Understanding Incoterms: Your Guide to International Trade and Logistics

In the labyrinthine world of global trade, a unified language that bridges the divide between different countries and trade cultures is more than a convenience; it is a necessity. This is precisely where Incoterms — a portmanteau of "International Commercial Terms'' — step in. Developed by the International Chamber of Commerce, these predefined commercial terms are globally accepted and facilitate smoother, conflict-free international transactions. Here, we delve deep into understanding Incoterms, shedding light on their significance, different classifications, and how to utilize them effectively in international business deals.

Incoterms (source: Wikipedia)

The Significance of Incoterms

Incoterms play a pivotal role in global trade, providing a standardized set of terms and conditions that govern international transactions. These terms delineate the responsibilities, costs, and risks associated with the transportation and delivery of goods from sellers to buyers. By utilizing Incoterms, businesses can circumvent misunderstandings, disputes, and legal complications, ensuring that transactions are conducted with clarity and mutual agreement.

Understanding Incoterms not only provides insight into the logistic obligations of both parties but also helps in calculating the total cost of a business deal, as they distinctly indicate when the responsibility for goods (and the costs associated) shifts from the seller to the buyer.

Deciphering Different Classifications of Incoterms

Incoterms are categorized into groups, each offering varying degrees of responsibility and liability for the buyer and the seller. Here, we elucidate the four primary classifications of Incoterms:

Group E (Departure) - Risk lies primarily with BUYER

• • EXW (Ex Works): The seller has fulfilled their obligation once the goods are made available for pickup at their premises or another named place. The buyer assumes all costs and risks involved in transporting the goods to the desired destination.

Group F (Main Carriage Unpaid) - Risks distributed between BUYER and SELLER

• • FCA (Free Carrier): The seller delivers the goods to a carrier or another person nominated by the buyer at the seller's premises or another agreed-upon location. From this point, the buyer bears all costs and risks.

• • FAS (Free Alongside Ship): The seller places the goods alongside the ship of the buyer at the named port. The risk of loss or damage to the goods passes when the goods are alongside the ship, and the buyer bears all costs from that moment onwards.

• • FOB (Free on Board): The seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment. The risk of loss or damage to the goods passes when the goods are on board the vessel.

Group C (Main Carriage Paid) - Risks distributed between BUYER and SELLER

• • CFR (Cost and Freight): The seller clears the goods for export and pays the costs of transporting the goods to the named port of destination. The risk of loss or damage to the goods transfers from seller to buyer as soon as the goods are loaded on board the ship in the port of shipment.

• • CIF (Cost, Insurance, and Freight): Similar to CFR, but the seller also has to procure marine insurance against the buyer's risk of loss or damage to the goods during the carriage.

Group D (Arrival) - Risk lies primarily with SELLER

• • DAP (Delivered at Place): The seller delivers the goods when they are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination.

• • DPU (Delivered at Place Unloaded): The seller delivers the goods once they are unloaded from the arriving means of transport and placed at the disposal of the buyer at the named place of destination.

• • DDP (Delivered Duty Paid): The seller delivers the goods when they are placed at the disposal of the buyer, cleared for import, and ready for unloading at the named place of destination. The seller bears all costs and risks involved in bringing the goods to the destination, including import duties and taxes.

Utilizing Incoterms Effectively

To effectively use Incoterms in international business transactions, it's essential to incorporate them explicitly in the sales contract and to identify the specific term applicable to the transaction. Moreover, a clear understanding of the respective responsibilities and obligations under the chosen Incoterm helps in avoiding potential disputes and facilitating smooth trade operations.

Regular updates are made to the Incoterms to reflect the changing dynamics of global trade. Therefore, businesses should stay abreast of the latest versions and amendments to ensure compliance and to safeguard their interests in international transactions.

Conclusion

Incoterms stand as a linchpin in international trade, streamlining transactions and fostering clear communication between buyers and sellers across borders. By understanding the various classifications and their implications, businesses can navigate the complexities of global trade with confidence and efficiency.

As global commerce continues to evolve, a deep-rooted understanding of Incoterms becomes not only beneficial but essential for businesses aiming to expand their reach in the international market. Through clear delineation of responsibilities and risks, Incoterms ensure that the wheels of global trade turn smoothly, fostering growth, collaboration, and prosperity in the global marketplace.

