Glencore suffers losses in cotton trading

Discussion in 'Commodity Futures' started by TraDaToR, Sep 26, 2011.

  1. TraDaToR


  2. oraclewizard77

    oraclewizard77 Moderator

  3. ddouglas


    I find that most of the time, Financial Times Links do not lead to the actual article - even if you are registered (which I am). Too many "want to subscribe?" popups, redirects, & re-redirects.

    I tried both of the above without success.

    Thanks for posting the story, though - will try to google for another source . .
  4. lwlee


  5. lwlee


    Glencore has suffered a setback in its plans to expand into cotton trading after losing money in the first half of the year and firing the leader of its fledgling team.

    The Swiss-based trading house last week dismissed Mark Allen as the head of cotton, according to people with knowledge of the decision. Mr Allen was hired only 18 months ago from Noble Group, the Hong Kong-based trader.

    Glencore, the world’s largest commodities trader, is a small but rising force in cotton, behind veterans such as Geneva-based Louis Dreyfus Commodities, Olam of Singapore and US-based Cargill. The arrival of the powerful trading house nearly two years ago sent shivers through the tradition-bound world of cotton merchants.

    But cotton still represents a fraction of Glencore’s revenues and income. Peter Poort, an executive in Glencore’s agricultural division, has taken direct charge of the team and the company plans to push ahead with the expansion, people familiar with the matter said. Glencore’s cotton business has so far this quarter had its best three-month period yet, the people added.

    The loss comes after a tumultuous year for cotton, which trebled to record levels above $2 a pound in March on the back of supply disruptions in India and Pakistan. Prices then collapsed as textile mills cancelled orders en masse.

    Amid the wild price swings Louis Dreyfus, through its Allenberg Cotton subsidiary, became the dominant buyer of New York cotton futures, taking delivery of 390,000 bales of cotton worth $300m in May, then buying another 161,000 bales worth $100m in July, according to ICE Futures US data.

    Glencore delivered the majority of the May bales to Dreyfus after unsuccessfully trying to sell them at a discount on, a physical cotton trading platform, and then reaching out to the company directly, people familiar with the matter said. Allenberg did not respond to queries.

    Trading around May and July cotton futures has drawn the attention of market surveillance staff at the US regulator, the Commodity Futures Trading Commission. One CFTC official called the inquiry “routine”. ICE, the futures exchange, declined to comment.

    “I know the CFTC is very interested in what’s happened and has worked with the ICE and trade participants to try to understand what happened,” said Jordan Lea, chairman of merchants Eastern Trading. “This seemed like a classic squeeze play to me.”

    Glencore’s semi-annual statement disclosed that “weaker results in cotton” offset profits in grains and oilseeds. Earnings before interest and tax in agricultural trading plunged more than 97 per cent to $2m in the second quarter from $90m in the first quarter.

    The losses in cotton futures trading compounded troubles elsewhere as farmers reneged on forward sales. Glencore’s statement said the “unprecedented period of volatility” led to “various suppliers not meeting their delivery commitments”.
  6. ddouglas


    Fascinating - thanks.
  7. I interpret the future contract price chart as showing some long term trends.

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