Traders-SITCG Part XII: Cargill’s Geneva

THE CARGILL VISION
• Our Purpose is to be the global leader in
nourishing people.
• Our Mission is to create distinctive value.
• Our Approach is to be trustworthy, creative
and enterprising.
• Our Performance Measures are engaged
employees, satisfied customers, enriched
communities and profitable growth.

 

For more than 50 years, Cargill’s Geneva office has been the “window” for the
company’s international trading activities – a window that has grown
remarkably larger.

Cargill Risk Model: supporting decision making in trading, through analysis and supervision of objectives, while endeavoring to secure the value of transactions.

[Cargill News, Internal]

More than any company, the American giant of agricultural products laid the foundations of the “Leman commodity hub”.

Many other trading companies have settled in Geneva discreetly. Mercuria, one of the five largest energy trading companies is headquartered in Geneva. One third of the oil is traded in Geneva, while the Russian oil is 85 percent. Geneva is the world’s number one in agricultural commodities, mainly rice and grain, but also oil crops.

The commodity trade is now more important than tourism economically with 10 per cent in the Canton of Geneva.

400 companies with an aggregate sales of 800 billion CHF are active with a Geneva office.

Not only is  the connection with the banking center attractive, but also the low taxation of international trading companies, which is about half as high as 12% at other important trading venues.

Commodity Trading in Geneva and the Leman Region*

I think the credits goes to Richard Watts at HR Maritime, a maritime and international outsourcing company, for the mapping of the active companies*.

 

Traders-SITCG Part X: Cargill, l’université genevoise du trading

Cargill’s culture has some disadvantages for petroleum “trading”.

The bonuses are lower than in the competition.

Trade in crude oil is prohibited. Individual risk-taking isn’t appreciated.

Many times whole teams have gone to Vitol or Trafigura. But the advantage of this prudence is that Cargill has a resistance to any event to the vagaries of the market.

There is a limit to the amount of business you can do with a counterpart,”- Norman Hay, the former chief executive of Cargill International S.A in Geneva.

“If you are out-of-bounds due to market fluctuations, you are encouraged to cut exposure as much as possible. It reduces the amount of bad debt. Especially for emerging countries where we do not know the customers well”.

 

Cargill Risk Model

The risk management function in the SMEs or the large trading company requires a concentrate of competences, both «classic financial» related to risk aspects of the market, and an understanding of  the risk dimensions of physical trading.

In a commodities trading operation the role of risk manager consists primarily to control the application of rules and risk limitation approved by the BOD and, if need be, of informing the latter of any violation.

The role also extends to supporting decision-making in trading, through analysis and supervision of objectives, while endeavoring to secure the value of transactions.

On a daily basis the risk manager and his team are in constant contact with the
various departments in order to compile the information needed to analyze the non-covered risks.

The risk manager concentrates especially on the market risk, risk of liquidity, basis risk, currency risk etc.) along with other types of risk associated with international trading such as risks of compensation (political / financial / banking) or “operational” risks associated with physical commodities (shipping/credit).

He or she thus organizes the risk monitoring of the operations with a view to allowing him or her to decide whether or not to set up a cover strategy by the conclusion of limiting the exposure depending on the risks the company is prepared to take, as defined in a hedging policy.

I’m Simon Jacques. I’m certified Energy Risk Professional, “the gold standard of Energy Markets” as distinguished by the prestigious Global Association of Risk Professionals.

On Navigating the commodities markets with freight and spreads I share my passion with suberb views.

As the exclusive advisor to leading energy marketers and producers on defining and imparting the knowledge and skill sets necessary for their professional staff to function effectively.

Trade to Cash

I master the art of commodity merchandising obsessed by all its aspects of this Art.

simon-jacques/commodity-merchant-trading-and-shipping-advisory-services/

Flows

Navigating the commodities markets with Freight and Spreads © 2017