay on top of trade flows and the S&D, but I must also consider capacity utilisation. The biggest challenge is managing capacity in the sector. We are experiencing a ramp-up in soy crush capacity in the US, driven by expectations of growth in renewable diesel production. We must closely monitor the world’s demand for Renewable Diesel (RD) and Sustainable Aviation Fuel (SAF) to determine if it will support their growth.

Another common challenge in our industry is talent acquisition. Our industry plays a critical role in the world, but not everyone recognises how interesting and exciting it can be as a career, so it’s difficult to find the right talent. Some people worry that AI will take over tasks that people currently perform. I don’t see it that way. I believe AI is a tool that will help us make better decisions. Even so, we will still need smart people to make those decisions. Today, the commodity business is more transparent but still not widely known.

Is processing key in vegetable oils? Do you need to own industrial assets to trade?

I would say 50 per cent of what we do is trading. We always manage the assets with a trading view. As a trader of processed commodities, we are always long of processing capacity. I’m constantly asking myself, “Do I first buy the seeds or first sell the products? Or do I reverse the crush by reselling the seed and buying back the products? ”

You can trade vegetable oils without assets, of course. It’s a big market. If you trade without assets, you have some restrictions but also some freedom. If you trade around assets, you have fixed costs but have a processing margin to manage. To me, owning assets in a commodity supply chain is an advantage: it provides a better view of what’s to come regarding supply and demand, physical constraints, logistics, and a genuine connection with farmers and customers worldwide.

Is it advantageous for a value chain to stretch from the farmer to the supermarket?

I think it’s an advantage to have an integrated value chain. A good example was the European biofuels market last year. At a certain point, we could compensate lower crushing margins on rapeseed with higher margins on RME biodiesel (Rape oil Methyl Ester). Buying rape oil from the market to produce RME entailed significant additional logistics costs; however, the full margin approach enabled us to efficiently run both units at full capacity.

How do you cope with the stress of trading?

I have got used to it. I like action. I feel something is missing when there’s no stress. So, if you like action, you want things to happen and markets to move.

Stress grows when things don’t work as planned. Managing our risks and knowing how much we can make or lose makes me sleep comfortably. For me, managing stress effectively involves being disciplined in risk management. Be aggressive, but never overtrade. Let your bosses know what your positions are and what your exit plan is if things go wrong.

I have also learned to be disciplined about cutting losses. You lose control when a position becomes unmanageable and losses become too significant. Then you’re just hoping, and hope is never a good strategy. I ask all traders to operate within a framework of risk and stop losses or drawdowns.

What about AI? How will it help traders and managers?

It can be a good risk management tool. It already consolidates internal information about different traits. One of our Big Data-AI tools informs us about the oil yield we receive from the various farmers. It tracks what the farms deliver and their quality specs. It gives us real-time information to say, “Okay, this farmer is systematically producing better quality soybeans with a higher oil yield. If I have to pay $2 more to get his lot, it’s worth it.”

What one piece of advice would you give to a trader on their first day on the trading desk?

Be curious. You want to understand why things happen and, over time, to connect the dots. Our work is a lot about connecting the dots. Maintain your level of curiosity at all times.

What do you know now that you wish you knew when you started trading?

How to use a framework to manage risk. Today, I can take a lot more risk than I used to and sleep much better.

Have more confidence in your analysis. I constantly rechecked the analysis and the assumptions we made to enter a trade. Today, we do a good job when we do a good analysis. It may be wrong, but if we do the proper analysis, we will be right 8 out of 10 times.

What do you like about your job?

I like the connectivity and the action. It is never dull. Every day is different. Every day, something happens. Every day, you must think about how something will impact us in any part of the world. I’m still excited about what I do after more than 30 years in the business. Not many people could say that in different sectors.

In contrast to mining or oil, the agricommodity world originates grain from the aggregation of many small land plots, and this process occurs all over the world, including Brazil, the US, the Black Sea, and India. We have consumers everywhere. You’re all connected. It’s fantastic. It’s amazing.

The above is an extract from the second edition of my book, Commodity Conversations – An Introduction to Trading in Agricultural Commodities, available on Amazon.

©Commodity Conversations® 2025

Good morning, Denis. Thank you for agreeing to this interview. First, I would like to ask about your career journey so far.

I am from Moldova, although my father was born in Kazakhstan, and my mother was born in Ukraine. I attended high school in France and earned a bachelor’s degree in international finance and economics from the University of Toulouse, as well as a master’s degree in International Business and Commodities from the University of Paris Dauphine. I did executive programmes at INSEAD and Harvard during my career with Cargill.

I joined Cargill in 2011, after my studies, in their cocoa department in Amsterdam. I knew nothing about cocoa, but I spent a decade in it and never regretted it. Yes, it’s unique. It is a niche commodity with an interesting interplay among products, including beans, liquor, butter, and powder, all in quite different markets.

After ten years, I felt too much in my comfort zone and wanted to expand my perspectives and experience in other markets. Cargill offered me a position in bioenergy. I made the switch and immediately fell in love with it.

However, I craved a more entrepreneurial approach and wanted to widen my horizons. FincoEnergies offered me a position as Head Trader and Board Member. It meant that in addition to trading and risk management leadership, I could get involved in long-term strategy, building up the company and expanding its presence and impact.

Could you please tell me about FincoEnergies?

FincoEnergies is an independent supplier of (bio)fuels and decarbonisation services for the transport sector. We supply about a quarter of all the road fuels sold in the Netherlands. We are strong in maritime bio-bunkering services and are the largest independent biofuel supplier in the ARA (Antwerp, Rotterdam, Amsterdam) region. ARA and Singapore markets are today the largest marine biofuel hubs in the world. FincoEnergies also offers a variety of decarbonization products for customers in the voluntary market, such as environmental attribute certificates, which permit the cost of decarbonization to be shared among different market players.

We have approximately 270 people, and our head office is located in Rotterdam.

You started as a cocoa trader, focusing on the supply and demand (S&D) of just one commodity. With biofuels, you must master the S&Ds of various agricultural inputs, keep an eye on the competition from fossil fuels, and monitor rapidly changing government policy. How do you make sense of it all?

It is an intellectual puzzle with complex price discovery and dynamics.