Kontango Team’s Favorite Commodity Trading Books

Here at the Kontango team, we hold a particular fondness for books that offer deep insights, practical strategies, and an intricate understanding of the commodity trading industry. Whether you're a seasoned trader or new to the field, here is our curated list of favorite books, each accompanied by its respective author for easy reference.

Commodity Trading

• The World for Sale by Javier Blas and Jack Farchy

• Metal Men by A. Craig Copetas

• King of Oil by Daniel Ammann

• The Informant by Kurt Eichenwald

• Sons of Wichita by Daniel Schulman

• Kochland by Christopher Leonard

• The Science of Success by Charles G. Koch

• The Alchemy of Air by Thomas Hager

• Salt by Mark Kurlansky

• Nathaniel’s Nutmeg by Giles Milton

• Limit Up by Russ Crawford

• The Secret Club That Runs the World by Kate Kelly

• Supermarketer to the World by EJ Kahn

• Merchants of Grain by Dan Morgan

• Invisible Giant by Brewster Kneen

• Titan by Ron Chernow

• The World of Sugar by Ulbe Bosma

• Cargill: Going Global by Wayne G. Broehl Jr.

• Cargill: From Commodities to Customers by Wayne G. Broehl Jr.

• Cargill: Trading the World’s Grain by Wayne G. Broehl Jr.

• Hot Commodities by Jim Rogers

• Diary of a Professional Commodity Trader by Peter L. Brandt

• Dan Yergin’s Collection

- The Quest

- The Prize

- The New Map

• Private Empire by Steve Coll

• Commodities Demystified by Trafigura

• The Asylum: The Renegades Who Hijacked the World's Oil Market by Leah McGrath Goodman

• Jonathan Kingsman's Collection

- The Sugar Casino

- Commodity Crops

- Commodity Conversations

- Crop to Cup

- The New Merchants of Grain

- The Fastest Tortoise

• The Domino Effect by Rusty Braziel

Supply Chain & Logistics

• The Box by Marc Levinson

• Railroader by Howard Green

• Nothing Like it in the World by Stephen E. Ambrose

• Maritime Economics by Martin Stopford

• The Business of Shipping by Ira Breskin

• Ninety Percent of Everything: Inside Shipping, the Invisible Industry That Puts Clothes on Your Back, Gas in Your Car, and Food on Your Plate by Rose George

These books are more than just a reading list; they are an intellectual toolkit that has greatly influenced our understanding of commodity trading, supply chain, and logistics. Whether you are looking to deepen your understanding or just getting started, these books offer a solid foundation and a wealth of knowledge. Happy reading!

Always in Kontango #3: Chris Lawson of CRU

In this third episode of “Always in Kontango,” we had the pleasure of speaking with Chris Lawson, Head of Fertilizers at CRU.

https://open.spotify.com/episode/1jQioFr1z4Rt9vc880xUkx?si=ab48bfd4a34c4933

Having been involved in commodity trading his whole life, Chris’ story began on a dairy farm in South Australia. He studied agriculture science at the University of Adelaide and worked in a variety of roles within agriculture. Growing up on a dryland dairy farm without irrigation, Chris details his prior experiences and how they have taught him the meaning of hard work and innovation. He mentions how agriculture as an industry will always hold a special place in his heart as he shares a deep love for the constant ability to learn from the international nature of the commodities market.

When it comes to guidance and development, Chris explains how the interactions he has shared with his colleagues and bosses have been most impactful for his career. He emphasizes the importance of building and maintaining good relationships with his customers to create trust and to extract meaningful learnings. 

From a value system perspective, Chris believes maintaining a curious mindset is the key driver in keeping him interested and engaged in his work. He finds that remaining curious and asking questions results in receiving higher engagement along with greater personal benefit. Chris shares that this philosophy on curiosity is something he works to instill in the team he manages at CRU, as he finds this approach to be most beneficial. 

In this podcast episode, we hear about Chris’ backstory and the experiences that led him into the career he has today. Join us in this episode as we dive deeper into Chris’ personal journey in regards to career development, breakdown his core leadership values, and listen to his learnings from his global experiences. 

Podcast: https://open.spotify.com/show/4M0wXNIvCDA8HB7WHtBVf0?si=46d6db8afd43421d

Always in Kontango #3: https://open.spotify.com/episode/1jQioFr1z4Rt9vc880xUkx?si=ab48bfd4a34c4933

In this episode: Chris Lawson (Head of Fertilizers, CRU), Christian Callender-Easby (CEO, Kontango)

The US-China Trade War: The Soybean Saga

The economic and political relations between two of the world's major superpowers, the United States and China, have long been complex. But in recent years, the tension between these nations rose to new heights, evolving into a trade war with widespread repercussions. A quintessential illustration of these impacts can be seen through the lens of the soybean trade.

