Friday, July 26, 2013

"10 top global commodity trading firms: Smart money or bad boys?"

FuturesMag goes long form:
Commodity traders come in all shapes and sizes, but commodity trading firms can be and often are juggernauts. In the last year alone, the top 10 global commodity trading firms brought in $1.3 trillion in revenues. According to the Financial Times, a report commissioned by the Global Financial Markets Association, whose members are the world’s largest banks, wanted to gather evidence on why commodity trading houses should be regulated like banks.

This might have been related to the drop in revenues by the top 10 banks’ commodity trading revenues to  a “paltry” $1.2 billion. However, it appears the report didn’t find the evidence the banks hoped they would. According to the FT, “it is unlikely that a large loss suffered by a single global commodity firm…poses a systemic threat to the broader financial system,” and that “the nature of commodity trading, and the structure and capital structures of  commodity trading firms makes them substantially more robust to [a financial crisis] than systematically important financial institutions,” like Wall Street banks or big insurance companies, which are the groups largely held responsible for the 2008 financial system melt-down. The report was never published, but here’s our take on the identities of the “smart money.”

2012 revenues: $60.9 billion
2011 revenues: $58.7 billion
CEO: Soren Schroder
Executive Chairman: Alberto Weisser
Founded: 1818 by Johann Peter Gottlieb Bunge in Amsterdam
Headquarters: White Plains, N.Y. 

Focus: Oilseeds and grains, produces sugar and ethanol, mills wheat and corn to make ingredients used by food companies and sells fertilizer in North and South America. Clearing member of the Chicago Board of Trade (CME Group).

Bad behavior: Recently five top executives at its India unit resigned during an internal audit into possible financial irregularities. Also has been accused of deforesting the Brazilian rain forest.

FY 2012 revenue: $ 89.03 billion
FY 2011 Revenues: $80.6 billion
CEO: Patricia Woertz 
Founded: 1902 in Minneapolis, Minn., by John Daniels and George Archer
Headquarters: Decatur, Ill., listed on the NYSE 

Focus: Oilseeds, corn processing, agricultural services, storage and transportation, wheat milling, cocoa processing and food ingredients business. Recently finalized a takeover of Australia-based GrainCorp for $3.1 billion. ADM Investor Services is a clearing member of the CME Group exchanges.

Bad behavior: Who hasn’t heard of the famous price fixing scheme of lysine and citric acid in the 1990s? ADM ended up paying a then-record of $100 million anti-trust fine. The story was captured on film in “The Informant!” in which ADM executive and whistleblower Mark Whitacre worked with the FBI to uncover price fixing. More recently ADM has been charged with violations of the Foreign Corrupt Practices Act, in which it was accused of bribing foreign officials. Reportedly, the firm has set aside $25 million in potential fines.

 2012 revenue: $93 billion
 2011 turnover: $87 billion
Chairman: Torbjörn Törnqvist
Founded: 1997 by Swedish oil trader Torbjörn Törnqvist and Russian businessman Gennady Timchenko
Headquarters: Amsterdam, the Netherlands, Geneva, Switzerland

Focus: The principal commodities traded are refined petroleum products (fuel oil, gasoil, gasoline, naphtha, and LPG), crude oil, coal, natural gas, LNG, biofuels, carbon emissions and grains. Gunvor also opened a metals desk in 2012.

Bad behavior: Seems like Gunvor’s questionable behavior is its bedfellows as it is aligned closely with the Russian energy markets. There was a report in the Economist in 2010 that alleged that Gunvor was manipulating Platt’s data on Ural oil to push prices down to purchase the oil and sell it at full price on the international market.

2012 revenue: $94 billion
2011 revenue: $80.7 billion  
Chairman: Richard Elman 
Founded: 1986 by Elman
Headquarters: Hong Kong, China. Listed in Singapore

Focus: Noble Group markets, transports and processes energy, minerals and ores and agricultural products including softs, grains and oilseedsRecently the firm forged into the United States to enter the natural gas pipeline and storage business. Its second largest shareholder after the Elman family is China Investment Corp. with a 15% stake.

Bad behavior: Difficulty in finding a successor to take over for Founder and Chairman Richard Elman, a British-born self-made man, who, from news reports, seems to have a Warren Buffet-type personae with an edge. At one point he stated his firm was run by PCS — plain common sense. In April, after two ill-fated attempts, Noble Group announced Elman’s latest choice to take over for him: Yusuf Alireza, 42, who was co-president of Goldman Sachs' Asia unit excluding Japan. Noble Group also just pinched JP Morgan's head oil trader Jeff Frase to head up their oil liquid's trading in Connecticut.