You almost feel compelled to have an S&D for every single factor. However, once you see how big that puzzle is, you realise that it is impossible to have all the information you need to give you the confidence to make a trading decision.

You must understand that the market is a complex interaction of various priorities and markets while identifying what matters at a particular time. What should I focus on, and what is noise that I can ignore?

You must accept that there are known unknowns.

For example, a drought will impact crops and your S&D.  How long will the drought last? How severe will it be? What are the alternative feedstocks? You must identify and focus on the price drivers.

However, if you identify a new energy directive as a significant price driver, you must understand the timelines and how different countries will implement it. You must also determine whether mandates or voluntary schemes are driving demand.

How does the biofuels market differ from the cocoa market?

You also have a unique setup of price drivers in the cocoa industry. On the supply side, you have the effects of climate, disease and government policies in West Africa. Demand primarily comes from the Northern Hemisphere, making cocoa a classic example of a south versus north commodity. You have some macroeconomic factors, but demand is largely inelastic. China has had a relatively limited impact on the cocoa market, as demand is not yet as substantial as in Europe or the United States.

Biofuels have three primary price drivers: feedstock availability, fossil fuel prices, and government policies related to climate change and environmental concerns. Biofuels are at the intersection of them all.

Traders often prefer to trade the arbitrages and differentials rather than the outright price. What differentials do you trade in biofuels?

One of the most exciting aspects of the biofuel market is its extensive portfolio of relative value opportunities. They come from different value drivers.

For example, you have different technical specifications. Some key aspects to consider include how biofuels perform in cold conditions and the transition from summer to winter.

Although a technical difference, it is not solely driven by technology. Instead, it is significantly related to the type of feedstock. What is the premium between winter and summer quality? You look at the feedstock S&D, but must also ask, what are the processing margins for different feedstocks?

What is the domestic EU production? What is the import price, and what qualities are available for import? You must make an S&D for each of them.

The second is the feedstock type. The regulation, in essence, is a target, somewhat like a glass that can be filled in different ways. I can fill it with different crop-based biodiesels, but in Europe, each country imposes a limit on the quantity. I can fill it with waste-based biodiesel, but most countries impose a maximum amount. You must understand how much of the glass has been filled so far, the price dynamics, and which biofuel was the most competitive.

Imagine you can only use a certain quantity of crop-based biofuels in a specific country, and it’s already May. If someone has already filled that quota, there will be zero demand for crop-based biofuels. Their value could collapse versus waste-based biodiesel. You must almost have an S&D for each feedstock type.

The third arbitrage is between the different types of bio tickets that reflect different feedstock types.

If I buy biofuel today and blend it into road fuels, I will generate a certain amount of compliance. Suppose I paid an $800 per tonne premium for FAME biodiesel versus diesel. Let’s assume, for the sake of example, that it generates 80 compliance tickets. This means that I created compliance tickets at a cost equivalent to $10.

However, the market is not necessarily trading at $10 per ticket, because bio tickets reflect a variety of factors. Electric vehicles can contribute to the target, as can biogas or other technologies such as HVO. The ticket price could be $12 or $13.

By blending the biofuel into the system, I create a cheaper compliance ticket than if I were to buy it. So, there is a value there that’s called the blending margin. It changes constantly. It could be $3 today and $5 tomorrow.

However, the blending margin depends on the feedstock. A crop-based biofuel would not have the same spread as a biofuel based on waste.

So, you can imagine how many different relative value positions you could take between the biofuel qualities, the bio tickets, and any interplay of these biofuel tickets versus biofuel proof of sustainability. This phenomenon occurs across various European countries. Each country has its dynamics.

There is always a price disconnect somewhere. The question is, how early can you identify it? How quickly can you put a finger on a fair value, and how quickly can you transition to it?

What are the leading EU and US trade flows?

The EU biodiesel sector has a domestic supply of rapeseed, while the ethanol sector utilises a variety of domestically grown feedstocks, including sugar beets, wheat, and corn. The EU imports a lot of feedstocks from abroad. It also imports biofuels.

The EU sees meeting climate objectives as a key priority. That’s why the focus is on transforming waste streams into usable energy sources. We also see a strong growth in the voluntary market demand, adding to the puzzle of price interactions.

The EU imports biofuels primarily from China, Indonesia and Malaysia. It imports some soy-based biodiesel from Argentina, but the EU capped the volume after an anti-dumping investigation.

US biofuel production capacity has increased enormously in the last couple of years. They do have some imports, but fewer than in Europe. The US exports ethanol widely across different regions, and some biodiesel production is also exported to the UK due to favourable tariffs.

When discussing feedstocks, the world needs feedstocks from everywhere, especially those derived from waste. As we expand the use of biofuels globally, we need to find more sources of waste material.

Are you optimistic about the future of biofuels, or are you concerned about the impact of electric vehicles?

Electrification is a positive outcome in terms of energy efficiency, although the method of producing electricity is crucial. We should electrify where possible and where it is efficient. If we look at private passenger cars, electrification is likely the future.

However, we are far from having only electric vehicles, particularly when considering heavy-duty vehicles. It will take time to get there, especially when considering the ICE fleet’s current size. It will take many years, even in wealthy countries that can afford to install charging infrastructure.

We need something that helps us transition from where we are to where we should be. We cannot put all our hopes on electrification and do nothing in the meantime. Biofuels play an immediate role and serve as your transitory agent. They contribute to climate decarbonisation while you journey to get where you want to be.

Biofuels may be a longer-term solution for heavy-duty road vehicles, maritime shipping, and aviation. Just one per cent of trucks in Europe are electrified, and the average lifespan of trucks is substantially longer than that of private passenger cars. We need a solution. We can explore compressed natural (bio) gas or liquefied natural (bio) gas, but we see that biofuels have an essential role to play in the long term.

It is a whole different ballgame when you look at maritime and aviation. You cannot electrify long-haul flights unless we make an enormous technological breakthrough. The batteries occupy a significant amount of space, are too heavy, and have limited autonomy. Biofuel is presently the most economically and technologically available alternative to decarbonise the sustainable aviation sector, with e-fuels (e-SAF) likely to play an increasingly important role in the coming years.