Historical Context

The story of soybeans in this trade war is not just about a bean; it’s a tale of global economies, intertwined agricultural systems, and political might. Historically, the US has been the world’s leading producer of soybeans. By the early 2010s, China had become the world's largest consumer of soybeans. The US exported a significant $12 billion worth of soybeans to China in 2017 alone, marking China as the largest buyer and accounting for over 30% of all US soybean exports.

Trade War Onset

Tensions escalated in 2018 when the Trump administration, concerned about China's trade practices and intellectual property theft, imposed tariffs on billions of dollars' worth of Chinese goods. China retaliated with its own tariffs, notably including a 25% tariff on American soybeans. As a result of these measures, US soybean exports to China plummeted drastically from $12 billion in 2017 to just $3.1 billion in 2018, representing a sharp drop of nearly 74%. Suddenly, the soybean became a central figure in this economic face-off.

For American soybean farmers, the repercussions were immediate and severe. Soybean prices dramatically dropped from $10.50 per bushel at the start of 2018 to around $8.50 by the close of the year. Stocks surged, and farmers, many of whom had heavily invested in ramping up their production capacity in anticipation of Chinese demand, were now mired in economic uncertainty.

China’s Alternatives

Amidst the trade war, China actively sought other avenues for soybean importation. They increased their imports from countries like Brazil, Argentina, and Russia. Brazil, in particular, saw a surge in its soybean trade, with exports to China jumping from 50.9 million tonnes in 2017 to 68.8 million tonnes in 2018. Already a formidable player in the soybean market, the trade war positioned Brazil to claim an even larger stake in the Chinese market.

China also began measures to reduce its dependence on soybean imports. These included incentivizing farmers to cultivate soybeans, exploring alternative feeds for livestock, and modifying the diets of animals like pigs to decrease soy content.

The Ripple Effect

The aftershocks of the trade war, with soybeans at the vanguard, were felt globally:

• • Supply Chain Disruptions: The reduction in trade between the US and China disturbed global supply chains, affecting not just primary producers but also ancillary industries such as shipping and logistics.

• • Price Volatility: The uncertainty of the soybean market made prices highly unstable, posing challenges for farmers worldwide.

• • Environmental Concerns: The uptick in soybean farming in nations like Brazil raised environmental concerns, particularly about the deforestation of areas like the Amazon rainforest.

• • Shift in Alliances: Changing trade dynamics prompted nations to reconsider their trading allies, redefining global alliances in the process.

Resolution and The Road Ahead

The phase-one trade deal inked in January 2020 between the US and China heralded a glimmer of hope for American soybean farmers. Within this agreement, China pledged to purchase an additional $32 billion in US agricultural products over the subsequent two years, with soybeans being a part of that deal.

Yet, the trade dynamics had irrevocably shifted. Even as China augmented its purchases of US soybeans post-agreement, a full return to pre-trade war dynamics remains unlikely. China's diversification strategies are set to have long-term effects, and other soybean-producing nations have firmly entrenched themselves in the Chinese market.

According to Reuters, “available U.S. soybean supply is expected to remain flat into 2023-24, but USDA has U.S. exports falling nearly 7% on the year. Also noteworthy is that the agency has 2023-24 Chinese soy imports steady on the year at 99 million tonnes.”

According to Mintech, “China, the top soybean importer, is forecast to increase its imports in the 2023/24 season (+2.0% year-over-year to 100 million metric tonnes); however, slow economic growth within the country has become a determining factor.”

The unfolding soybean narrative within the vast expanse of the US-China trade tensions is a testament to the delicate balance of our globalized ecosystem. What begins as a mere trade scuffle over commodities such as soybeans quickly spirals into far-reaching impacts, from eroded profit margins for hardworking farmers to the degradation of virgin lands in a frantic race for alternative soybean cultivation. 

Moreover, it has pushed nations and conglomerates into the shadowy realms of collusion, seeking bypasses around established trading norms, tariffs, and taxes. Market watchers remain divided in their forecasts for US-China trade's future trajectory, a division birthed from the current complexities and strains in bilateral relations.

