What might just be called ‘week 23’ on every regular calendar, is known as Commodity Trading Week for everyone involved in the trade, production and procurement of commodities. The 2021 edition of Commodity Trading Week brings over 10 years of commodity trading events into one online setting to talk Risk, Digitalization, Logistics and Trading strategies – with interaction and shared learning at the heart of it. Obviously, we at Agiboo joined the all-digital Commodity Trading Week, including the closing days of ComRisk on Thursday and Friday. As we’ve grown accustomed to, there were a lot of interesting presentations and live panel sessions. We’ve tried to cover of few of them in between meetings for those of you who have missed it.
Commodity Trading Week 2021
Commodities People was very pleased to announce another all-digital Commodity Trading Week, bringing together 100s of hours of content from expert speakers – including actionable best practices – to thousands of commodity trading professionals worldwide. As senior risk management experts from all over took to the virtual stage, we sat down to discuss the overarching trends of digitalization, regionalization and decarbonization and their impact on risk management and business models.
There were sessions on trade finance, counterparty risk, the latest developments in technologies and software solutions, as well as best practices around operational risks, and many more. A returning topic of course was the COVID-19 impact on markets and risk management practices.
Let’s dive straight in with the keynote, presented by Souleïma Baddi, CEO of Kongo.
Keynote: digitalization in commodities
The opening presentation of Commodity Trading Week was focused on trends, disruptions and implementation priorities – among others. “It would be nice to meet up soon, but it’s great to be live,” said Baddi. “Organizational transformation is hard”, she said. Something needs to be tangible before it can be called innovation – but innovation drives transformation.”
“What does digitalization mean? Well, most businesses are already fully digital, right? We’ve been digital for ages – even blockchain has been around for a while now. But digitalization to me is not about technology, it’s about a behavioral change.”
Let’s look at the example of the three D’s of commodities transition: Decentralization, Decarbonization and Digitalization. They are changing the way we do business. Baddi built on that by presenting the three C’s of digitalization: Customization, Control, Connection.
Customization, Control, Connection
At Agiboo, we couldn’t agree more, as we took it as a plea for a bespoke solution that allows you full control of the day-to-day as well as connects you, in real-time, to all the information you need. Agiblocks software supports trading management as well as financial management from the same source of data and within the same easily accessible application. Its modular structure allows you to implement an end-to-end solution or to select individual functions to implement only the functions you need – in many cases specialized for a certain commodity or commodity group. When implementing the software, organizations can select what they need at that moment. Extra functions can easily be added at any time. Customization? Check.
Our CTRM software has been developed with the single goal of making your fixed routine of commodity trading and risk management more efficient. Its clean user interface is simple with fast access to key functions. For every task, from creating a contract to evaluating your risk, all required information is readily available. It is as powerful on smartphones and tablet computers as it is on the desktop, so it’s accessible anytime, anywhere. Connection? Check.
Agiblocks has been developed in one of the latest available software architectures, cloud services based and is designed to be accessible through any browser on any computer or tablet. Due to its design and its technology it offers a unique and intuitive user experience and is very scalable in its implementation. Together this facilitates easy implementations and a low total cost of ownership. Control? Check!
You can find out more in one of our latest whitepapers.
What are CTRMs evolving into?
One of the first panel discussions of the week was hosted by our good friend Gary Vasey of ComTech Advisory and CTRM Center. What are some of the pandemic-induced trends in 2021 going into 2022? Where are we in terms of standardization of protocols and interoperability. Is the ecosystems-based approach the most efficient implementation strategy? Those were just some of the questions presented to the team, consisting of David Webb (capSpire), Dean Stiles (SAP), Guy-Laurent Arpino (Louis Dreyfus Company), Sonia Ghosh (Varo Energy) and Sôren Eriksen (Mabanaft).
They spoke about the difficulties in creating a single-source solution, as getting that real-time, end-to-end reporting layer and multiple levels of input is very, very challenging. An earlier whitepaper of Vasey’s came up stating that a CTRM is an architecture. Is the era of standard CTRM’s over and are we moving into custom solutions? Stiles (SAP) explained how his company keeps approaching those difficulties, as Eriksen (Manabaft) too spoke about his preference for the all-in-one approach.
