Cargill’s financial reporting: Committed to Lead

Cargill has very transparent financials and preserves an A1 financial health thanks to its Corporate Conservatism and Financial Orthodoxy.

They have reduced debt during 2010-2015 while others have seen the margins problem inversely, by leveraging.

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Spatial Competition, Arbitrage, and Risk in U.S. Soybeans

Conceptually, traders arbitrage price differences until markets have equal basis adjusted for shipping costs. In fact, location arbitrage is a “trading strategy to profit from market inefficiencies in price differences” Continue reading

“Noble Group downgraded as large debt payments are on the horizon”Noble Group Credit Research -NUS Credit Research Initiative

★★★★★
The case of Noble Group has stimulated industry participants and investors with mutual interests in commodity markets.
Academics at the National University of Singapore now take part in this effort to constructively address the credit, liquidity and solvency concerns of Asia’s largest commodity trader.

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The Sugar Casino

Summary:
★★★★★

Kingsman has this ability to bring complex-issues and fact situations regarding food and sugars into a non-trader lingo format accessible for an intelligent discussion between the policy makers, the industry and the public.

If Sugar is a Casino, then who sets the odds ?
Farmers, Weather, Millers, Trade houses, Governments ?

By 2040, our planet will be expected to support more than 9 billion people with twice today’s food demand.

Not only is there increasing uncertainty about food security with the climatic changes risk, demand for income growth will be expotential. An highly complex and the elaborate set of global trade policies will complicate matters further business decisions. Continue reading

Noble Group’s “Margin Call” Part II: The Enron Moment

★★★★★”Our balance sheet – the strongest in recent history – represents a significant advantage as we continue to identify high value growth opportunities across the products and geographies we operate in. Maintaining our investment grade rating with the international rating … Continue reading

With Noble Group, Nothing is created, Nothing is lost

Nowadays Hong Lim park is so quiet, no one bother to protest for our fellow Singaporeans !

Noble Group, the commodity trader listed on the SGX, is in a class apart mainly because their model assumptions and the financial reporting of commodity contracts and derivatives. Perhaps, Antoine Lavoisier, French nobleman of the 18th century and father of modern chemistry must have a great influence on the financial reporting of Asia’s Largest Commodity trader with Nothing is lost, nothing is created, everything is transformed. Noble Group has always had problems but now it seems they are taking some epic proportions. Continue reading

Reading the Basis:

Producers are a part of the foggy basis but face it very differently than the trader at the grain company.

Because they farm for a living, they face the market, they face the weather and have to pay for a lot of inputs before and after they got paid for their output.

I defined basis as the value, which determines when grain is moved. If the basis for corn is +$1 over the nearby futures in Ontario that is the value, which grain is being moved … Continue reading

S&P Just Warned Asia’s Largest Commodity Trader It May Be Junked

Summary:
S&P has given Noble a deadline of three months in which to raise a lot of capital, or else be downgraded to BB-, junk status. In addition to the warning by S&P, we are concerned about Noble Group’s financial reporting and realization of gains on commodity contracts, derivatives during Q3-2015. Excluding Derivatives MTM, Noble Group’s adjusted working capital is down to 685 million -47% from 3 months earlier.

Working capital has been reduced twice as much as their sales, essentially temporarily lowering their inventories and allowing its books amount of cash to show a positive amount.

The reported 500M$ gain on the oil hedge is not seen justified by the normal course of their hedging activity and was more likely to cover their working capital shortfall. We currently have a SELL on the stock with a price target of S$0.10.

Source: Commodity Merchant Trading and Shipping Advisory Services CMTSA Research- 23 Nov 2015 Continue reading

Find out how Cargill makes its trading decisions.

Risk Management is the core skill of Cargill and its Cargill Commodity Risk Management Group.

Cargill’s trading is intense, with a presence in the local agriculture of more than 60 countries.

It means that they deal with a risk profile that will expose them to harsh external financial of countries and will constantly make decisions to face difficult market circumstances over the time.

Cargill spends a lot of time outside the United States to understand how specific policies issues affect price discovery and markets in a positive or negative way.
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What’s the deal anyway with Glencore: is the trader making a death wish ?

They are good reasons to be concerned about liquidity, risk and cascading effects out there.

Is the Financial Market now catching with the financial reality of these shady traders ?

Is Glencore really the steal of the century like David Herro pretends ?

