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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.

Colt Bagley III is credited with revolutionising the sugar business in the 1970s and is sometimes described as the “Marc Rich of the Sugar Business.” I talked with him via video conference from his home in Bermuda and asked him to tell me a little about his life before commodities.

I grew up in Minnesota and attended a military school at an early age. I had learning disabilities, and the small classes suited me better. The school was rough, but athletics was fun. In high school, I realised that I wanted to explore the world. Days after graduation, I joined the Marine Corps, serving three and a half years, including 14 months in Vietnam.

Serving in Vietnam and visiting Japan, Korea, and Australia was eye-opening. I never looked back. I came home and completed the University of Minnesota in three years with a Chinese History and Mandarin degree. I played hockey for the University and had the opportunity to play at higher levels, even in Minnesota. However, I needed less practice time and more academic time in the library to get on with my life. By then, I loved playing hockey for fun, but nothing more.

Did you join Cargill because it was an international company?

I grew up in Wayzata, Minnesota, where the MacMillans and the Cargills lived just down the road. My great-grandfather owned a country grain elevator company with plants in Minnesota, the Dakotas, and Montana. At one point, he was a joint venture partner with Cargill, but he didn’t like his counterpart and ended the relationship.

While I was in high school, I worked at the Dakota elevators and the Minneapolis Grain Exchange during summer vacations. After my parents divorced, I didn’t want to work for my dad. Besides, I wasn’t interested in working for a domestic company. I accepted a position with Cook Industries, which had started trading grain in a big way. However, a friend who worked there warned me against taking it. “We’re having trouble,” he told me. “There are other places to learn the business. You’ll be fine.”

I joined Cargill in 1971 and did grains in Norfolk, Virginia, trading corn and soybeans during the Russian Great Grain Robbery. The company executives knew I wanted to work in international trade and offered me a position in the sugar business they were setting up in New York with Rick Frame and Robin Lawson. I stayed with them until 1977, when I left to join Phibro, who were keen to pick up on Cargill’s rapid and successful sugar trading model.

How did you transition from grain to sugar?

When I started in sugar, I said, “Okay, let’s sit down with a map. Where are the major consumers? Where are the major producers? How many are owned by entities in the business that handle distribution directly?”

At Cargill, I learned that commodity trading is a logistics business involving getting the commodity from point A to point B. However, the real business is trying to create a niche where you can build exclusivity in client relationships. This is how you control profit margins in the trading business.

However, the key to profit and growth in any trading business is a tight and trusting trading team anchored by partners working together. My initial team formed at Cargill and expanded in Phibro with the inclusion of Daniel Kilbert in white sugar and George Testard in raw sugar and grain strategy. We also had an experienced trading team in Geneva with new trainees and Robin Lawson’s expertise in managing the hedging positions.

When I started in sugar, Russia bought Cuban sugar, but who else was in the game? There was the US quota, but that wasn’t interesting. It was primarily a tender business, and you had to pay top dollar for the supply. Still, countries like the Philippines and Thailand had free and open sellers with whom you could build relationships.

I realised I needed people in each country who understood local conditions. Are the crops good? How is the weather? Is there a problem at the port due to congestion?

Agents are important. Your relationships at origin are crucial because those are the guys who have the problems. And when they have a problem, you’ve gotta finance them.

Thailand was interesting because you talked directly to the mill owners, which was more personal. Until the government took over, the situation was similar in the Philippines.

Once I learned the business, Cargill could offer clients good logistical and loading terms, premiums for late loading, advance or postponed shipments, and other benefits, such as respect for contract law and contract performance.

Can you give me an example?

We made sales in Romania, but the buyers came to us and said, “Okay, well, we can’t take the sugar now.” We agreed to extend the contracts and amend the terms. There was a slight premium, but we locked in additional forward contracts for the following years. Suddenly, we had pyramid trades and dominated specific regional markets. We could then focus on originating sources of nearby supply to increase the trading margin.

