Cargill hands in the Cape Market

As Trader Cargill was expanding out of the Midwest, it was clear that the freight factor would

become more paramount than ever. In the world markets, where competition is fierce, freight rates

are a decisive factor.

As Cargill was trying to push by the European houses' back-door, they felt that they were losing

business and margins because of their freight market judgment.

Cargill Merchants were still booking freight for high-volume too much on a short-term basis when

time-charters would have proved more advantageous.

We are in the 50's and freight rates were low on fleet overcapacity. (History repeats itself, freight

markets were going nowhere just like these days...)

Grain was moved in small and inefficient size vessels and demurrage costs were high because

discharge rates were slow at euro ports:

It was an opportune time to build storage facilities, leasing and owning to learn "the

greek affair" wishing happier days.

Cargill hands in the Cape Market

As one of the world’s top charterers of dry bulk freight, Cargill operates today more than 600 vessels

on charter at any given time anywhere on the planet.

Cargill aggressively buy/sell short and long-term ocean freight like Greeks.

Any softening of the t/c rates can caught Cargill exposed with a long ocean freight position.

They do well and have to always do well because they are handling over 200 million metric tons of

ocean freight each year.

This summer they decided to sold deep in both basins just before entering July...

Because daily rates were at depressed levels during June, it must have been very difficult, even with the

most bearish S/D bias to convince the traders at this time to go short, but they did it. Huge calls have

made a difference on a freight desk's performance.*

The freight markets are volatile by nature; dry-rates have done a V-rebound just after this episode.

This week, Tradewinds reports that Cargill Ocean Transportation, the ocean freight trading arm of

Cargill has hired the 170K DWT 96 BLT Capesize GOLDEN TRUST 15-18 MTHS CHOPT.

1996 built...

This old vessel is a D or at most a C- at the extreme-end of its useful economic life.

Why a top trader/operator name would be interested in paying for a much less efficient and less

performing below other candidates ?

The final REDEL in 15-18 MTHS is likely to be the scrap yard, is it also a part of the deal ...

Hints:

1. 2014-08-28, The Baltic Exchange has reported the fixture @ +125 over the CAL 15

2. Option to relet the Golden Trust (Relet clause gives the charterers the option of sub-chartering

the ship to others) at higher rates.

3. In some ways, they must now deem CAPE 1YR T/C as cheap. (see below)

In my opinion, the Golden Trust is not very indicative of, or bullish for the spot rates for 2014'-15'.

It is more pointing out that:

i) one big merchant co is long freight CAL 15, without the margin calls.

ii) they are not anticipating a softening of the 1yr T/C numbers in the near-future.

The Golden Trust is only one of many ingenious trade crafted by Cargill employees recently.

They don't have just opportunity capital, they also have this knack to accomplish oversized and out of

the box ideas that no one else do: barter trades, distressed assets, niche products like Truvia®...

The Trade Shipping and Finance Wizard © 2014

Navigating the commodities markets with Freight and Spreads

*Cargill Q4 results hinted about in their broad statement...

Price is only what you pay… Cargill Inc's move to order bulker ships and take advantage of lower

vessels value.

Cargill, Vitol are in the Driver seat, Owners in the rear seat

For more about Cargill use search on the home page of The Trade Shipping and Finance Wizard