Regarding the maritime sector, biofuels are among the most competitive in terms of price. They are a drop-in fuel that requires no substantial adaptations to existing infrastructure.

Thank you, Denis, for your time and input.

The above is an extract from the second edition of my book, Commodity Conversations – An Introduction to Trading in Agricultural Commodities, available on Amazon.

 © Commodity Conversations®2025

Doug has over 30 years of experience in trading commodities. After graduating, he joined Cargill, where he became the head of both the UK non-grain import business and the UK grain business. He moved to Switzerland in 1997, where he became the global head of petroleum trading before his departure after ten years with the company in 2000.

Doug then went on to lead Crown Resources’ global petroleum trading business. He consulted as an energy market expert to a large US hedge fund before co-founding the Merchant Commodity Fund in 2004.  In 2010, Doug and his business partner, Mike Coleman, acquired the RCMA Group, a diversified global physical commodity trading business based in Singapore. The Group’s most significant investment came in 2016 with the green-field construction of the first major oilseed rape processing plant in the UK for thirty years, Yelo Enterprises. 

You left Cargill in 2000 to join Crown Resources Petroleum. Four years later, you co-founded MCF, Merchant Commodity Fund. Could you explain the motivation for MCF?

We worked extensively with hedge funds during my tenure at Cargill in petroleum from 1997 to 2000. Oil prices were coming to the end of a 20-year bear market and were as cheap as chips. There was a demand for exposure from the early pioneering hedge funds in that sector. Cargill had an entrance via OTC-type structures. I met Tudor Jones and saw his flagship operation in Connecticut. I thought, “Gee, this is where we should go.” I began to understand how the hedge funds worked.

When I left Crown Resources, I consulted with Cataquil Asset Management, which was run by Paul Taradji and Rob Ellis. They had a couple of billion under management. I hoped they would delegate some of their funding to us. It didn’t all work out for several reasons, one being that the partners fell out quite spectacularly, but it whetted my appetite to get into the space.

Mike Colman, who worked with me at Cargill, called me in early 2004. He said he had funding to start a hedge fund and asked if I would partner with him. I agreed, and we set up MCF together.

One of the problems that fund managers face is that they can’t take or make physical deliveries against an expiring futures contract. They can’t play the convergence. You once took delivery of physical sugar by teaming up with a trade house. How did it work out?

The fund has taken physical delivery twice. We took physical delivery of rubber from the Tokyo Exchange, where one could cash and carry the physical rubber. The physical carry versus deferred futures was attractive. It was a small delivery, but we did it early in the fund.

In 2010/11, we were bullish on raw sugar and felt there was a substantial risk of a significant blowout, upwards of 30-40 cents a pound. We had invested significantly in that view. Being in a hedge fund and not seeing the physical flow makes it challenging to understand how much a customer wants or doesn’t want a commodity. It is critical when you’re taking prices way above their long-term cost of production. We took delivery to get some clarity on that.

Looking back, it was a logistical and administrative hassle, even though it provided us with the necessary visibility. Despite the heavy inverses, we saw sugar moving quickly through the system to end users. However, it was hairy, and we haven’t done it since, and that was 13 years ago. We now watch the price delivery and futures convergences from afar.

That’s interesting. I always believed that you took delivery to play the convergence and stay in the spot position beyond expiry.

We are a fundamentally based hedge fund. We examine supply and demand, and cash information is crucial. However, convergence on expiry is dangerous because it boils down to playing chicken with your counterpart.

A classic technical squeeze occurs when the futures shorts cannot deliver the volume of physical commodity the futures longs hold at expiry. The shorts have no option but to buy back their positions at whatever price the longs decide.

However, what tends to happen is that the shorts deliver anyway, and it is up to the longs to prove that they don’t have what they delivered. Everyone mucks around for a while, and it usually ends in arbitration. It becomes a massive waste of time. We prefer fundamental commodity valuations. We don’t play convergence at expiry.

I’m learning a lot here. In 2010, you and Mike Coleman acquired the RCMA Group. Did that come from believing you can’t trade commodities without being involved in the physicals?

Despite a 28 per cent return in 2008, we had massive redemptions after the Madoff affair. Investors lost confidence in managed funds and wanted cash. They didn’t trust anybody. We had $1.3 billion of redemptions. I realised we had to diversify into other areas.

We knew the owner of RCMA Group as Mike Coleman came from the rubber industry. I felt that rubber was interesting. Nobody really knew it. RCMA was a slow business within the traditional Asian world, but it had international offices and distributed rubber in the United States and Europe. We thought we could use the company as a starting point to build a conventional trading house where we could move physical commodities, earn a margin, and get away from speculative trading. We would also benefit from firsthand, physical information in the markets we chose, which could be potentially helpful for the hedge fund.

I suppose RCMA was too small in the physical markets to provide you with genuine insights into the physical markets. Am I correct?

Initially, RCMA was limited to rubber. It was the world’s largest independent distributor of natural rubber, employing approximately 150 people. We brought in a CEO to manage the business while we concentrated on the hedge fund. Rubber had been trading at $1,500 to $2,500 per tonne for a long time and then entered a significant bull market, driven by massive stimulus in China following the global financial crisis. Prices spiked to $5,500 per tonne. We were in the physical flow, saw the scarcity, and participated actively in the bull move. Also, as you’re aware, your distributing, trading, and wholesaling margins expand when prices rise. We had a combination of riding the bull market and making excellent margins. By skill or by luck, our timing was perfect.

Do you still own all those businesses? I know you’ve given up sugar, but are you still involved in the rubber industry?

Over the next five or six years, we diversified into sugar, cotton, coal, coffee and palm oil. The main ones were cotton, sugar, and rubber. We bought a Guatemalan coffee mill and a coffee distribution business in Vietnam. We had rubber and latex storage facilities in Rotterdam and a rubber distribution network in the United States. We built the group into a mini trade house with around 500 employees in 30-35 countries, generating cash lines of a few hundred million dollars and achieving a profitability of around $10-20 million per year.

I became somewhat demoralised in 2016-17. Prices were trading in a low-price range, and margins were under pressure. People costs were not dwindling. Credit exposure was underpriced. You could blow your full-year profits on a single counterparty default. The risk-reward of being in the business in such a low-price environment suddenly looked bleak. I decided to pivot.