Later, we did that in Philip Brothers in places like East Germany and Poland. It’s how you build up and control the tributary trade flows.

How else did you build the business?

We got the best Brazilian agent, Costa Pinto, and learned what was possible from a Portuguese mentality. We started buying 100,000, then 250,000-mt contracts, then 500,000 mt clips in long-term contracts and then up to one and a half million mt. Suddenly, we had an evergreen contract business source that made us dominant from Brazil to the Mediterranean, the Baltic, and the Indian Ocean.

As the Brazilians converted more from raws into whites, we built up our expertise in white trading. It allowed us to go into Europe, buy restitution (export subsidy) at public EU tenders and add European whites to our trading book. The producers gave us flexibility if we handled the relationships right. Europe became a key origin point in our book, as did Brazil, the Philippines, and Thailand.

We then focused on the destinations. China and Russia had problems when Cuba had a bad crop. The traditional colonial brokerage/trading companies were firmly implanted in Russia, and we couldn’t do anything there for a long time. As such, it was essential to build up greater capacity and capabilities that others didn’t have.

At Phibro, I met a couple of kids doing a PhD at Columbia. They studied weather and photo imagery, correlating satellite imagery with crop statistics. They needed money to finance their projects, and we funded them twice. They devised a way to digitalise black and white satellite photographs to determine the moisture content, size and density of the crops, the number of husks of corn and the density of the field in terms of productivity. They then compared the results against previous years to produce crop estimates and projections. Phibro financed their degrees and became a client of their information. It is funny how things turned out as Cargill finally bought their operating company many years later.

When I moved to Phibro, I knew I needed an advantage – an edge. I realised that the weather was the key to a strong trading portfolio, and so I went to work on “weather”. I studied it every day. The traditional colonial trade houses were full of ex-army guys who had no clue what the weather was like. However, we on the trading desk could see what was happening to the crops in Cuba and Russia. I realised they had a problem ahead of the rest of the market and before it impacted price.

I went to the Russians with our Moscow office manager, Ken Davis, and we showed them the statistical changes in the supply/demand data and our analysis based on the severe weather during that growing season. I sold them a first tranche of 700,000 mt and a second tranche of 400,000 mt.

It also attracted the attention of the Chinese. Richard Elman was our guy in Hong Kong, and we went together to Beijing. We shared our analysis of the beet crop in North China with them there. It showed a significant deficit in sugar beet production, and we eventually sold them 600,000 mt.

The following year, Cuba and Russia had an even worse crop, and I went with a significant offer and long position in August of that year, ready to trade. I hated being that long, but I was 80 – 90 per cent sure the Russians were gonna bite my arm off. After much prep work by our guy in Moscow, I went to see them. They told me they would wait until November or December, when they would have a better idea of their crop, before deciding to buy. They were playing me.

I went home, liquidated the flat price position, and told everybody in the company not to trade a single tonne to Russia. Later, when I was on a trip, one of my partners sold them 50,000 mt. I was furious!

We sold our physical long sugar position to firms who sold to Russia and were desperate to cover the physical sugar. We made a significant profit on those sales.

How important were your partners to you?

Partners are cornerstones. Although they may not contribute financially daily and may never develop an excellent trading strategy, the trading desk and I could bounce ideas off them. They understood the business, our capabilities, and sources and could spot everything wrong with a trading strategy.

George Testard once said that you had a thousand ideas a day. Of these, 999 were useless, and one would go on to make tens of millions of dollars. His job was to discard the 999.

I loved having George in the room because he could analyse anything. He also helped us avoid losing money, a big part of trading.

Why did you leave Phibro?

I got fired three times in my career, not because I lost money but because I was too harsh on people. Yes, I was tough. I was in the office at 6 a.m. and worked until late at night, expecting everybody to work just as hard when the work was there to be done.

While at Phibro, I fired the Chairman’s grandson because he was taking extra days on weekend trips to Israel to see his girlfriend. I had warned him that his behaviour was wrong and a poor example for others. I talked to his grandfather, who encouraged me to be strict with him. Still, it was probably a mistake to fire him. I was fired a year later with the Chairman’s approval.