Do large-undercapitalized commodity traders and leveraged hedge funds cause systemic risk and economic downturns ? Continue reading

The Economics of Grains: the Canadian Experience of the Market Freedom.

In “The Politics of the Grains: a Canadian Experience” explains why in Western Canada, farmers are deeply suspicious of the business practices of the grain companies and hostile to their positions of power, alluding to trust, the single most important concept behind any commodity trade.(Commodity Traders are providers of Trust…)
The article has also highlighted the socioeconomic factors explaining why somewhere in the political process of the early 30’s, Westerners have pushed for centralization and for more government intervention in the market. Continue reading

Cargill: Follow the Beans from Pacific Northwest to China

As incomes have risen across Asia, people there have improved their diets, including eating more meat. China’s increasing consumption of animal protein has fueled the demand for soybeans, as soybean meal is a key ingredient in animal feeds. In 2004, China imported 9.4 million metric tons of soybeans from the U.S. By 2014, its U.S. soybean imports had more than tripled to 31.3 million metric tons. Continue reading

Cargill’s very own weather department

The Weather Department received hourly observations for 10,000 cities worldwide, as well as telex reports and satellite maps from national weather services.
Weather technicians sorted through volumes of data, relaying relevant observations to various business divisions worldwide.

Cargill’s salt business, for example, tracked where the next major snowstorms would hit, enabling them to supply sufficient amounts of road salt to those locations, while Sunny Fresh Eggs, now Cargill Kitchen Solutions, used daily temperature readings to adjust the feed mixture for its layer hens. Continue reading

Cargill: Barges brings salt business to the North

Since nearly as much fuel and time were needed to make the return trip, whether the barge was loaded or empty, backhauling helped maximize hauling efficiency and created another revenue opportunity for Cargill.
And in the case of salt, it gave rise to a new, highly profitable industry for the company. Continue reading

Corn Wars

On September 30, 2012, agents from the FBI contacted U.S. Customs and Border Protection at O’Hare International Airport in Chicago with an urgent request. They wanted bags from two passengers on an outbound flight to Beijing pulled for immediate inspection. The passengers didn’t track as dangerous criminals: Li Shaoming, president of Beijing Kings Nower Seed Science & Technology, a large Chinese agricultural company that develops corn, rice, cotton, and canola seeds, Continue reading

Protected: The Politics of the Grains: a Canadian Experience

There is no excerpt because this is a protected post.

Cargill: The unique science of grain

In 1922, a Russian-Jewish immigrant named Dr. Julius Hendel came to Cargill in search of a job.
Hendel was an expert in grain, well on his way to becoming one of the first in the United States to hold a doctorate in an agribusiness-related field.
He also shared the same adventurous spirit as John MacMillan, Jr., Cargill’s vice president at the time. Continue reading

What will disrupt Dry Bulk Shipping?

[CRUCIAL POST EVERYONE: IT WAS WRITTEN BY AN ASSET OPERATOR WHO UNDERSTANDS THE PEOPLE AT THE OPPOSITE SIDE, WHO HE IS FACING IN THE MARKET SO THE REASONS WHY IT IS VERY DIFFICULT TO MAKE THE BREAK-EVEN. Continue reading

“The Poverty of Academic Finance Research”:Trading Brent/WTI spread

The implication is that most published empirical discoveries in Futures Trading are likely false… Continue reading

Hocus-Pocussians, Commodity Credit Stress and Economic Gambles

Hong Kong Financial place by any standards, is very corrupted and only concerned by its well-being.

The role of financial analysis research is misunderstood by firms and maybe also by young people who dream to get a foot in the financial industry.

An Analyst has to be independant and be allowed to express an opinion, even if it’s negative.

To me the Iceberg case has focused attention on the risks that financial analysts face in candidly reviewing companies accounting. Continue reading

The Idiosyncratic Risks of Commodity Trader Noble Group

We maintain the call made in Noble Group’s Kurtosis Awakening Moment for the Commodity Markets in which we profiled the ongoing fast-motion trainwreck of Asia’s largest commodity trader.
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Noble Group’s Kurtosis Awakening Moment for the Commodity Markets

Trust is everything in commodity trading, it is also what is maintaining a constant risk premia in this market.

Noble Group is Asia’s largest commodities trader.

According to GMT research, Noble Group took what they have estimated as between $4 to $6 billions $US worth of fair value gains on asset valuation over the last 5 years.