We sold the rubber trading business and gradually phased out the other wholesale businesses. Did we sell at a profit? No, we dismantled them or passed over the teams to different companies.

We pivoted the company closer to the consumer, moving away from wholesaling and taking a small margin on high-volume products to focus on branded items. We initiated the Yelo project and established a large electricity retail business in Singapore.

I thought that Yelo originated from the idea that you can’t trade commodities without assets, but you’re saying you wanted to get closer to the consumer. Is that correct?

I had been aware of the Yelo project for a while, as a friend had brought it to my attention. He wanted to build a rapeseed processing facility in the UK to capitalise on government subsidies for renewable energy. It didn’t have to do with commodities; it was more about getting subsidies. It lacked a clear vision.

I didn’t look at it that way. I liked the idea of the green energy front-end that would allow us to be competitive on variable costs. However, I wanted to expand into refined oil and animal feed, creating differentiated products. I found that much more exciting.

Why do ag traders make millions while oil traders make billions?

The disappointing aspect of agriculture is that it yields a harvest only one or two times a year. You get a lump of supply coming at one time. The beauty of oil and petroleum commodities is that they’re produced and consumed daily. It’s a river that continues to flow.

Petroleum is a larger market with more volatility and intricacies than agriculture. It offers a variety of products that you can trade and participate in, providing more arbitrage opportunities.

However, perhaps the most important thing is that oil has more volatility than ags. Volatility is where you make big money. Agricultural volatility is only about the weather: a drought or a flood.

What advice would you give to a young person looking to make a fortune in commodities?

Find a way in and then be inquisitive. Don’t get bogged down. Navigate to a position to generate wealth through your skillset, whether in physical flows, assets, or derivative trading. But before you do that, ask yourself, “Do I want to make money?” That is the critical question you must answer.

Don’t be scared to take risks. You won’t know everything, but if you’ve done enough groundwork to understand the risk, you shouldn’t be shy about taking it. Every risk should be uncertain; we’d all be doing it if it weren’t.

If you make a mistake, don’t let it deter you. Learn from it and make sure it isn’t terminal. Life and careers are long, and you will undoubtedly make mistakes along the way. You shouldn’t be worried about the errors; they will make you better at what you do.

The above is an extract from the second edition of my book, Commodity Conversations – An Introduction to Trading in Agricultural Commodities, available on Amazon.

© Commodity Conversations® 2025

Ivo is a Certified Public Accountant from the National University of Rosario (UNR), with a master’s degree in economics from Universidad Francisco Marroquín. He has completed executive education programmes at Oxford University, Harvard Business School, and IMD Business School.

He was the former Global Head of Soybeans and Sugar at Cargill in Geneva, where he was also responsible for the company’s operations in the Middle East and Africa. He was the former CEO of Alvean, the world’s largest sugar trading company.

Ivo currently serves as a non-executive director on the boards of several international agribusiness and livestock companies. He is a visiting professor of Agricultural Commodities at the University of Geneva, Erasmus University Rotterdam, Universidad Torcuato Di Tella (UTDT), Universidad Austral, and UCEMA. He is the author of Commodities as an Asset Class (Palgrave Macmillan, 2022).

Good morning, Ivo. First question: Do the ABCD+ agricommodity trading companies collaborate as an oligopoly, enabling them to control prices?

Agricultural commodity markets tend to be open. Entrepreneurs can enter, compete, identify arbitrage opportunities, and attempt to earn profits—but only if they offer something better, faster, or more efficient than incumbents. This openness generates continuous competitive pressure, reflected in slim gross margins, often thinner when accounting for risk. Firms constantly enter and exit the space—new ventures, bankruptcies, divestitures, and acquisitions. Because the capital required to become a physical participant in ag trading is relatively modest, unlike in energy trading, the sector remains highly dynamic and entrepreneurially vibrant.

Some people interpret any deviation from the textbook model of perfect competition as market failure. However, from a market process perspective, this view is fundamentally flawed. Real-world markets are not static equilibria but dynamic, evolving arenas of entrepreneurial discovery. In practice, few markets operate under anything resembling perfect competition. Instead, we observe markets embedded within specific institutional frameworks, ranging from less to more competitive, where firms engage in continuous entry and exit, growth and retrenchment, and adaptation to dispersed information.

In this view, competition is not a static condition defined by structure, such as the number of firms or market concentration indices like CR4 or the Herfindahl-Hirschman Index. Instead, it is a process of entrepreneurial rivalry—constantly searching for new efficiencies, arbitrage, and innovation. What matters is not the number of firms that exist, but how open the market is to new entrants and new ideas—how contestable it is.

Still, to understand the competitive environment properly, it’s important to distinguish between the three main segments of the value chain.

The first is origination, from the farm gate to FOB. These markets vary widely by region. In major exporting countries like the US, Canada, Argentina, Brazil, Russia, Ukraine, Australia, and Europe, you’ll find a mix of global, regional, and domestic players competing to serve both export and domestic demand.

On the other hand, you have destination markets, where multinational and regional food processors coexist with a wide range of local firms. Apart from crushing activities in some locations, international traders typically play a limited role in this segment. Local processors tend to lead the industry, and in many cases, they can also source from domestic crops, broadening their supply base and reducing dependence on international suppliers.

In the middle, you have the international trading space—maritime flows from FOB to C&F—where most public attention tends to go. In 2024, EY and others prepared a discussion paper for the EU’s Agriculture Committee titled “The Role of Commodity Traders in Shaping Agricultural Markets.” They added up the reported volumes traded by the four ABCD companies. They concluded they “handle around 50–60 per cent of the worldwide trade in essential COPSs (Cereals, Oilseeds, Protein crops and Sugar), and 70–80 per cent if you include CIL (COFCO International Ltd) and Viterra.”

However, there is a major methodological issue with that estimate. The researchers used total sales volumes from company financial reports as the numerator—yet those figures include all sales to third parties, not just FOB-to-C&F flows. The latter is only a subset of the total volumes, with other transactions occurring at different stages of the value chain; therefore, this approach overstates the numerator.