Why did Phibro exit the sugar business?

Sugar trading is a logistics business. Phibro failed because they didn’t support their origination and didn’t appreciate the value added in trading and logistics or the significant value added in the destination part of long-term trading relations.   A couple of mills in Guatemala and Costa Rica came up for sale, and I put it in front of them. Phibro said, “No, we don’t want to own sugar production assets.”

Phibro never got close to the downstream distribution’s long-term business potential of developing the trade flow between producers and consumers. They preferred to buy FOB and sell C&F and leave the trade there. I talked to them about ships that could load white sugar in bulk and discharge it in one-tonne or 50-kilo bags. I worked on the project for four years, but Phibro didn’t have the entrepreneurial shipping department to take this on. Ex-brokers ran it. They were good. They got time charters and everything else when we needed them, but they minimised risk and never invested in speciality ships to enhance trade to destination clients.

And then you moved to Gill & Duffus.

I did my initial j/v deal with the Chairman, who was looking to buy ED&F Man. I talked him out of it. I told him I could build a similar Phibro team in the US and Switzerland, and we could trade sugar and grain with a line of credit without the massive debt load of buying an existing trading company with bad contracts/debts. G&D liked the idea of trading sugar like they traded cocoa. They were the largest in that sector.

I started with Pat Atkin, the Chair of Gill & Duffus, and we had a great ride, earning more than cocoa one year. Sadly, Pat fell sick and became distracted. When he stepped aside, a financial guy with no understanding or trading experience replaced him. He surrounded himself with cocoa traders he knew for advice and to look over our shoulders. I started to get tough with the cocoa guys. It wasn’t going well for any of us. I told them we would find someplace else to go.

Long term, Gill and Duffus didn’t have the thrust to develop the business.

Did you ever think about moving to Marc Rich?

I used to talk to Marc Rich all the time, and we got along well. I liked the guy, and I respected him. You could speak to him about everything related to the world, global risk, etc. He understood everything but was always slippery on legal issues, cheating and looking for an advantage to increase his margin.

He wanted to dominate businesses but didn’t have a moral code as strict as mine. Because he operated in Switzerland, he would do things that broke the law. He wanted me to work for him. We talked and talked. Finally, one day, I told him that I didn’t like the direction he was taking the company and broke off the talks.

So you decided to go into inter-trade brokerage?

My wife and I love London, and we think it’s a better place to raise kids than the US. So we put them in school, and they were fine.

After shaking many trees, I wanted to stay visible but keep my hands clean. So, I decided to try brokerage for a while, staying reliant and near the game. However, I thought people would be more accommodating if I helped them with strategy. I even hoped they might include me in their strategies more as part of a parallel relationship.

You then transitioned back from brokerage to trading.

It was the best thing I ever did. I partnered with two Dutch guys, ex-bankers, to create blended sugar products and import them into the EU. We bought sugar in Africa or other localities with preferential duties into the EU, blended it with another project mix, usually cocoa or a citric product, and sold it to chocolate or soft drink companies. Coca-Cola couldn’t do business in some parts of Africa, but I could. There was a period in Ethiopia when our blended sugar products were outselling coffee as an export.

I had been in the global trading business but made more money selling one-tonne bags in containers mixed with a bit of cocoa. They were 97.3-5 – 98 % sugar. The margins were huge. With margins like that, you could always make money. You could fall asleep and never worry. We had 5,000 containers afloat at any one time, keeping the business going for 5 or 6 years.

In sugar, like all commodities, we had large price swings that narrowed or widened the difference between world price sugar and preferential EU or USA domestic sugar. At times, countries like Ethiopia and Sudan had to import to export, so when the world price rose above the domestic EU price, the business no longer made sense without hedging and risk management.

I estimated we needed $50 million in credit lines to continue the business and manage a hedging programme, but my partners felt uncomfortable and refused. They were bankers and had a problem with hedging.