These 10 Countries Make up 80% of the Global Gold Trade

Gold, known as the "king of metals," has held a special place in human history for centuries. Its allure lies not only in its beauty but also in its intrinsic value as a store of wealth and a safe-haven asset. Today, the global gold trade continues to thrive, with several countries playing pivotal roles in its production, consumption, and distribution. In this article, we delve into the ten countries that collectively make up 80% of the global gold trade, exploring their contributions, challenges, and the significance of gold in the contemporary global economy.

1. China

China stands at the forefront of the global gold trade, both as the world's largest producer and consumer of gold. The country's gold production reached an estimated volume of 420 metric tons in 2022, accounting for approximately 15% of the world's total production. Additionally, China's insatiable demand for gold jewelry and investment in bars and coins positions it as the largest consumer, contributing to approximately 30% of the global gold demand.

2. Russia

Russia ranks among the top gold producers globally and has been steadily increasing its gold reserves in an effort to diversify away from traditional reserve currencies. In 2022, Russia produced around 390 metric tons of gold, representing nearly 14% of the world's total production. The country's central bank has been actively purchasing gold, bolstering its economic stability and reducing reliance on foreign currencies, particularly amidst geopolitical tensions.

3. Australia

Australia is renowned for its extensive gold reserves and well-established mining industry. The nation's significant gold output reached approximately 330 metric tons in 2022, contributing to around 12% of the global gold production. Australia's proximity to Asian markets has also positioned it as a crucial player in the gold trade, particularly in supplying gold to neighboring countries.

4. United States

The United States boasts a rich history in gold mining and continues to be a major producer of the precious metal. In 2022, the country's gold production stood at approximately 240 metric tons, accounting for nearly 9% of the global gold production. Additionally, the country's status as a global financial hub, along with the presence of major gold refineries, makes it a central player in the gold trading and distribution network.

5. Canada

Canada's gold mining industry has been flourishing for decades, with numerous large-scale mines contributing to its status as one of the world's top gold-producing countries. In 2022, Canada produced approximately 180 metric tons of gold, representing nearly 6.5% of the world's total production. The country's stable political environment and well-developed mining infrastructure attract significant foreign investment, solidifying its position in the global gold trade.

6. Peru

Peru has a long history of gold mining, and its abundant mineral resources make it a vital player in the global gold supply chain. In 2022, the country's gold production reached approximately 150 metric tons, contributing nearly 5.5% of the global gold production. Peru's gold exports play a crucial role in supporting its economy and creating employment opportunities in rural areas.

7. Ghana

Ghana is Africa's largest gold producer and an essential contributor to the continent's gold trade. In 2022, the country produced approximately 130 metric tons of gold, accounting for nearly 4.5% of the world's total production. The country's mining sector plays a pivotal role in its economic growth, with gold exports accounting for a significant portion of its foreign exchange earnings.

8. South Africa

Although South Africa's gold production has experienced a decline in recent years, the nation remains a key player in the global gold trade due to its historical significance in gold mining. In 2022, South Africa produced approximately 100 metric tons of gold, representing nearly 3.5% of the global gold production. Gold has been a cornerstone of South Africa's economy for over a century, and the country's gold reserves continue to contribute to the global market.

9. Indonesia

Indonesia's gold production has surged in recent years, driven by increased investment in mining projects. In 2022, the country produced around 90 metric tons of gold, contributing nearly 3% of the world's total production. The country's gold exports have been bolstered by growing demand from its domestic jewelry industry and its role as a regional supplier to Asian markets.

10. Uzbekistan

Uzbekistan has witnessed a remarkable surge in gold production, establishing itself as one of the fastest-growing gold-producing countries in the world. In 2022, the country's gold production reached approximately 80 metric tons, representing nearly 2.5% of the global gold production. The government's supportive policies and efforts to attract foreign investment have contributed to the country's rising prominence in the global gold trade.

Challenges and Future Prospects

Despite their significant contributions to the global gold trade, these ten countries face challenges that impact their positions in the market. Fluctuations in gold prices, environmental concerns related to mining practices, geopolitical tensions, and changing consumer preferences for jewelry are some of the issues that could affect their gold industries.

However, gold's enduring status as a safe-haven asset and its use in various industries, including technology and finance, offer positive prospects for the global gold trade. The metal continues to play a vital role in central bank reserves, investment portfolios, and as an integral component of cultural traditions, particularly in jewelry markets.