Then there’s the issue of the denominator. The authors based their calculation on international trade flows of essential cereals, oilseeds, protein and sugar crops—yet many of these companies have diversified business models, not limited to grains and oilseeds. Some also trade other commodities—locally and globally—including meat, cotton, rice, cocoa, coffee, orange juice and biofuels. These are included in their reported sales volumes but excluded from EY’s calculation of the denominator. So, depending on how you define the scope of traded commodities, you can end up with very different—and quite arbitrary—market shares and concentration ratios.

The total FOB-to-C&F flow of the ABCD companies is probably around 225–250 million tonnes. The following four major players—CIL, Olam, Wilmar, and Viterra—add another 170–190 million tonnes. That puts the top eight at a combined 400–440 million tonnes.

But again, what should we use as a denominator? If we broadly define agricultural international flows, the total global maritime ag trade is around one billion tonnes.

It suggests that the ABCD companies hold a market share of approximately 25 per cent in maritime agricultural trade, with the top eight players accounting for around 40–45 per cent. These figures do not point to a cartel-like structure controlling prices. On the contrary, the data reveals high rivalry, reflecting a vibrant and competitive environment. Of course, these are aggregate figures. A more nuanced understanding would require disaggregating by commodity and trade flow to better assess each player’s relative position and overall industry footprint.

It is also worth noting that the traditional “ABCD” grouping no longer reflects the current market structure. The top four are now more accurately described as “ABCC,” with CIL effectively replacing Louis Dreyfus as one of the leading global traders.

A recent article that addresses these issues and arrives at similar conclusions to mine is “Dynamic Changes in the Structure and Concentration of the International Grain and Oilseed Trading Industry” by William W. Wilson, David W. Bullock, and Isaac Dubovoy, published in Applied Economic Perspectives and Policy in 2025.

But what about the origination and destination pieces?

There are varying market shares across these geographies, as strong regional and local players compete actively with the global actors. At origin, key participants include AMaggi in Brazil, Molinos Río de la Plata and Aceitera General Deheza in Argentina, Invivo in France, CHS in the US, Demetra in Russia, and Nibulon and Kernel in Ukraine. Alongside them are numerous local feed and flour mills, biofuel plants, feedlots, dairy farms, and small crushers serving domestic demand.

At destination, the shōsha—Japanese trading companies—maintain a strong presence in Japan, as do the major Korean trading firms in South Korea. In China, the landscape is more fragmented, with a wide array of players besides COFCO and Sinograin. Other notable regional actors include Invictus and Al Ghurair in North Africa and the Middle East, Enerfo in Southeast Asia, and Cefetra in Europe.

All these environments are highly competitive marketplaces.

Is the sector becoming more concentrated?

My analysis suggests that, in relative terms, the market share of the top players is gradually shrinking as local and regional actors continue to gain ground in step with the expansion of crop volumes and trade flows. One of the most significant developments over the past decade has been the rise of CIL. At the same time, Russian and Ukrainian companies have assumed a dominant role in wheat and oilseed exports from the Black Sea region, and some regional buyers are also increasing their share of FOB purchases.

Contrary to common belief, the sector is becoming less concentrated and more competitive, moving further away from an oligopolistic structure.

Even so, the media often argues that agricommodity trading firms have made excessive profits in recent years. Do you agree?

Agricommodity trading profits are strongly associated with market volatility and sudden, unanticipated disruptions to established trade flows. These disruptions lead to sharp adjustments in relative prices, creating arbitrage opportunities that actors with superior analytical capabilities and interpretive judgment can capture.

Unfortunately, turbulent conditions tend to create more favourable trading opportunities, while the opposite is also true. One notable exception is when volatility arises from erratic or unpredictable political developments, such as during the Trump-era trade wars, which forced market participants to reduce exposure, ultimately capping potential gains.

Beyond that, trading profits do not always result from pure free market dynamics. In many cases, political decisions shape them. A clear example is the biofuels sector, where regulatory shifts—often driven by political agendas rather than economic fundamentals—can dramatically alter market behaviour and create or erode profitability.

Another point is that aggregate performance figures tend to lump together companies with vastly different business models. Some are pure commodity traders, while others are more diversified. Some operate in livestock, others in biofuels, some focus on grains and oilseeds, and others on soft commodities or consumer-facing products. There are both asset-light and asset-heavy firms. Some resemble commercial trading houses with logistics and industrial operations, while others operate like hedge funds. Grouping such diverse players can easily lead to misleading conclusions.

Moreover, media reports frequently present historical revenues and performance without adjusting for inflation—a mistake no Argentine would ever make. A company that earned $1 billion in 2010 would need to generate roughly $1.5 billion today to match that figure in real terms. Put differently, $1 billion today buys only about two-thirds of the fixed assets it could have acquired 15 years ago.

In real terms, the agri-trading sector earned less during the 2020–2023 cycle than in the previous high-return period from 2008 to 2012. And those earlier results were achieved with lower equity and investment levels, meaning that returns on capital employed—the metric that truly matters—were significantly more attractive then.

The same logic applies when assessing performance in relation to the volumes handled. As traded volumes have expanded considerably over the past 15 years, returns per product unit have naturally declined.

To gain a meaningful perspective, you must assess agricommodity trading performance over entire price cycles. Traders posted substantial profits from 2008 to 2012, followed by a leaner stretch from 2013 to 2019. Volatility returned with the US-China trade war, intensified with the COVID shock in 2020 and spiked again after Russia invaded Ukraine in 2022. That set off a brief period of exceptional profits, which peaked around 2022. Today, the sector appears to be returning to a more normalised environment.

It raises an important question: if traders truly possess the market power some people accuse them of—being able to widen margins at will, pay farmers less, and charge customers more—then why are their profits so cyclical? And why must these companies continually reinvent themselves through new business models, refreshed management teams, and recurring cost-cutting measures to meet their return targets?

 Are some trading companies so big that they present a systemic risk in the case of failure? If so, should they be regulated like banks?

Most publicly listed agricommodity companies trade at market capitalisations close to their book value, typically at or near a one-to-one ratio, with only modest multiples. It provides a helpful benchmark for estimating the potential market value of privately held trading firms.

