CBH sets up shop in the US

23 Apr, 2014 02:00 AM
CBH North America senior commodity trader Sam Nottle.
We’re here to strengthen our origination capabilities and relationships with customers
CBH North America senior commodity trader Sam Nottle.

THE US city of Portland is famous for its eccentric subculture, irreverent fashion styles and oddball attractions like the world’s smallest park.

The city’s unofficial motto, seen on bumper stickers, is even “Keep Portland Weird”.

But for CBH North America senior commodity trader Sam Nottle the motto that’s driving his new role based in Portland, Oregon, is anything but.

Mr Nottle landed in the US in January and in the past three months has been slowly establishing a new presence to buy US and Canadian wheat for export to the WA grower-owned co-op’s Asian customer base.

He’ll be buying high protein spring and winter wheat varieties grown in the US Pacific North West (PNW) to complement Australian wheat grades already used by CBH’s Asian customers in their flour milling process.

Mr Nottle said CBH was in Portland for the long haul but for now, “we’re not trying to set the world on fire”.

“We’re certainly complementing the current CBH business model but we’re not going to be trading millions and millions of tonnes of grain,” he said.

“We’re here to strengthen our origination capabilities and relationships with customers and we can do that by offering a full suite of products and a broader suite of products and that’s what the name of the game is.”

Mr Nottle said CBH wouldn’t be buying grain direct from US growers which would require investment in capital assets like upcountry grain elevators.

Instead CBH wanted to purchase wheat from US and Canadian trading companies and ship those cargoes to the co-op’s existing customer base in South-East Asia.

CBH will also be trading physical cash markets in the US to gain exposure and visibility over price discovery and price direction, he said.

CBH is also staking a foothold in Portland to gain critical market information which otherwise wouldn’t be accessible or delayed 12-15 hours for the Perth time zone.

“Commodity prices and wheat prices in particular can be extremely volatile at times so we need reliable access to better information to know where we’re going and to hedge or manage risk better and act accordingly.”

Keeping it low key

Mr Nottle said CBH has entered the US in a “very understated way” with low overhead costs.

“And that’s important to us,” he said.

“We’ve seen many companies come and go over time, which have made a lot of noise about setting up offices and they’ve hired a lot of staff and had big overheads to cover.

“I won’t go into the details about what other companies have done wrong but I’d like to think with low overhead costs and good access to the US market and building stronger networks, we can provide a good return on investment for WA growers.”

Mr Nottle said any wheat export sales, driven through CBH’s new Portland office, were not intended to “displace” Australian wheat sales into the Asian market.

“We’re not looking to displace Australian wheat in the marketplace but many of our customers use US wheat and Canadian wheat and wheat from other origins to blend with Australian wheat,” he said.

He says CBH’s first shipment of US wheat to Asia via the new office, would be on the water “as soon as possible”.

“For us it’s all about building relationships with the export terminal operators and bringing value to them and letting our customers base know we’re in the US originating US wheat,” he said.

“We do that by getting in the middle and showing the export terminals a bid they’d be happy to sell at and making an offer our customers would be happy to buy at which involves us being in the market and getting a better understanding.”

Mr Nottle has worked at CBH for five and a half years, starting in marketing and trading accounts for two years before moving onto the trading floor.

He admits the audition process to claim the new job and move his young family from Perth to Portland to establish and run the new grain trading office was quite robust.

“It was a very sought after position and I’m happy with the opportunity,” he said.

Mr Nottle said generating greater profits for CBH grower-shareholders was central to his focus in the role.

“The number one aim of me being here is to trade profitably and by having access to information and building our contacts here, we believe we can certainly trade better as a result.

“And by building our customer relationships and being a one stop shop for them, we’d like to think we can make more money from trading.”

Port key to the Asian market

Located near the confluence of the Willamette and Columbia Rivers in Oregon, Portland is home to seven large, operational grain export terminals with a combined storage capacity of more than 1 million tonnes.

Unlike WA, where the majority of grain is shipped post-harvest, the US market trades almost the whole year round, with old spring wheat crop currently being exported.

While CBH’s focus is on accumulating wheat in the Pacific North West, corn and soybeans are also exported in large volumes from Portland’s key facilities and some sorghum crop.

According to the USDA, 11.5mt of wheat, 9mt of corn and 3mt of soybeans were shipped from the region last year.

The grains are grown and accumulated in the Pacific North West states of Oregon, Washington, Idaho, North Dakota and Montana and in Canada and mostly transported into Portland’s grain terminals via a powerful system of railway tracks and rivers.

The rivers carry barge-loads of grain from upcountry elevators into the seven port sites where Panamax vessels are loaded with grains destined for flour millers and bakers in Japan and the Asian region.