Conclusion

The global gold trade is buoyed by the efforts and contributions of ten key countries, which collectively make up 80% of the market. From China and Russia, leading in production and reserves, to the United States and Australia, crucial hubs for refining and distribution, each country plays a unique role in shaping the dynamics of the gold market. As the global economy evolves, gold's intrinsic value as a store of wealth and a safe-haven asset ensures its continued significance in the contemporary world, making it an enduring symbol of prosperity and stability across cultures and nations.

Always in Kontango #2: Mara Jorgensen

In this second episode of “Always in Kontango”, we shine the spotlight on Mara Jorgensen, the Head of Freight at Kontango. 

https://open.spotify.com/episode/3o3QkoA5Zk8tTaxoOkABta?si=7c2942c7fb6047d5

Mara's story is not just about tech. Her journey starts from a rural setting, painting a vivid picture of resilience, passion, and a deep-rooted love for agriculture and the outdoors. Her childhood was filled with endless fields, hearty soil, and an appreciation for the simple yet profound rural lifestyle. She often mentions how her experiences from these years have shaped her into the person she is today, from being a hands-on and practical individual to appreciating the importance of embracing technology.

Mara carries a belief that encourages intellectual curiosity - asking more questions rather than focusing solely on being right. This stems from her conviction that innovation is fostered through a culture of learning, exploration, and understanding. Her philosophy about motivation is worth noting. Mara believes that the most impactful teams comprise individuals who are inherently motivated. This is an unusual perspective in a world often focused on motivational tactics and strategies.

In this podcast episode, we delve deeper into Mara's intriguing story. From her early life in a rural environment to her career milestones in software, product management, and leadership roles. We unpack how her curiosity and focus on intrinsic motivation help shape Kontango's success. We also explore how her upbringing, steeped in agriculture and the outdoors, influences her approach in a high-tech, fast-paced startup environment. This intersection of her past and present, agriculture and technology, and leadership and team dynamics make for a captivating narrative.

On this insightful journey, Mara shares her professional experiences, personal philosophies, and the lessons she has learned along the way. From the fields of her childhood to the corridors of Kontango, Mara’s story is a testament to the power of resilience, curiosity, and self-driven motivation.

Join us in this episode as we uncover Mara’s story, a rural-born leader whose life and work continue to reshape the contours of the commodities trading industry.

Podcast: https://open.spotify.com/show/4M0wXNIvCDA8HB7WHtBVf0?si=46d6db8afd43421d

Always in Kontango #2: https://open.spotify.com/episode/3o3QkoA5Zk8tTaxoOkABta?si=7c2942c7fb6047d5

In this episode: Mara Jorgensen (Head of Freight at Kontango), Christian Callender-Easby (CEO Kontango)

Why is Saudi Arabia cutting 1 Million barrels per day of oil?

In June 2023, Saudi Arabia, the world's largest oil exporter, made a significant decision to curtail its oil production by 1 million barrels a day. This move sent shockwaves through the global energy market, eliciting widespread interest and concern from industry experts and governments alike. Amidst geopolitical tensions, including the ongoing war between Ukraine and Russia, this deliberate reduction in oil production has far-reaching implications. In this article, we explore the reasons behind Saudi Arabia's decision to cut production, the impact of the conflict between Ukraine and Russia, and the strategies the Kingdom may adopt to navigate these challenging circumstances.

Geopolitical Factors

The Middle East region has been grappling with heightened geopolitical tensions, and Saudi Arabia has been closely monitoring the situation. The ongoing war between Ukraine and Russia has raised concerns about potential disruptions to oil and gas supplies from the region, amplifying uncertainty in the global energy market. Given its critical role in the market, Saudi Arabia may have chosen to curtail production as a precautionary measure to avoid any supply shocks that could result from escalating conflicts in the region.

OPEC+ Policies

As a key member of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, Saudi Arabia has been at the forefront of managing global oil production levels. The OPEC+ alliance has historically implemented production cuts to stabilize oil prices and balance supply and demand. Saudi Arabia's decision to cut production by 1 million barrels a day aligns with OPEC+'s strategies to regulate the market. This move could also have been influenced by Russia's position within OPEC+ and its own production decisions in response to the Ukraine-Russia conflict.