Based on that logic, I estimate the combined market capitalisation of the top eight ABCD+ agricommodity companies to be around $150 billion. To put that into perspective, Chevron has a market cap of roughly $250 billion, Nestlé around $230 billion, and PepsiCo approximately $200 billion. In other words, acquiring the eight largest agricommodity trading firms would cost you about two-thirds the value of Nestlé. Then you start wondering about your definition of ‘big’.

My colleague Craig Pirrong, from the Master of Science in Commodity Trading program at the University of Geneva, has written an insightful paper titled “NOT TOO BIG TO FAIL: Systemic Risk, Regulation, and the Economics of Commodity Trading Firms.” He argues that agri-trading companies are fundamentally different from banks. They typically operate with lower leverage—on average, four or five times equity—and are not engaged in maturity transformation. Rather than borrowing short to invest long, they generally borrow long to fund short-term positions. Moreover, in most cases, their assets are highly liquid and can be readily redistributed among competitors in the event of bankruptcy.

History shows that large agri-trading firms have failed without triggering systemic risk.

Thank you, Ivo, for your time and insights.

The above is an extract from the second edition of my book, Commodity Conversations – An Introduction to Trading in Agricultural Commodities, available on Amazon. 

The full interview covers other topics such as biofuels and the impact of demographic changes on food demand.

© Commodity Conversations® 2025

Robert was the Enterprise Sustainability Leader for Agriculture and Head of Environmental Markets at Cargill. Previously, Robert served as the managing director of the company’s European oilseeds business and as the global head of trading for its vegetable oils refineries group.

Robert is an Associate Fellow of the Erasmus Commodity and Trade Centre at Erasmus University Rotterdam.

Robert, could you briefly sketch out your 30-year career with Cargill?

Like most people in the oilseed business, I started as a trainee in Amsterdam. I’ve moved around a lot. I was in Fargo, North Dakota. I spent five years in Asia, three in China and two in Singapore. I also worked in Switzerland.

I spent 25 years in trading, primarily in oilseeds and refined oil, as well as in business development on the bio-industrial and energy sides. I spent my last four years in sustainability at Cargill, although sustainability was already part of my remit when I led trading for our refineries. I had had enough of trading. I wasn’t bored with it, but after 25 crop cycles, I wanted to make an impact on topics such as food security, deforestation and human rights. I also wanted to do more teaching, writing and researching.

You recently mentioned on LinkedIn that 800 million people go to bed hungry each night. Why is that? And what can be done? Isn’t there enough food in the world to feed everybody?

We already produce sufficient calories in aggregate to feed everyone, including the addition of between 500 million and a billion people over the next 25 years. Acres are expanding, and yields continue to grow. The system has many imperfections, though.

Waste is the most significant. It includes crop waste from farmers who do not store their crops correctly, as well as waste from kitchen tables and supermarkets. It adds up to a generally accepted estimate of 20 per cent of the world’s food supply. A third of that occurs on the farm, so we need to consider improving infrastructure and warehousing for perishable goods and ensure that farmers can get their crops to market quickly. The FAO estimates that 14 per cent of all food waste occurs between the farm and the retail market.

Approximately 9 to 10 per cent of global arable land supplies biofuels: virgin vegetable oils are used for biodiesel, while sugar and corn are used for ethanol. There are government mandates in Brazil for ethanol and in Indonesia for palm oil. Europe utilises rapeseed oil as a feedstock for biodiesel production. We burn food in our vehicles. I’m not saying it’s wrong. I’m not passing judgment.

Meat is the third imperfection. When I say sufficient calories, I include some conversion of arable crops into meat. If meat consumption increases beyond what is currently projected in our models, more crops will be required to feed these animals. It takes 8 kg or more of feed ingredients to produce one kg of beef. The feed conversion rate for lamb is five to one.

Access is the fourth imperfection: geographical and economic access to sufficient nutritious food. For example, when Russia invaded Ukraine, enough food was available, but much of it (stored as grain or oilseeds) became landlocked.

Climate change is the fifth element. If you talk to 100 people, you’ll get 100 different opinions about what food production will look like in 2050. I believe you will have more food production due to longer growing seasons, but that’s only in places where there is already enough food. You’ll have less food in areas where it’s needed. You will have a problem not only with affordable food but also accessible food – a dislocation.

Therefore, we can envision a scenario in which sufficient calories are produced in aggregate, but a proportion of them remain unavailable for consumption due to these five factors.

Don’t governments deserve some of the blame for these imperfections?

In part only. Waste isn’t necessarily a government problem. The private sector could solve waste. In America, I could only buy family packs in the supermarket. The problem with perishable goods is that you often throw away half of them.

Biofuel mandates are government initiatives.

Meat consumption is an interesting one. People initially eat more meat as they become richer, as seen in countries like China, Indonesia, and Nigeria. Meat consumption in America and Europe is levelling off. But I always ask my students, ‘Will you tell the people who’ve just reached the middle class that they can no longer eat meat?’ Meat consumption is endogenous to the model. It’s going to increase. I don’t see how governments can change that.

North America and Europe have a billion consumers. It wouldn’t necessarily move the needle if they switched to becoming vegetarians. For every consumer in America and Europe combined, you’ve got two in Asia who are just reaching the level of a middle-class consumer.

Governments can play a part, particularly regarding tariffs, but a significant portion is the responsibility of the private sector, and some is endogenous to the system. You can’t change it.

Does food security focus too much on consumers and not enough on ensuring farmers get a decent living?

It’s part of the equation. I recently discussed palm oil with somebody from an NGO. Palm farmers earn just enough to make a living. The same is true for cocoa farmers in the Ivory Coast or cotton farmers in Malawi. They cover their costs and provide food for the family, but they have insufficient funds to invest in their farms, replace trees, or buy fertiliser.

You’re going to see a doubling of the population in Africa, one of the places where food production is not keeping up. Increasing the living income of Africa’s farmers would enable them to invest, rather than just providing for their families.

A living income is part of the solution to ensure food security.

Is food security now more important than environmental sustainability? Has the green agenda taken a back seat to economic nationalism?

Yes—and increasingly so. However, food security and the environment cannot be considered separate issues. We must produce more food using less water and emitting fewer greenhouse gases.