Just before their Q2 earnings release, I have published the reasons outlining why I believe that the trader is an accounting hocus-pocus.
Continue reading

A win-win Deal, Teekay Tankers

Teekay Tankers’ purchase of 12 suezmaxes, a win-win deal By Barry Parker from New York The fate of Principal Maritime, a tanker company backed by private equity (PE) powerhouse Apollo Management, was revealed last week, with the announcement of the … Continue reading

The Trans Mountain-Panama Shipping Pipeline to Philadelphia

PBF Energy – has recently crafted an unorthodox trade: Delivering a 500,000 bbls Kearl Lake cargo (Albertan) to Philadelphia through Panama by LR2 tanker.
It is a move that you would normally expect from guys like Freepoint Commodities, (not PBF). Continue reading

The ETFs, Redemptions and Creation Arbitrages Case

According to Goldman Sachs Asset Management. ETFs have a very transparent portfolio holding and predefined creation basket. This allows arbitrageurs to create and redeem units every day through the in-kind creation / redemption mechanism. Such arbitrageurs are always in the market to take advantage of any significant premium or discount between the ETF market price and its NAV by doing arbitrage between the ETF and its underlying portfolio. Thus, the open architecture of ETFs ensures that there is no significant premium or discount to NAV. At the same time, additional demand / supply is absorbed due to the action of the arbitrageurs. Continue reading

ThisisNoble’s Farewell

[IN FEBRUARY 2015, ICEBERG RESEARCH ISSUED A REPORT ALLEGING, AMONG OTHER THINGS, THAT: (I) NOBLE GROUP EXPLOITS THE ACCOUNTING TREATMENT OF ITS ASSOCIATES TO AVOID LARGE IMPAIRMENTS AND FABRICATE PROFIT; AND (II) CONTRARY TO WHAT NOBLE GROUP’S MANAGEMENT CLAIMS, THE … Continue reading

TRADE FINANCE : Why The Idyllic Surmise is Broken

In trading, there is a time lag between the shipment of products by an exporter and their arrival by the importer depending on the duration of a voyage. Normally, exporters will require payment upon loading, whilst importers ideally would delay payment until arrival. In its simplest form, trade finance is bridging this timing lag by providing a short-term credit facility. This activity is intermediated by banks and also collateralized by the underlying cargoes as well as by additional export guarantees. Continue reading

The Mastermind Behind Clarksons: Martin Stopford

Shipping is not a boring activity, it has always attracted ultra-smart and passionate types. Martin Stopford is a Brit Economist and the Mastermind behind Clarksons Research, part of Clarksons group. He is a sophisticated and Smart type with formidable intellectuals. Continue reading

Commodity Trading Case: The Location Arbitrage

An Arbitrage is a trading strategy to profit from market inefficiencies in price differences of a given commodity, either at the same location or at different geographical locations.

Frontier Effects are an excellent starting point in a discussion about arbitrages. Continue reading

Freight Trading Lingo Demystified

Simplifying how oil traders make deals on various freight transactions terms.
inShare99

Have you ever wondered about the meaning of commodity trading terms, or Incoterms? FOB…DES…DDP. Say What?!?

Incoterms were established by the International Chamber of Commerce (ICC), a non-governmental organization, to standardize the interpretation of major trade terms.

Sales contracts using Incoterms define the obligations and risks of both the seller and the buyer. The obligations cover the period while the merchandise is in transit, whether by land, sea, air or a combination of modes. Continue reading

Risks of Non-Compliance of CL.19.7 CL.20 under BPVOY4.

The shipping trade is nested by an ancillary web of commodity sale & purchase contracts crafted by traders to create “the ultimate trading optionality”actionable unto the smallest decision timeframe possible !

Disputes arise when the liabilities and risks of such trade innovations are not carefully apportioned in the S&P contracts. Moreover some organizations exert an operational veto on the commercial operations of others because of physical/logistical constraints and in some case because of their natural bottleneck monopoly. Continue reading

Economics Fundamentals of Ethanol Blending in the United States

Recently, a solid MISPRICING has appeared in the RIN market with D5 RIN (the RIN for advanced cellulosic ethanol have become expansive vs E100 and Gasoline( shortly after the EPA issued RFS and during pending changes for Brazil tariff on foreign imports). A major U.S IB has brought Brazil Ethanol to blend ethanol to generate the RIN, then separate it and cash-out the credit attached. Continue reading