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A Conversation with Alex Eito<\/strong><\/p>\n \u00a0<\/strong>Good morning, Alex, and welcome to Commodity Conversations. Please briefly describe your career so far and your current role.<\/strong><\/p>\n I began my career at Cargill, a highly structured and demanding environment for learning the commodity business. From there, I moved through a few other trading firms, then into the financial sector just before the 2008 crisis and later established a hedge fund with some former Cargill colleagues. The hedge fund performed well operationally, but a major investor withdrew, so we returned all the money and closed it cleanly.<\/p>\n All those experiences have given me exposure to nearly the entire value chain: very large houses, mid-sized traders, and the financial aspects of commodities. I am naturally a generalist, so I\u2019ve always preferred knowing a bit of everything rather than specialising intensely in a narrow niche. In this industry, curiosity is crucial.<\/p>\n Today, I work for Arasco<\/a> in Riyadh, Saudi Arabia, as a Senior Vice President. I\u2019m responsible for trading, shipping, procurement, pricing, and all aspects of buying, importing, distributing, and reselling raw materials domestically and regionally. We also co\u2011own five vessels in partnership with Bahri, the Saudi shipping company, so shipping is a significant part of my remit as well.<\/p>\n What does Arasco do in practical terms? <\/strong><\/p>\n The core of Arasco\u2019s business is animal feed, with corn milling as a secondary major activity. We have a port with approximately 450,000 tonnes of storage capacity, rail connections, and three plants: two feed mills and one corn mill. Arasco is also a major shareholder in a poultry business.<\/p>\n We also operate a vessel agency and an inspection company, import inputs, and utilise our assets and logistics network to redistribute commodities within Saudi Arabia. These include corn, soybean meal, sunflower meal, wheat bran, alfalfa, and other feed-related products. We are not involved in flour milling or oilseed crushing, so we concentrate on the feed sector rather than food staples like bread.<\/p>\n How is your trader\u2019s experience assisting you in managing the current situation in the Middle East with your factories, mills, and distribution chains?<\/strong><\/p>\n It helps me in two ways: international logistics and domestic distribution. Internationally, you must understand when to divert a vessel, how to renegotiate terms, what your insurance covers, and which routes involve certain risks. For example, choosing between time charters and voyage charters is partly an energy gamble: if you commit to a long voyage charter at the wrong time, you\u2019re effectively taking a position in crude oil and bunkers. Occasionally, in volatile environments, time charters are safer because they minimise bunker exposure.<\/p>\n Domestically, trucking operates similarly to ocean freight. If security measures or congestion cause trucks to travel three or four times the usual distance, and loading or unloading is slower, your effective \u201clocal freight\u201d cost per tonne increases because each truck makes fewer trips. Considering freight as \u201cdollars per ton\u2011mile\u201d or \u201cper day’\u2014rather than just a fixed number\u2014helps you convert your shipping intuition into domestic logistics decisions. Originating and distributing are mirror images of the same challenge.<\/p>\n Are you noticing unexpected distortions in futures markets and spreads due to the Iran conflict?<\/strong><\/p>\n The biggest distortions today are in the oilseed and vegetable oil complex, partly linked to the broader energy and biofuels story. A large share of vegetable oil production now goes into biodiesel, and higher crude oil prices create a kind of \u201cwar premium\u201d across that complex. It\u2019s hard to quantify precisely, but you can feel the froth when oil rallies and pulls vegetable oils and even corn (through ethanol) along with it.<\/p>\n We\u2019ve also observed periods when the relative value of soybean oil compared to soymeal shifted so dramatically that the meal effectively became the byproduct rather than the primary product. This alters how crushers operate and how you consider margins. Some of this is driven by war and regional tensions, some by biofuel mandates, and some by broader energy market dynamics.<\/p>\n The conflict is pushing up fertiliser and other input costs. Could this lead to higher food prices and lower yields in the longer term?<\/strong><\/p>\n The main factor is planting decisions and input application. Higher fertiliser prices may prompt farmers to reduce application rates or shift land away from fertiliser\u2011dependent crops like corn and, in some cases, wheat. That\u2019s a double blow: higher per-unit costs and possible lower yields.<\/p>\n From what I hear, many US farmers are well covered with fertiliser for the current season, but there could be effects in Brazil and other regions where coverage is less complete. Lower application this year may reduce yields and influence what gets planted next year in South America. Will that justify a significant price move today? Probably not on its own, but over the medium term \u2013 six to eighteen months \u2013 it can tighten balances and support prices. In this environment, I would be cautious about taking large, long\u2011dated positions purely on this factor, whether long or short.<\/p>\n Should the Middle East be worried about possible food shortages?<\/strong><\/p>\n It\u2019s difficult to speak for the whole region because stocks and logistics differ greatly between countries, and I don\u2019t have a detailed view of every stock level. What I can say is that, so far, I haven’t seen widespread, systemic shortages\u2014more local shortages and logistical issues rather than factories having to shut down due to a lack of raw materials.