Trade Agro: International Commodity Trading Company in Brazil

Interview with Eduardo Figueiredo, Managing Director of Trade Agro

What is your evaluation of the agriculture and agribusiness sector in Brazil at the moment?

Agribusiness in Brazil is a very natural business for us. It is a very natural product that we have to trade especially on the international market, which is working well at the moment. As everyone knows, this is a hungry world, especially because the China and South East Asia have increasing populations with increased purchasing power and one of the main places in the world that can feed this hungry world in Brazil. Naturally, Brazil faces huge challenges logistically. It is very far from this new consumption area, so we have to find solutions for these logistical challenges and this is the most important task for Brazil in the next ten years in my opinion. Trade Agro is trying to explore new opportunities in international commercial trading, basically shipping agro products in containers.

Can you give us an overview of the company?

Trade Agro was founded 10 years ago. My background is in international trading of commodities. This company was established initially to export cotton for textiles. We were exploring a specific opportunity in the cotton market. Cotton is a very complex commodity. Thus it gave our company some very important expertise and experience in managing this agro business. Cotton is 100% shipped in containers. After we started our business with cotton, we slowly began to explore different operations with cotton seeds, which is basically for animal feed. Trade Agro started to identify very important opportunities shipping other animal feed stuffs in containers.

Ten years ago when I structured the company, my plan was not to compete with the big players such as ADM and Dreyfus. So, the company started to explore niche markets in the agribusiness in Brazil. In the container market in Brazil there are several opportunities to enter niche markets. Our first demand for containerised products beside cotton seeds came from Saudi Arabia; I was visiting the customers in 2009 and they approached me to say that as well as buying cotton seeds they would like to buy corn and soy bean meal in containers. I had never thought of or heard about corn in containers. Doing our internal research we identified that the United States had been doing it since 2004 and Brazil was doing nothing to explore other commodities in containers. On top of that, we also understood that the big players hadn´t entered in on this segment of containerised exports because it is a niche, and is always going to be of secondary importance on the huge commodity market. I said to myself, it is perfect for Trade Agro because we know about containers and this kind of logistics. The challenge for us was to increase our customers worldwide with a very strong focus on animal feeds.

Today, Trade Agro has changed. We still work with cotton for textiles and cotton seeds, which is a very small market in Brazil but we are the leading company regarding exports in this market. We sell cotton seeds to the Arabian countries and we also sell to Japan, Korea and European countries such as Italy, Spain, and Portugal. Europe has restrictions for genetically modified products and only accepts non GMO products. Sometimes it can be difficult for us to find non GMO cotton seeds. Thus we are having to put aside the European market because we just don’t have the conditions to supply it.

Besides exporting cotton seeds we export soy bean, corn, different varieties of soy bean meal, sorghum, feed wheat, and we also have a small operation importing alfalfa in pallets from Argentina and distributing them in Brazil for animal feed especially for dairy cows. We also export alfalfa from Argentina to Saudi Arabia. This is basically what we do today.

The containerised export market is new in Brazil; it only just started in 2012 and 2013 was the first year that Brazil saw an important volume of exports in this sector. Thus everything is new. Somehow over these ten years, Trade Agro went through a change to its commercial approach. Today we are much more of a trader and exporter of animal feed. We are also exploring opportunities with sugar and we are doing research on concentrated juice especially to export to Saudi Arabia. Our clients there ask for these products.

Why did I decide to establish this company? Brazilian entrepreneurs don’t know how to treat the international market. Brazil is not good on international relations; some entrepreneurs don’t even speak English. In my opinion, this is an opportunity in itself. We established a commercial and serious company and for us the international market is a great opportunity. I also personally think that Brazil has a very large concentration of big trading companies and a lot of people doing international trading on a very small scale. Organised, professional middle sized trading companies that know how to deal with hygiene and protection are less common. I decided that for this reason there was a real opportunity here. In my family I have a lot of background in coffee and so I have commodity trading in my blood. So in my opinion this is the right place for me to be.

What are the company´s philosophy and values?

As I mentioned, I wanted to establish a professional, international company. When you start doing business abroad, you realise that some countries have reputations, for example people might think that one country is not serious enough… Brazil doesn’t have the best reputation overseas. People do love Brazil, we are known for our carnival and for our kind people. On the professional side, I think that Brazil is falling behind. There are other countries that are doing better than us.

One of the main values of our company is to honour all of our commitments. When you talk about gaining customers and companies abroad that are interested in establishing a one year supply, these kinds of customers are very difficult to gain or even to reach. I would say that the Argentinians do much better than Brazil in international trading in my opinion.

Trade Agro is an honest company in Brazil; nothing goes on here that I would not share with my kids or with my wife.

Now with the re-elections here, how do you think that foreigners view Brazil as a place to invest or work?

That is a very tricky question because to answer this question I have to give my opinion about the “Partido de Trabalhadores” political party. Unfortunately most of the international analysts don’t have the right understanding about this party and its prospects for Brazil, in my opinion. It is much more than just a political objective. Brazil has done very badly for the last four years. It is very clear that the group managing Brazil doesn’t know how to deal with the challenges. It is very easy when you have to manage a company or a country when everything is going well and there are no problems but Brazil has huge problems to solve and those politicians in charge of Brazil don’t seem to be taking the challenges seriously. It feels like they think that everything will solve itself automatically or by God´s decision. I am hearing that there is a kind of bad feeling from investors about coming to Brazil.

