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Agro-Commodity Trading Patterns
Pedro Nonay
Geneve – April 2021
“When we thought we had the answers, all the questions suddenly changed” (Mario Benedetti)
Successful traders have differentiated themselves by having information ahead of others. In the last decades, rapid accessibility to the similar pieces of information have equalized competitive advantages.
Timing weighs a lot in trading. Before the Digitalization Era through Internet, the history of transmission of ideas was dominated by (i) Learning to Speak (moving towards “sapiens”) (ii) Learning to write (beginning of we call civilization) (iii) Gutenberg Printing Press (making knowledge accessible).
In trading, the historical paradigm changes were sponsored by the “speed” of the information transfer. First came walking, then horses, followed by the telegraph at the same time of the birth of Cargill and LDC. More recently with the telephone, airplanes and finally the Internet. The faster the information flowed, the greater competitive advantages market players could leverage.
In perspective, climate change is the main parameter of the most critical trends. Then, global crises (i.e recession) and short term Covid plays a role as accelerators facilitating remote working conditions, driving food security concerns, creating more local and regional protectionism while suspending globalization.
The debate is open, but how long will it take Amazon, Google, Alibaba or any of the new owners of DATA to enter Agro-Trading and take advantage of transforming patterns? All ingredients are in the Agro-cosmos:
- Covid as a disruptor and accelerator (remote working, supply chain disruption, shifting operations, multiplying productivity, changes in resiliency expectations…)
- Morphology of the demand is moving towards online marketplaces, new consumption habits, just-in-time deliveries, local radius, new products (ie protein meat).
- Regulatory uncertainties and more protectionism due to food security being a priority (i.e stockpiling in China the main driver in the market) so the trilemma local VS regional VS global encourage changes
- Geopolitics is creating different powers and Agro is becoming a key vehicle to channel political interest
- Talent is also finding new frame such as cross-functional teams, flexible ways of working including for hybrid remote/in-person teams, agile, resilient to move fast and adapt to new realities targeting employee satisfaction.
- New business models are bringing more efficiency (less workforce to do more, faster connectivity, higher innovation). In the last 25 years, we have moved from decentralized to centralized models, but now we may be moving to a distributed model
Timing is the king of trading. Adaptability to the new times is a catalyzer. If we enter in the Era of Algomocracy (where algorithms define the trading regime), then we should expect the dominant players of the technological revolution to enter the Agro-trading arena. If trading is to remain, in part, as an art of using the data, then the adaptability of the traditional players will dictate the dominant player.
Needless to mention that Blockchain moves from theory to fact, as well as the virtual reality traders’ terminal is going to be essential in our trading toolbox. We are building new answers to new questions. Let’s adapt quickly before the questions changed.