Miller Magazine Issue: 121 January 2020

55 COVER STORY MILLER / JANUARY 2020 the challenge of operating in the economic climate of a country, where financing costs are a well-documented problem with the benchmark interest rate at a whopping 63%. To sum it all up, Tolstoy's quote on happy families be- ing all alike while every unhappy family being unhappy in its own way is certainly true when coming up with a plethora of plausible reasons for profit meltdowns and personnel shake-ups, whereas the crux of the matter is that they all happen against the backdrop of tough trad- ing conditions. When information was difficult to obtain, and markets more opaque, large trading houses with established financial instruments and trading channels had a significant edge. Today’s commodity markets are characterized by increased competition, transparen- cy and unrestricted access to information making pure trading less profitable. On the other hand, owning cash generating assets in strategic areas have become key to success. Grain trade is capital intensive, it requires investment in storage, facilities, port and trans- port infrastructure. As a result, com- panies are forced to restructure in order to improve their finan- cial strength and investment grade rating enabling finance further growth which facili- tates trading. It all boils down to the evolutionary survival of the fittest as a natural selection mechanism. In a recent development heavy weights in commodity trading, among which ADM, Bunge, Cargill, Dreyfus and more recently, COFCO and Glencore, have joined forces to digitize its supply chain and commodity trad- ing systems. This blockchain initiative started by world’s largest agribusiness firms is set to explore solutions for grain and oilseed post-trade processes and supply chain efficiency with technologies including blockchain and AI, streamlining contract execution processes to make them more efficient, more accurate and more transparent. Changes in phyto- and quality requirements of im- porting countries are evolving and changing constantly. Thus, Egypt - the world’s top wheat buyer, has recently announced revival of its travelling delegations of agri- cultural inspectors, who are to resume checks of wheat cargoes purchased during state tenders at the port of origin. Government quarantine inspectors had in the past travelled at the expense of supply companies aim- ing to secure smooth passage for their wheat, incurring a fixed cost per ton. Retrospectively, it proved a lesser of two evils, after several cargoes were rejected at Egyptian ports on arbitrary and unpredictable grounds incurring huge costs. News travel fast today. There is a big demand for news from various market players, and a growing number of news agencies and analysts, large and small, cater to that need. Information supply is extensive and of vari- able quality and accuracy. The spread of inaccurate and misleading information is a significant and growing glob- al problem. It is a major challenge for journalists and a source of alarm for governments, institutions and individ- uals internationally. So much so, that Thomson Reuters and Facebook partnered to explore the significance and extent of this growing global problem in their new online course "Manipulated Media". Back to trading. More often than not, marketing and trading still uses Chicago Board of Trade (CBOT) fu- tures as a risk management tool to hedge accumulated wheat and corn quantities, but an increasingly big proportion of the price – the basis - cannot be hedged with all its conse- quences. At the same time, rela- tively flat commodity markets have spurred some young opportunistic traders to form international trading service entities aiming at selling applied trading ser- vices to the industrial users who consider outsourcing trading altogether. Furthermore, as trading be- comes more transparent, and informa- tion flow less restricted, the profitability of convention- al news terminals is also coming under pressure from cheaper alternatives, which unbundle various services making them more affordable while securing some valu- able features, like Excel analytics plugin, connecting data to Excel sheets with in-house analytic calculations and corporate messaging with its advantages of being con- nected to other influential traders through a professional platform enabling pitching real-time ideas and gaining feedback from the community and analysts. Meanwhile, market volatility is increasingly kept in check by modern agriculture, which is characterized by most innovative production practices and growing techniques, employed by today's farmers in order to maximize the production of agricultural produce while