One-stop-shop
There was a lovely take-away from the final part of the discussion as well, as one question was presented to the public rather than to the panel. A poll asking which of the following has your priority in any CTRM; accessibility, speed, customizability, scalability, or cost? The overwhelming winner, with about 70 percent: all of the above. That too speaks to the Agiboo approach, as our software solution – designed by traders – enables its users to focus on the essence of their trading by being easily accessible, fast and customizable; you can select what you need when you need it. As far as scalability and cost go, it’s like Giorgio Ungarelli said: Agiblocks offers per-transaction prices.
“For example, if your company has two transactions a week, but you still need a full CTRM solution, that’s all you’re going to have to pay to use Agiblocks. I don’t know of any other company that offers the same pricing model. This makes it really interesting for trading companies of any size: no expensive entry license costs.”
Agiblocks CTRM is the first CTRM software solution that truly simplifies the daily practices of commodity trade professionals. To guarantee customer satisfaction, we keep developing the product. Because we agree with what Baddi said in her keynote – digitalization is not about technology, it’s about behavioral change –, but any software solution worth its salt is about technology too. Technology – having new and improved features – is still an enormous part of choosing a CTRM solution. That’s why we’ve recently added two interesting features in Agiblocks, one of them being the tools for what-if analysis. A what-if or sensitivity analysis is a powerful decision-making tool that helps you to understand what kind of business impacts can arise from dynamically changing one or more variables, greatly assisting you in risk management decisions. We’ll soon tell you all about it in more depth.
Digital Dialogue: World Sugar Balance
On the second day, we’ve made a little sidestep towards Digital Dialogues, an Agiboo-sponsored webinar that was not technically part of Commodity Trading Week. However, it did strategically fall in the same week – so it kind of was?
Digital Dialogues is a prominent series of online discussions for the sugar, ethanol and biofuels industry, allowing anyone to keep their finger on the pulse of all the latest in their respective industries. The edition of Digital Dialogues that took place during CTW was a virtual discussion of all the latest on global sugar demand and prices in the current economy, and the growing needs for automation that were continuously addresses in CTW events throughout the week as well. Speakers were Stefan Uhlenbrock (F.O. Licht) and Marcello Gulinelli (ABB).
Sugar production and prices
Uhlenbrock shared his insights into the projected sugar deficit in 2020/21 and the market forecast of a surplus in the upcoming 2021/22 season. The ten leading producers will present a nearly 5 percent increase in global production for the 2021-2022 season; a growth led by Thailand, EU and Russia, mainly. Moreover, while the market shows a slight deficit of 3 million tons for 2020/21, Brazil’s huge rise in output has kept global exportable production intact despite the sharp drops elsewhere. In addition, India has produced another huge exportable surplus in 2020/21, on top of its heavy stocks which together with a new program of subsidized exports will keep the market well supplied throughout 2020/21.
Sugar futures prices have been heavily influenced by the coronavirus-induced volatility in global financial markets over the past year, Uhlenbrock said, which led to significant movements of crude oil prices as well as the Brazilian currency – two key factors for sugar price formation. Early indications would point to a marginal surplus in 2021/22, but unprecedented dryness in Brazil, which leaves the risk of a downward revision.
Price volatility in the sugar market is expected to remain a key feature in the coming months. A post-pandemic recovery of demand together with a crop downgrade in Brazil would give prices further upside potential.
Automation in the sugar industry
The second half of the webinar was presented by ABB’s Gulinelli, who shed some light on the automation perspectives. How can automation support the business? The short answer can be found in key steps aimed at increasing energy efficiency performance, increasing asset utilization and throughput, improving quality, reducing variations and errors, and enabling lean and agile manufacturing. Those interventions rely on increased application of technologies, as is customary with automation. The focus however wasn’t on defining automation, but rather on sharing what ABB has achieved with respect to increasing asset utilization and throughput, and decreasing lead times.
The challenge, Gulinelli showed, was that all process equipment must operate reliably and perform optimally to produce the highest quality end product; good asset practices mean good production output. Inconsistent system behavior is a leading cause for concern.