It’s a mathematical equation. You maximise food production while minimising water use and greenhouse gas emissions. Agriculture uses 70 per cent of fresh water, accounting for 25 per cent of greenhouse gas emissions. If you expand food production, you will emit more greenhouse gases and use more fresh water. Fresh water will ultimately be a more restricting factor than greenhouse gas emissions, as climate change will lengthen the growing seasons in the Northern Hemisphere. You’re going to have beans in Manitoba and Far East Russia. They will need to find their way to the end consumer.

If you were the World Dictator, what three things would you change to make our food system more sustainable and secure?

One, I would tackle waste by getting governments involved in improving infrastructure from the farm to the distributor. Unfortunately, I’m unsure how much you can influence consumer behaviour, but I would also dictate smaller packaging sizes. A one per cent reduction in waste would significantly increase the amount of food available.

Secondly, I would focus on the environmental impact of agriculture and the need to produce more food sustainably. I would double down on more sustainable forms of agriculture to make crops more resilient against climate change and improve yields. Technology plays a crucial role in regenerative agriculture, enabling the production of more food with reduced emissions and lower freshwater usage.

You asked me for three things, right?

Yes, you still must find one more.

I’ve addressed infrastructure, reduced waste, and transformed agricultural production. The third thing I would do is review biofuel mandates.

So-called first-generation biofuels are not, in my view, the saviour in terms of transportation emissions. I can see how virgin vegetable oils, as feedstock for biodiesel, are included in the energy transition, but I don’t know how that can be a long-term solution. I would ultimately discourage the use of virgin oils to produce biofuels and promote the use of waste oils instead. Technology, again, is part of the solution.

I have another three-point question for you. What three lessons would you like your students in Rotterdam to take away?

First, I want my students to think about food security. I don’t mind how they feel about it, but I want it to be on their radar screens. I want my students to understand what factors go into the equation without necessarily solving it.

Second, I want my students to think about their connection to food. If I asked my 17-year-old niece where food comes from, she would reply, “The supermarket.” It’s not her fault. We don’t know where our food comes from or how it’s grown. We don’t know our ingredients because we don’t read the labels. When people understand where their food comes from and have a connection to it, they waste less of it. They care about it. That’s what I want my students to take away. I want them to ask themselves where their food comes from.

Third, I want my students to ask why hunger exists. Why do 800 million people go to bed hungry every night? What are the five or six factors that contribute to this?

Penultimate question: What do you know now that you wished you knew when you started as a trader?

I wish I had familiarised myself earlier in my career with the institutions that make our trade possible: commercial contracts, the arbitrage process and the applicable law governing our contracts, market organisation and price discovery, trade policy, the legality of supply (think land rights and regulatory compliance), etc. I learned them on the job, but only late in the game. Admittedly, the theory is a bit dry, but it is indispensable. More than once, I have thought, ‘If only I had known this earlier …’.

Last question: what question should I have asked but didn’t?

You should have asked why people pay little attention to agricultural commodity trading.  When people discuss commodity trading, they typically refer to metals and energy. Agriculture is almost an afterthought. I understand it from an economic perspective, considering the dollars traded and trade flows, but agriculture fills such a fundamental need. You can do without your car, but you can’t live without food.

However, I am glad you didn’t ask that question, as I don’t have the answer!

Thank you, Robert, for your time and input.

The above is an excerpt from the second edition of my book, Commodity Conversations – An Introduction to Trading in Agricultural Commodities, available on Amazon.

© Commodity Conversations® 2025

Joel has had a unique shipping career with substantial international experience in Geneva, Panama, Dubai, Madrid, Shanghai, and London.  He graduated from top universities in the UK, Europe, and America and is a regular speaker at shipping and trading events worldwide. He lectures at various universities and is the co-founder and CEO of multiple companies.

Good morning, Joel. First, please tell me what you do now.

I am Spanish, born in Barcelona, and live in South Ireland. I am 50 years old, happily married, and have three beautiful children.

I do shipbroking and freight trading, but I mainly focus on advisory and consultancy work for small and medium trading companies that move less than 10 million mt of cargo annually. I invest in start-ups and listed companies and lecture at the National Maritime College of Ireland, Deusto University, and UFM on maritime freight, logistics, supply chain, and business strategy. It takes time, but I do it to share the knowledge and experience gathered during these years and the countless courses I took as a student.

I have just launched an online shipping course, summarising key concepts. My goal is to become a tour guide in the business. We’ve launched the course I wish I had taken when I started in the industry.

What do you love about maritime freight?

I love following commerce, geopolitics, finance, and the macroenvironment. Politics significantly affects commodity markets, but the causality in freight is in the other direction. Maritime freight and trade flows frequently drive politics.

I will return to politics later, but first, I wanted to ask how the freight business has changed during your career.

Seaborne dry bulk trade volumes have grown significantly, surpassing 5.6 billion mt in 2024, up 26 per cent over the past decade. Iron ore, coal, and grains remain dominant cargoes, but the composition of trade is evolving, with grain shipments increasing and coal shipments projected to decline. Moreover, we have a new kid on the block: bauxite, which gives market makers optionality and flexibility.

The global dry bulk fleet has expanded accordingly, with a notable increase in vessel deliveries, especially in the Capesize and Panamax segments. On a forward basis, however, the Capesize+ order book is at its historical low levels (as are VLCCs). Shipyards have been more interested in containerships, car carriers, and LNG/LPG ships.

The industry has embraced digital transformation, with increased use of data analytics, digital tracking, and automation to optimise operations and improve efficiency.

Thanks to the industry’s healthy balance sheet and cash piles, mergers and acquisitions have reshaped the competitive landscape with larger players consolidating to achieve economies of scale and enhance logistics capabilities.

How have the major agricommodity companies adapted?

A few decades ago, the big trade houses were primarily on the buy side of the freight market, chartering on a voyage or time charter basis from traditional ship owners.

Agricommodity companies are now heavily involved on the supply side as operators or long-term time charterers. For example, Cargill controls more than 700 vessels, with only a quarter of this tonnage for their in-house cargo. The rest is third-party business.

All the major agricommodity companies trade freight as a standalone profit centre, taking long or short positions depending on their market view. Freight has become a tradable commodity.

What has driven this change?

Commodity prices have become more transparent; your buyers and sellers know the price as well as you do. It has made it difficult for trading companies to make a margin on their pure commodity trading.