Diversification Efforts

Saudi Arabia has been proactively pursuing economic diversification under its Vision 2030 program. As the global energy landscape evolves, the Kingdom acknowledges the need to reduce its reliance on oil revenues and seeks to diversify its economy into non-oil sectors. By curbing oil production, Saudi Arabia may be signaling its commitment to promoting other industries and accelerating its renewable energy initiatives.

Environmental Concerns

Amidst the growing concern for climate change, there is an increasing shift towards renewable energy sources and cleaner alternatives to fossil fuels. The geopolitical situation, particularly conflicts in oil-producing regions, can impact the global perception of fossil fuels and intensify the call for sustainable energy practices. Saudi Arabia's decision to cut oil production might be influenced by OECD countries’ need to address environmental concerns and align its energy policies with global sustainability goals.

Economic Impact

The curtailment of oil production has significant economic implications for Saudi Arabia. Oil exports have traditionally been the mainstay of government revenue and foreign exchange earnings for the country. By cutting production, the Kingdom might experience a decline in oil revenues, which could impact its infrastructure projects, social welfare programs, and overall economic stability. However, this decision could also incentivize further investment in non-oil sectors, driving economic diversification and reducing its vulnerability to oil price fluctuations.

Global Energy Market

As the world's top oil exporter, Saudi Arabia's reduction of 1 million barrels a day can significantly impact the global energy market. The reduced supply may lead to higher oil prices, affecting importing countries and potentially triggering inflationary pressures on a global scale. This decision comes at a time when the energy market is already navigating through various challenges, including geopolitical tensions and the growing focus on sustainable energy solutions.

Strategic Responses

Saudi Arabia's decision to curtail production can be seen as a strategic response to the evolving geopolitical landscape and the dynamics within OPEC+. As market conditions change, the Kingdom retains the flexibility to adjust its production levels accordingly, helping to stabilize prices and support the long-term sustainability of the global energy market.

Conclusion

Saudi Arabia's decision to cut oil production by 1 million barrels a day as of June 2023 reflects its responsiveness to the geopolitical situation, adherence to OPEC+ policies, commitment to economic diversification, and recognition of environmental concerns. This move has significant implications for the global energy market, and its impact will be closely monitored by stakeholders worldwide. As the situation in the Middle East and the conflict between Ukraine and Russia continues to evolve, Saudi Arabia's approach to managing its oil production will play a crucial role in shaping its economic trajectory and its role in the evolving energy landscape.

How growing up on a farm shaped me

— By Mara Jorgensen, Head of Freight at Kontango

I grew up on a corn, soybeans, and cattle farm in northwest Iowa in the United States. Growing up on a farm provided a unique set of experiences and values that have shaped my life. Many of the experiences from my childhood have molded my career and the way I look at the world. It was hard work to be a part of a farm, especially in the pre-digital age where tractors, implements, and equipment were not so automated.

The hard work did not stop at the physical/logistical part of farming. Economic conditions were also far less favorable in the 1980s. During this time, grain prices were low and interest rates were high. Legislation started to shift in the 1990s, but by this time many family farms were being swept up by large corporate farms.

Knowing what I know now, I believe my parents and grandparents spent many years operating at a deficit. They then spent the remainder of their lives trying to hold onto land, equipment, and make a decent living. I am happy to say that our family farm still exists, and my brothers happily run the organization. My mom is also still alive and active on the farm.

What did all of this teach me, and how did it shape me? I can hone in on four important characteristics:

Strong work ethic and perseverance – There is no 9-5 in farming, and I don’t abide by a “9-5” life either. Some strive for “work/life balance” - I strive for generally being content and pleased with the quality of my life and work. When living on a farm, crops need to be tended to in a very tight window, and livestock will not wait to be cared for the next day. Getting the key things accomplished urgently is very important and seeing the results of that labor is very rewarding.

Curiosity and ability to figure out “how things work” – As a child, I was not expected to have to fix equipment or to “pull calves” (the process of pulling a calf out of the birth canal in the event that a birth was not proceeding as planned). However, I spent endless days and weeks building forts, raising strange animals such as tadpoles and caterpillars, and trying to create toys and scenarios out of any available materials. I bring that into thinking about problems today to get to a collaborative and optimal solution for our customers.

Desire to connect with others – In family farming, there is rarely a straightforward transaction where you can hop on Amazon and make a purchase. There is a “person” for everything: the person that sells you fertilizer and seed, the person that helps you apply fungicide, the person that works at an implement dealer and sells/fixes combines and tractors. All of these connections are so important, and I value talking to my customers face-to-face today and knowing more about them. Outside of business, I also value being with my family and friends. This is a big part of rural living – banding together in good times and bad.