However, today there is a big article in the local newspaper saying that perhaps the only sector that still has a lot of interest from abroad for investment is the agribusiness. This sector cannot wait because we have to feed people and more people are consuming. Thus I am very optimistic about the agribusiness sector in Brazil, especially when we have an exchange rate that is positioned at a more correct level. It was clear that during 2014 the government did whatever necessary to keep the Brazilian Real very strong. The commodities such as soy bean, corn, wheat, saw a decrease of almost 40% over this year; in dollars our production is worth a lot less than it was three or four years ago. Today, the exchange rate is going to play a very important role in calculations. If they keep the Real in such a strong position they will hurt the profitability of the producers. If Brazil has an exchange rate above 2.50 in 2015, it will be very good for exports. We are going to enter this new year with new price levels which is very important. This year we started the year with soy bean for example at the price of 16 dollars per bushel but in October it was at 9 dollars per bushel. This tremendously hurts the commercial process. For 2015 the cards are on the table, customers will buy plenty knowing the price is 9 or 10 dollars per bushel. In my opinion commercially speaking 2015 will be an easier year.

Can you tell us about some success cases?

We have customers in Saudi Arabia, which we have been supplying for the last 6 years. These customers are very demanding. It is not easy to deal with this culture. We sell to groups like Nadec, and Al Safi that supply cotton seed for their milk production. We export to customers in Japan and Korea supplying animal feed stuff. We also do business with cotton, with different kinds of merchants and big trading companies worldwide; but we do not access the final consumption. We normally trade with big companies although we are making changes to this business approach. We export to the textile division of Samsung Asia and we supply cotton for distribution to China and Vietnam. These are a few examples of our commercial successes.

What projects are you working on now?

Today we are developing a new strategy for our internal operations, always maintaining our focus on containerised exports. For 2015, Trade Agro will be shipping and working with containers in different parts of Brazil, always inland, always giving preference to operating in interior dry ports in Minas Gerais, Goias, and Mato Grosso, etc. This will probably represent an important percentage of our exports. The containers will arrive at the port ready to be exported. We will not be dealing with the product or its operations at the port. Only a small percentage will be dealt with at the port. This is a very important change from our current structure.

On the international front, Trade Agro is opening its own office in France. It will work in partnership with a local agent office. We are going to put a focus on export commodities in containers to Europe. We believe that for 2015 Europe and Asia will probably represent 50:50 of our exports. From 2015 onwards we are going to concentrate on other products that are not commodities. In Brazil we are going through a process of “de-commoditisation”, that means we are going to put less focus on soy bean and corn, which are pure commodities and try to enlarge our horizons. Cotton seed for example are not a commodity, it is an agri-product but it is not a commodity.

When we are supplying dairy cattle feed consignments in Saudi Arabia, they have 70,000 animals eating every day and so this means we are entering their supply chain. It is like an industry. For me, this is where we gain value for our customers, more than just operating with commodities. Thus in 2015 we want to move away from commodities and diversify including more exports to Europe. We also want to operate more in the interior of Brazil.

One of the biggest challenges will be China. Studying the American case of containerised exports, China is by far the most important importer. 70% of America´s exports go to China, Hong Kong and Taiwan. That is a challenge for us because to enter into China we have to find and identify the right partner, someone local who we can trust. It will not happen in 2015 but it is certainly something we are going to work on over the next 5 years.

What are you going to do to reach this goal and reach these potential partners?

We visit, travel and go to exhibitions. We are talking to an important Chinese group that controls their own port operations. As with everything in China, the company is gigantic. They have an interest in establishing a distribution of containers with Trade Agro. We are just in the preliminary stages of conversations so I can’t talk much about it.

What is your vision for the future of the sector and the company over the next three years?

It is very difficult not to agree that the future for the agribusiness in Brazil is great. People need to eat. As you know, we are suffering in Sao Paulo this year with very dry weather that is hurting everyone because of water shortages. In a country like Brazil, which is probably one of the countries in the world that normally receives the most water from rainfall, this is a real challenge. In fact, water represents a huge challenge all over the world. China for example represents a huge problem as China does not have huge reserves of water and they have huge demand. You cannot produce anything if there is no water. Thus Brazil is really pushing its production, there is more and more production happening in Mato Grosso and Goias for example and Brazil can double its production without destroying the Amazon, just by using land that is basically being used for cattle. In my opinion Brazil has great potential. Obviously we are always dependant on the government´s decisions and investments in logistics.

Today, it is very clear that there is a worldwide problem regarding the imbalance of logistics. Most imports are coming from the Far East, China or South East Asia with ships full of products that they produce there like electronics, clothing etc. but on their way back, the ships are empty. What does Brazil have to import to China in terms of industrialised products that can be exported in containers? Nothing! We don’t have anything! The United States is the same; they don’t have anything manufactured to export. Europe is the same, when vessels come from the Far East to Europe, they are returning empty. Although Europe does export some wine and olive oil. However Brazil and the United States are very similar because they are both huge producers of agri-products. Today, we are importing parts to build cars here and the containers have to return to the Far East to bring back more parts. When you transform those empty containers into potential volume for Brazilian exports it is a huge opportunity; it´s more than 10 million tonnes. Trade Agro is one of the pioneers in this. We are fully dedicated to containerised exports. We are one of the leaders in Brazil today. Our target is to be the leading company in this market in Brazil. I believe that Trade Agro will be a very important agro exporter by the end of 2020. We are always trying to establish long term contracts and commitments with buyers, not only being a trader of commodities; we want to enter supply chains of big companies worldwide.

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