Freight rates are less transparent than commodity prices, and the market might be more complex. You can play with your ships and fleets, ballasting times, charter-party terms, freight & bunker hedging, port congestion, ton-mile dynamics, trade routes, supply chain disruptions, FFA market liquidity and logistics efficiency. There are so many aspects you can massage! If you operate wisely and understand the cycles, you can make excellent returns positioned long or short tonnage. Fleet control provides enormous flexibility and optionality for trading houses. They love it!

However, there have been cases where companies have misread cycles and suffered significant losses on the shipping side. That’s when investors say, “I didn’t know you were taking such big positions on shipping!” The freight market is one of the most volatile markets in the world in terms of percentage moves and massive standard deviations.

This means that trading companies are reluctant to discuss their freight trading operations. Just check their annual reports, and you’ll see.

Agri-freight is a small percentage of the freight market, but how does its seasonality affect the overall freight market?

The relevant origins are in the Atlantic: the US Gulf, Canada, Brazil and Argentina. To participate, ship owners and operators must reposition their fleets in the Atlantic for loading. They discharge their cargoes in the Pacific or East Suez and then invest in the backhaul.

Owners must make enough cash on the front haul to cover their investment on the backhaul to reposition, but demand during the season is high enough to allow them to rebuild cash flow and profits.

Peak harvest periods can see spot rates for dry bulk shipping rise 20–50 per cent, with capacity shortages and spiking freight rates for Panamax and Handysize vessels. The Brazilian soybean harvest (March-May) heightens demand for larger vessels on China-bound routes, influencing the Baltic Dry Index.

Shifting harvest times due to weather disruptions can complicate scheduling, increasing demurrage and detention costs.

You mentioned global politics earlier. What is happening there?

There are so many things happening. We have a new global order in which the traditional gateways, the Panama and Suez Canals, are no longer 100 per cent reliable—Suez because of the Houthis and the political instability in the Middle East and Panama because of droughts. The Panamanian government has set up a new booking system based on auction slots. The last few years have seen some bad decisions for international investors in Panama, such as the closure of Minera Panamá, one of the largest copper miners in the region.

We need to find new routes. China needs reliable access to its buyers in the Atlantic from its Pacific ports. It can go around the Cape of Good Hope, but it is more expensive and time-consuming, uses more fuel, and is less environmentally friendly. The longer voyages take tonnage off the market and increase general freight rates.

Instead of going south, the Chinese now go north via Russia. The Chinese and Russians are developing ice-class vessels that they can use for six months of the year. With climate change, they may soon be able to do it for seven months or more. This is a significant advantage for Russia and China, which is why Americans want to control Greenland.

How will the Northern Sea Route (NSR) affect global trade flows?

It will have an enormous effect. Going north rather than south cuts shipping distances between Europe and Asia by 30–50 per cent compared to traditional routes via the Suez or Panama Canal.

The Hamburg to Yokohama voyage is 7,356 nautical miles via NSR versus 11,585 via Suez, saving 14 days. The NSR reduces the voyage time between Singapore and Europe to 70 days compared to 110 days via the Cape of Good Hope. These shorter sailing times can reduce fuel consumption by up to 40 per cent.

Going via the NSR avoids traditional chokepoints such as the Suez Canal and reduces the risk of political interference. Russia and China control the NSR and aim to increase cargo volumes to 130 million mt by 2035. As part of its Belt and Road Initiative, China invests in Arctic infrastructure to bypass US-controlled chokepoints like the Malacca Strait.

NSR cargo volumes reached 37.9 million mt in 2024, up from 111,000 mt in 2011, and may reach 130 million mt by 2035. Some predict that with global warming, the NSR may be navigable year-round by 2040, transforming it into a mainstream trade artery. Controlling ice-class fleets will become a question of national security.

You mentioned the political risk of the Suez Canal, but what about the Panama Canal: could the US control it and prevent other countries from using it?

The Chinese have been worried that the US might take control of the Panama Canal and exclude them from using it. They are taking evasive action.

COSCO Shipping Ports, a subsidiary of the Chinese state-owned COSCO Shipping Corporation, in partnership with Peru’s Volcan Mining Company, is building Chancay Port, a multi-billion-dollar mega port about 60 kilometres north of Lima. The port began operations last year and should be fully operational by 2025-2026. It will be a deepwater facility (17.80 m draft!) capable of receiving the world’s largest container ships, with a planned capacity of up to 1.5 million TEUs annually in the long term.

It will serve as a direct maritime link between South America and Asia, significantly reducing shipping times between Peru/West Coast South America and China-Asian markets by up to 20 days and bypassing traditional routes through North America and the Panama Canal. Chancay is the equivalent of the port of Singapore for South America.

In addition, Chinese companies are actively investing in additional port projects across Peru, making the country a key node in China’s Belt and Road Initiative, connected with rail networks into Brazil – the world’s supermarket! It is a game changer in the Asia-Pacific.

They aim to connect Brazilian commodities to Asian markets by bypassing the Panama Canal.

Last question: What’s your advice for young people interested in developing a career in shipping?

First, when you finish reading this interview, you must learn how to invest to let compound interest work for you. Doing this will buy you the time to think, study, read more, travel, do nothing, sleep properly, eat healthily, meditate, exercise and spend quality time with the people you love. Relationships are what matter the most.

Second, go and live abroad alone. You’ll have no other option but to develop in various ways. Invest in yourself. No one can take from you the person you will become in the process.

Third, be as curious as a child and humble as a sage. Never take things for granted. Add value before asking to be rewarded. See yourself as a learning machine in this endless learning process called life. And don’t forget to have a lot of fun throughout.

Shipping is a fascinating industry with many colourful characters to learn from. It has a compelling risk-reward ratio. It will allow you to discover the world, cultivate soft skills and understand the real economy, bringing together geopolitics, international trade, commerce, finance, and other intellectually challenging subjects.

If all this makes sense to you and you are interested in working in international environments where teamwork makes the difference, dive into the shipping world. You won’t regret it.

© Commodity Conversations® 2025

The above is an excerpt from the upcoming second edition of my book, Commodity Conversations – An Introduction to Trading in Agricultural Commodities, available on Amazon.