Value of agriculture – You cannot live in the midwestern United States without being peripherally surrounded by corn, wheat, or soybean fields. You cannot go 100 miles on a stretch of highway without seeing cattle, hogs, or poultry farms. It is amazing that we, in the heart of the United States, have the ability to feed so much of our country and the world. We always want to be improving practices, optimizing, and changing. Where I grew up, you literally can’t miss it. It is right in front of you and it is beautiful and awe-inspiring.

There are many invaluable lessons that growing up on a farm imparted on me. I still live on a farm today, and we intend to stay on the farm while my husband and I raise our children. We have a significantly easier life than I did growing up; most farm implements are digital and include GPS and thousands of data points and analytics. Vehicles are more reliable, crop yields are better (thanks to lots of scientific achievements), and prices have been on a reasonable trend. Our children won’t have nearly as much experience in mending fences or fixing trucks, but they will have some. Most importantly they will see the hard work, curiosity, and love of their parents that got imparted to them through rural farm living.

8 Common Pitfalls in Commodity Trading Teams

Commodity trading is an intricate business that requires a strong working understanding of global markets, economies, and regulatory frameworks. When done effectively, it can be a durable, lucrative and rewarding enterprise. However, navigating this complex landscape can be fraught with challenges. Here are 8 common pitfalls commodity trading teams often encounter and some practical solutions to avoid them.

1. Lack of Team Collaboration

In commodity trading, the combined skills, knowledge, intuition, and market views of an entire team often outperform the capabilities and reach of any individual trader. However, teams can face significant collaboration challenges due to siloed departments, disjointed / manual communication, or lack of shared goals. This lack of cohesion can lead to conflicting decisions, missed opportunities, and increased risk exposure. To prevent this, foster a culture of transparency and encourage open dialogue. Implementing collaborative tools and finding the right channels / cadence of team communication will facilitate better information flow and promote team unity and effectiveness. 

2. Inadequate Risk Management

Commodity trading inherently involves high-risk scenarios due to unpredictable market fluctuations and geopolitical events. A common pitfall for trading teams is underestimating or ignoring these risks, which can lead to severe financial and reputational consequences. It is crucial to establish a robust risk management framework that considers a wide range of possible scenarios and ensures the team's actions are in line with the company's risk appetite and the appropriate regulatory frameworks and protocols. Proper risk management can help identify potential weaknesses and adjust strategies accordingly.

3. Lack of Technical Expertise

The commodity market is not just about economics—it also encompasses a wide array of sectors, including agriculture, energy, and metals. As such, having team members with sector-specific technical expertise can be an invaluable asset. However, teams often neglect this aspect, relying solely on financial analysis skills. This lack of technical knowledge can lead to misguided decisions and missed opportunities. Building a diverse team with a broad range of expertise, and encouraging continuous learning, can help to mitigate this risk.

4. Failure to Adapt to Market Changes

Markets are dynamic, and commodity markets are no exception. Economic conditions, technological advancements, policy changes, and environmental factors can cause rapid shifts in commodity prices. Trading teams that fail to adapt quickly to these changes can suffer significant losses. Therefore, it's essential to maintain an agile mindset and employ advanced analytics tools to monitor market trends and make timely adjustments to trading strategies.

5. Over-reliance on Historical Data

Historical data is an important tool for understanding market trends and patterns. However, an over-reliance on it can lead to complacency and a false sense of security. The belief that future market behaviors will mirror past patterns is a trap that many commodity trading teams fall into. It's essential to balance the use of historical data with real-time market analysis, forecasts, and an understanding of current global events.

6. Regulatory Non-compliance

The commodity trading industry is heavily regulated, and non-compliance can result in hefty penalties and reputational damage. Teams often stumble by failing to stay updated with the latest regulatory changes or neglecting to ensure all trading activities are compliant. Establishing a solid compliance framework, conducting regular audits, and providing ongoing regulatory training for the team can help avoid these issues.

7. Inefficient Technology Utilization

In today's digital age, leveraging technology is crucial for effective commodity trading. Automated trading systems, data analytics, blockchain technology, and AI can provide significant advantages. However, some teams fail to fully utilize these tools due to a lack of understanding or resistance to change. Embracing digital transformation and providing the necessary training can greatly enhance the team's performance and decision-making process.

