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The Kings of Oil and Grain

This is written by Nikita Kabanovs, two months ago, and can be sourced from http://itraveltrade.com/

Silence Is the Sound of Money Talking. How else can you explain the fact that successful companies earning billions of dollars per year and employing relatively small groups of people across the globe are pretty much unknown to the general public? 

Ladies and gentlemen, let’s get to know the names of the world’s largest Commodity Trading Firms.

What do the top 10 commodity trading firms have in common? Good profits and offices in Switzerland and Netherlands (one for tax, the other for a well known harbour in Rotterdam and operations there).

The top trading firms have very different businesses. While some are active in upstream operations, others are active only in mid- and downstream operations. Some specialise in oil, gas and other energy resources trading, others are focused on edible agricultural produce. 

Some made their billions by concentrating on a handful of businesses, while others trade everything under the sun from iron ore to coffee beans. Below is the list of the kings of oil and grain:

1. Archer Daniels Midland (ADM), based in Decatur, Illinois. Specialises in grains, especially corn and oilseeds producing biofuels such as bioethanol (sugarcane) and biodiesel (rapeseed, soybeans), cocoa beans (produce chocolate) and other niche products. In December 2014, ADM paid US$147 million to tighten its grip on the world’s biggest palm oil trader Wilmar International to 17.3 per cent from 16.4 per cent. Wilmar is listed on the Singapore stock exchange.

2. Bunge, based in St.Louis and stands next to ADM. Operates in agribusiness (all type of products), food additives and animal feeds.

3. Cargill, based in Minnetonka, Minnesota. Some say they are the most powerful agricultural trader. Trades all possible products, and has quite some trading operations in energy sector. Some trading in energy means it is small relatively to the company size but they still can make some deals worth hundreds of millions.

4. Dreyfus, based in Paris, France. Another huge agri-trader, specially active in cotton trading. According to the forum discussion on WSO forum, I found Dreyfus is “still the remaining owner of pipelines from the French Colonial Era!”

5. Vitol Switzerland, probably the largest oil trader. A deal worth US$10 billion to buy oil from Rosneft? “Give me two!” – that is Vitol’s answer.

6. Glencore Switzerland, a giant that got huge after first becoming public and they merging with Xstrata. Now it is a trader with large vertical integration in metals. Comparable to BHP Billiton.

7. Trafigura Switzerland, another major oil trader. Full of tasty deals worth billions with major traders in the CIS, Latin America, Africa, Middle-East and Asia.

8. Gunvor Switzerland, here he is. Trades quite a variety of products but the majority of operations takes place in oil markets. Moves largest oil tankers in the world across the globe to buy/sell oil.

9. Noble Hong Kong, a rising star but already worth billions. Active in metals, oil, gas, coal, cotton and other agriculture. Relatively smaller than first 8 traders but still of a decent size or deliver to their refinery to further process it and sell petrol.

10. Mercuria Switzerland, another rising star. Mainly trades oil and recently acquired JP Morgan’s physical commodity trading desk for US$3.5 billion. Not bad for a rising star, isn’t it?

What is particularly interesting about these firms is how lean they are run, which of course means a bigger share of profits to go around for the employees. For example Vitol and Glencore only have a staff of 2,700 people each, but their revenues were US$195 billion and US$145 billion, respectively.

The commodity trading firms will always be around as everyone in the world needs to eat and heat their houses. Recently, laws were proposed in the United States to limit certain types of commodity trading, primarily speculation but it affected banks only. Moreover, these guys are not in the U.S. except for ADM and Cargill who are quite heavy lobbyist in their home country.

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