The solution: with fine-tuned precision, a DCS (Distributed Control Systems) together with a sugar application library can control, monitor and coordinate all key electrical, instrumentation and control assets. Plant managers receive daily production reports via email. The benefits include throughput increased by up to 25 percent as well as manpower cost reduced by 50 percent.
Find out more about Digital Dialogue webinars on informaconnect.com
ComRisk 2021
The last two days of CTW were all about ComRisk, and with an unprecedented period of geopolitical volatility, pandemic and black swan events, coupled with ongoing sustainability challenges and technological innovation, there was lots to talk about. An interesting event we were able to attend on Friday morning was a session called ‘the post-pandemic world: impact on contractual terms and clauses in the commodity trading world’, hosted by GAFTA’S Jonathan Waters. Because first off: are we in a post-pandemic world? That’s an interesting question, said Waters. There’s a possible third wave in the UK and we are seeing various new strands of the virus, so we are certainly not in the clear yet.
PPE disputes due to force majeure
He went on to focus on a very common issue in terms of covid-related disputes we’re seeing, which is contractual disputes – mainly an increase in PPE disputes due to delay in performance failure caused by ‘force majeure’. Because a very interesting discussion right now is: ‘does covid-19 fall under force majeure?’ The short answer: is it explicitly defined in the contract (‘pandemic’), or does it fall within something else (such as: Act of God)?
It is very much a creature of contract, Waters said. The claimant in any case must prove force majeure as defined in the contract, but also prove delay, causation (did force majeure cause the inability to perform) and notice clauses. In courts in the UK, a pandemic is part of force majeure, but it has to be defined as such by the contract too. Furthermore: whose law is it anyway? When you have a purchaser in the UK and a supplier in Spain working as an agent for a manufacturer in China, which courts have jurisdiction? A very interesting debate indeed. In terms of avoiding risk, the overall lesson here is: pre-contractual due diligence!
Keeping a pulse on CTRMs
Another great discussion was held by the panel of Alex Whittaker (Bonroy Petchem), Ben Dickson (Origin Commodities Limited), Chirag Ahuja (Varo Energy), Ganesh Natarajan (Enuit), Richard Philcox (SAP) and Richard Williamson (Gen10), hosted by Gary Vasey.
In what could be seen as the follow-up of the also Vasey-led panel of the opening day of Commodity Trading Week, the debate was focused on new innovations and improvements in CTRM, as well as how to better integrate various parts of the company for a global view on the business. Especially the latter question was a continuation of the debate ‘are CTRMs transitioning to ecosystems?’, summarized by the statement ‘CTRM + ERP = Commodity Management?’.
CTRM + ERP
It’s a fascinating statement, partly because a lot of people tend to confuse CTRM software with ERP technology. A CTRM is the software-pillar for all departments in a commodity company, like logistics, trading, finance, IT and the management. With this core software, employees can perform their daily tasks and transactions accurately and efficiently. The aim of an ERP system is to create a single source of truth for an organization as well. The benefits of achieving this are huge, including real-time reporting, increased productivity, reduced operational costs, and improved business insights. However, an ERP system cannot do this effectively without data – and integrations are how that data gets into the system.
In other words, we too advocate the ‘CTRM + ERP’-approach. That’s why we’ve recently written up the most important differences between the two, including solutions on how you can integrate Agiblocks CTRM into your ERP system to have the best of both worlds. You can read more about it here, including our Top 5 of ERP’s integrated with Agiblocks.
The session on Friday afternoon was concluded by another poll question for the audience: ‘What new technologies are you most excited by?’, the options being Advanced Data Analytics, AI, Blockchain, Data Management Tools and RPA / Intelligent Automation. Instead of the amusing ‘all of the above’-option we had on Monday, the various boxes more or less received equal votes – with a slight lead for blockchain (26%) and advanced data analytics (23%).
Digitalization in commodity trading and risk functions
We finished up our attendance on Friday by checking into a session with Inquari, VAKT, SAIPOL, Digiterre and capSpire focused on automation in risk-related functions. How do you make sure it doesn’t just widen the gap between management and collaborators? How do you step up you game in terms of automation and the human factor (intelligent automation)? And: is there and end-to-end workflow vision to make risk assessment and management easier? A lively discussion followed to round up another successful CTW.