8. Reporting Paralysis

Another pitfall commodity trading teams often encounter is reporting paralysis. This occurs when teams are overwhelmed with the amount of data, reports, and analytics they need to process. With the abundance of data available in today's digital age, it can be challenging to filter out the noise and focus on the information that truly matters. Teams can end up spending an inordinate amount of time preparing and analyzing reports, leading to decision-making paralysis and missed trading opportunities. To overcome this, it's crucial to implement effective data management strategies. Prioritize key performance indicators, use advanced analytics to streamline data interpretation, and automate reporting where possible. It’s also important to train the team to discern and focus on actionable insights, promoting efficient decision-making and preventing analysis paralysis.

Conclusion

Avoiding these common pitfalls in commodity trading teams requires a holistic approach that includes fostering team collaboration, implementing robust risk management practices, developing diverse technical expertise, remaining adaptable to market changes, balancing reliance on historical data, adhering to regulatory compliance, and fully utilizing technology. By recognizing and addressing these issues, commodity trading teams can better navigate the complex landscape of the global commodities market, ultimately achieving more successful and sustainable outcomes.

Always in Kontango

We are thrilled to announce the launch of our new podcast, "Always in Kontango." This podcast is designed to explore the enthralling world of commodity trading, with an emphasis on the chemical industry, yet spanning a variety of other sectors as well. Our aim? To pull back the curtain on this complex industry and illuminate its inner workings for professionals and the general public alike.

https://spotifyanchor-web.app.link/e/fYZbKMjlcBb

The commodities market is an essential pillar of global economies. Despite its integral role, it often remains shrouded in mystery, misunderstood or ignored by the uninitiated. Commodities, particularly within the chemical industry, are pivotal in the creation of countless products we use daily. With "Always in Kontango," we strive to shine a spotlight on this dynamic industry, making it accessible to a broad audience.

Our podcast is set to host seasoned commodity traders, industry professionals, and market analysts. They will provide first-hand insights into the ins and outs of commodity trading, delve into the challenges and opportunities in the market, and share their experiences navigating this fascinating field. Through their stories, we hope to demystify commodity trading and foster a better understanding of its importance in our global economic fabric.

What sets "Always in Kontango" apart is its in-depth exploration of the chemical industry. The chemical sector, often overshadowed by the likes of energy or agricultural commodities, is vital yet remains mostly unexplored. We will delve into topics such as the volatility of chemical commodities, risk management strategies, the role of environmental sustainability in trading, and much more.

For industry professionals, our podcast is an opportunity to learn from colleagues, explore new trends, and gain a broader perspective on the sector. The information and experiences shared will provide valuable insights, enhancing their ability to navigate the evolving marketplace effectively. Our discussions will go beyond the theoretical, incorporating practical advice and actionable strategies that traders can implement in their daily operations.

For the general public, "Always in Kontango" serves as an eye-opening journey into a world that significantly influences their daily lives, often without their realization. By increasing transparency and awareness, we hope to empower individuals with knowledge, enabling them to understand how global events impact commodity prices, and by extension, the cost of goods and services.

While the focus of our podcast is primarily on commodity trading, we are also committed to providing a broader view of the industry. We plan to cover related topics such as the regulatory landscape, technological advancements shaping trading, the impact of geopolitical events, and the future direction of the commodity markets.

"Always in Kontango" is more than just a podcast; it is a platform where the complex becomes comprehensible, where the esoteric becomes engaging. We believe in the power of conversation to enlighten, inform, and inspire. By bringing together a community of listeners from various backgrounds, we aim to foster a greater understanding of an industry that is more than just trading. It is about connections, collaborations, and the global exchange of goods that shape our world.

The world of commodity trading is as thrilling as it is significant. Whether you're a seasoned trader seeking insights, an industry professional craving broader understanding, or a curious member of the public interested in learning about a pivotal economic sector, "Always in Kontango" has something for you.

So, join us in demystifying the world of commodity trading. Tune in, listen, learn, and let's start the conversation together!

Podcast: https://open.spotify.com/show/4M0wXNIvCDA8HB7WHtBVf0?si=46d6db8afd43421d

Always in Kontango #1: https://spotifyanchor-web.app.link/e/fYZbKMjlcBb

In this episode: Lio Slama (CEO AskNeo Media), Christian Callender-Easby (Kontango)