Can any other trader in the world possibly know as much about these markets and trading as Cargill?Guest Post
The author of this article may have a short position in Cargill
Cargill is probably the ultimate insider, producers, consumers, processors, transporters, operates at considerable advantage in trading commodities. Can any other trader in the world possibly know as much about these markets and trading as Cargill ?
Cargill has a sophisticated commercial team which analyzes fundamental and non-fundamental information. All the information is finally integrated at the World Trading Unit, interpreted into the strategies that provide the roadmap for the firm finance and capital allocation.
Cargill’s long-standing lead bank J.P Morgan Chase also acts as an advisor of the shareholders and financier.
22 March 2018
This said, Cargill wanted US$240M for the business. How does it factor into financing ?- not cheap.
Using a sharp pencil, La Coop, a US$525M equity cooperative is funding by debt US$228M- it comes at a $1,16M monthly payment. Based on appropriate metrics of 1% EBIT/Sales in the region, the Coop has to generate, (conservatively) more than C$ 1,94B sales to cover their interest + principal payment, a considerable risk:
If Cargill accounted for 1/4 of the grain, fertilizers & pesticides sold in the region- incl. the Sarnia export terminal which is excluded in the asset-sale agreement, La Coop asset base comes short at C$ 1.1B pro-forma sales.
An old Commodity Merchant cajoles me with “When Cargill sells, it is maybe because they’ve a view. (maybe indeed…)
Listen-up, you need to know when it’s time to get out just like Cargill: build the business, calculate the risk to sell at the top to others and start other ventures but you do the slightless mistake; you are dead.
-Simon Jacques, Structurer