Do you still trade?

No.

One of the fascinating things about your career is that you’ve gone from these mega deals with Brazil, Russia, and China to trading niche markets that nobody notices. Are niche markets the future of trading?

While at Phibro and Cargill, I focused on global trading and was always interested in building supply niches. We did this in the Philippines and Thailand and became Brazil’s dominant sugar company.

I learned my philosophy at Cargill, which is based on logistics and supply distribution. But how do you make money in logistics and distribution and then create profit niches and expand them? You enlarge the trading envelope into an exclusive relationship and improve the product ranges.

I wouldn’t pay off producers for physical sugar contracts. As a result, I often had problems in many producing countries with single-selling entities. Central America, the Dominican Republic, and Thailand were exceptions.

What were the biggest, the best, and the worst trades you made?

The first Russian sale was my biggest trade. The second Russian sale should have been even bigger, except the Russians played a silly game, and I never traded with them again. So, that was perhaps my worst trade.

One of my most profitable market trades was in the US market. A series of crop failures in Florida prompted the US to import a large amount of sugar under the US quota. I realised there would be too much sugar when the crops recovered, so I started working on a strategy for when the worm turned. I expected the domestic price to plummet and the US government to cut the quotas dramatically.

Over the next 12 months, I bought a bunch of cargoes and stuck the sugar in domestic warehouses. And when the USDA reduced the quota, prices rallied, and we made a fortune.

I could not have done it without Paul Farmer’s help. Paul was a young trader who grew up to become a “partner” type of reliable college. He focused on the US market and the prime buyers. He not only improved the strategy of the trading desk but, as had been done elsewhere, started to work with lower-grade raw sugar crystals that were higher in sucrose and had a value close to that of white sugar.

Producers in countries like Mexico were cranking crystals out of the production mills for domestic consumption, but the quality was not good enough for refined industrial sugar markets. Paul saw the merit of getting food manufacturers in the US and elsewhere to modify their facilities to take the crystal raws. This was a win-win situation that significantly boosted our volume and market share.

After I left Phibro, Paul continued to build his business. However, there were all sorts of limitations in the Phibro business model, and he eventually left and set up his own shop. He is still leading the way in US supplies of raw, white and crystal sugars to happy manufacturing companies.

Cargill, Phibro and Gill & Duffus have all exited the physical sugar market. Why do you think that is?

They didn’t want to invest in logistical downstream distribution networks.

Sugar is a challenging market. Cargill tried to develop downstream distribution and refining, but they chose the wrong countries. Syria is an example.

When they had the right machine, they never had the right guy to run it. There are umpteen examples of people who have failed to develop their potential in commodities, especially trading.

Would you have preferred to be in the oil market? Would you have made a lot more money in the oil market?

I grew up in a grain family to be in the grain business. I went into the sugar business because it was a speciality business, and it was the first job offered to me to take me abroad. But it was within a grain company. Some people argue that Cargill revolutionised the sugar business. Once in sugar, I wasn’t moving back to grain.

What advice would you give someone joining the commodity trading sector today?

Preferably, have an education and training in engineering. Be a problem solver. Read books. Read history, study geography, study raw material and product development, where imports are needed in net deficit countries, and study weather. Weather is everything if you’re in soft commodities. It’ll tell you everything. And it doesn’t hurt to take a class or two in law. Every trading department needs someone who is legally trained.

You need filters in trading, people to filter your ideas. Strong partners can be the best. That’s why, for me, partnerships are the key to good trading companies. If you start trading today, get a strong partner or two with money and limit your risk.

Big corporations are unreliable. I got frustrated in the big companies because I never knew whose hand was on the tiller. I took my frustration out on the young people on the trading desk. I was mean to them and got fired for it. I made mistakes like all people. I was hard to get along with, which is my solid regret.

When starting a business, always look for a trading advantage. Start slow and small, and get your training in a niche business.

Finally, you’ve gotta go find yourself because, ultimately, it’s your trade.

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