<\/p>\n If the conflict endures and disrupts flows over a long period, you can certainly find yourself in a tighter situation. However, an important factor in this region is a degree of practical solidarity: companies and even competitors have been working together to keep supply chains functioning within economic limits. Prices and logistics costs have risen, yes, but there has also been a deliberate effort not to \u201ckill\u201d each other in a crisis. That matters.<\/p>\n Has the crisis elevated your importance within the organisation?<\/strong><\/p>\n Regarding pricing and risk management, my background is very useful for analysing markets and developing balanced hedging strategies. However, it is a team effort in logistics, operations, and contingency planning. We have established a robust cross\u2011functional team to manage routing, freight, trucking, and plant supply.<\/p>\n The lesson from the Ukraine war is to be careful not to overreact in one direction. Many people were left wrong and with losses after initial price spikes because they extended too far on the assumption that tightness would last indefinitely. In crises, the challenge is to stay balanced: protect against real disruptions without betting everything on a single geopolitical scenario.<\/p>\n Going back to your career, you\u2019ve traded many agricultural commodities. Which one do you prefer, and why?<\/strong><\/p>\n Each commodity has its own character. Grains, oilseeds, sugar, coffee, cocoa \u2013 they all trade differently. Sugar used to be a \u201cclubbier\u201d business: smaller, with closer relationships and a very specific feature \u2013 it\u2019s deliverable worldwide on a FOB basis, which fundamentally influences how you manage logistics, spreads, and risk.<\/p>\n Grains like corn and wheat are more about basis and premiums compared to Chicago. They generally require more physical assets, starting from farms, and the trade is more dispersed. Wheat is closer to a flat-price market, but with significant political and geopolitical factors, especially since Russia shifted from being a major wheat importer in the 1980s to the leading exporter today.<\/p>\n Personally, I\u2019ve always liked grains and oilseeds, and to some extent, sugar. Coffee and cocoa are smaller, more granular markets in which destination stocks often influence dynamics. If your interest is in flat-price futures, grains may suit you better. If you prefer spread trading and delivery mechanics, sugar is fascinating.<\/p>\n \u00a0<\/strong>Which commodities have been the most challenging?<\/strong><\/p>\n Wheat can be complex because of its political and geopolitical context. Policy decisions can change suddenly. Sugar presents a different challenge: it\u2019s very relationship\u2011oriented, with mills and refiners you may have known personally for decades, and the deliverable contract makes spreads central.<\/p>\n The oilseed complex has become more policy-driven due to biofuels mandates, particularly biodiesel mandates. You now need to scrutinise energy policy and fuel markets nearly as much as crop reports, because soybean oil, rapeseed oil, and others are increasingly connected to diesel. That policy aspect has introduced an additional layer to what was once a simpler story of agricultural supply and demand.<\/p>\n Throughout your career, where did you earn most of your money \u2013 flat price, basis, spreads, or supply chain management?<\/strong><\/p>\n Most of my P&L has come from flat price\u2014mainly from getting the major directional moves roughly right. Even today at Arasco, where we are processors and physical traders rather than speculators, 70\u201380% of our price exposure is linked to futures. If you cannot interpret the flat-price market, it becomes very difficult to understand spreads and basis.<\/p>\n That said, each product has its own P&L \u2018engine\u2019. In sugar, because of the deliverable nature of the contract, spreads carry much of the basis risk; the flat price and spreads can lead or lag each other depending on the situation. In grains, basis, logistics and value-chain margins (origination, elevation, storage, freight) are much more important on the physical side. However, the fundamental building blocks \u2013 supply and demand, money flows, policy, and weather \u2013 remain the same across products.<\/p>\n Most successful traders talk more about their bad trades than their good ones. Can you share a bad trade and what you learned?<\/strong><\/p>\n I\u2019ve had many. Any trader who claims never to have lost money is lying. One recurring mistake has been hedging in the wrong futures contract \u2013 for example, hedging Russian wheat with Chicago futures. Over the long term, the relationship might hold, but in the short term, the basis can move violently, so you end up adding risk instead of reducing it.<\/p>\n The other major theme is timing. Many traders, including myself, are driven by fundamental analysis. We are often correct about the concept, but too early in our trades. A recent example was soybeans versus corn around 2022\u201323: we recognised that the bullish story was turning, and we were ultimately correct, but the change took six months longer than we expected. Being \u201cright but early\u201d can still lead to bankruptcy if you size your position aggressively and can’t withstand the downturn.\u00a0<\/strong><\/p>\n Can you share three key lessons from your bad trades?<\/strong><\/p>\n First, hedging instruments must truly match your underlying risk, not just look correlated on a chart.<\/p>\n Second, timing and position sizing can matter more than being fundamentally correct in the end.<\/p>\n Third, you learn far more from losses and near\u2011misses than from the trades where you just got lucky.\u00a0<\/strong><\/p>\n