The ABCD firms – Archer Daniels Midland, Bunge, Cargil and Louis Dreyfus - run various joint ventures in the region with the likes of Mitsubishi, Marubeni and Mitsui.

Mr Nottle said Japanese trading houses had been operating in the Pacific North West market for about 30 years or more to access the high protein wheats grown in the region.

He said the Japanese use PNW spring and winter wheats for the same reasons that the South-East Asian market does - to blend with lower protein wheats, for making specific noodle and bread based products.

Feeding the hungry Asian market

Mr Nottle said the Pacific North West was an ideal location for CBH to accumulate wheat varieties with specific end-use purposes for the co-op’s growing Asian customer base.

“Australian wheat doesn’t have the same protein levels as they do in this part of the US and in Canada,” he said.

“We’ll be looking to accumulate spring wheat which is a dark, high protein wheat – 14 to 15 per cent – that’s predominantly shipped out of Portland and the Pacific North West.

“It’s used in Asia for making different types of noodles and breads.

“Our Interflour mills are purchasing quite a bit of US wheat but we’ll be looking to focus on selling to all of our customers throughout Asia.

“We’re also looking to buy soft white winter wheat which is also grown in Oregon, Washington and a little in Idaho and shipped out of the Pacific North West.

“That’s a lower protein wheat variety - but also a softer variety that can also be blended with Australian wheat.”

Mr Nottle said winter wheat was harvested in the Pacific North West in about July or August while the spring wheat harvest became available in about September.

He said there were some key differences between the US and Australian grain markets but one common thread applied.

“The crux of it all is you’re still trading a commodity and in our case wheat.”

However, Mr Nottle said the US market seemed a lot more advanced than Australia with greater transparency.

“Here you have to own assets to ship grain, unlike Australia where the ACCC mandates that asset owners have to open the doors for others to use,” he said.

“Here in the US if you own the asset, you can choose who uses it.

“I’m certainly not saying the WA market isn’t commercial because it very much is.

“But WA has a 95pc export focus, so you pretty much know if you buy a tonne of grain it’s going to end up on a boat, where as over here in the US, the growers and traders have more options.

“If the export market is more valuable on any given day, they can shift the sales there, or if domestic market is paying more, they can switch it to that, so it’s very much like the east coast of Australia in that regard.”

Colin Bettles

Colin Bettles

is the national political writer for Fairfax Agricultural Media
Date: Newest first | Oldest first


jack tancock
23/04/2014 6:09:29 AM

Very interesting. Hopefully there are some WA gung ho growers reading this and starting to understand that WA wheat is not quite the be all and end all they believe it is. Millers and processors actually need qualities that WA do not have! CBH, as a grower interest group are doing the right thing by their coop members in becoming a broader church.
23/04/2014 7:15:30 AM

Anything for a sycophant to latch onto. The deck chairs are being shuffled and the disciples just love it.
23/04/2014 7:39:35 AM

Another foray into the never never with our hard earned. Since when has CBH ever turned a profit out of its trading desk?
Concerned Shareholder
23/04/2014 7:42:32 AM

CBH seems to be spending a bucket load of cash these days. Is there an ego problem at the board level?
23/04/2014 10:03:00 AM

Compared to what you cockies spend on your machinery this type of foray is completely justified in terms of capital use. CBH re stumps the house while you guys complain about a dirty door mat . Really you guys should do more reading and less commenting
23/04/2014 11:08:59 AM

CBH fiddles as farmers burn. CBH is a co op not a try hard corporate model. Get back to basics and give shareholders cheap rates.
23/04/2014 3:10:17 PM

Multi origin grain was hardly an amazing success story for AWB in Brazil!!!! How about addressing the basics first?
23/04/2014 8:25:57 PM

Cockies trying to blame CBH for their own farm or funds mismanagement, is like a taxpayer trying to blame the Federal Government when they lose all their money at the casino and get their house reclaimed for failing to make mortgage payments.
Concerned Shareholder
24/04/2014 7:16:03 AM

It time to stop the spending spree CBH board! Tighten the belt because there is competition and dry seasons ahead which will test the co-ops ability to survive. The troops are in line but they are getting restless.
Fibonacci of Merredin
25/04/2014 10:12:56 PM

Well, well, well. CBH makes a bumper profit and suddenly their staff are sporting lavishly appointed hipster beards. Coincidence? I think not! I don't remember any hipster beards back in the single desk days that's for sure. I also agree with the previous commenter "Concerned Shareholder" - what the heck are CBH doing trying to reduce concentration risk by diversifying income sources when there is a dry season ahead that might bankrupt CBH and...ohhh. Never mind. Last week I was reliably informed that the earth is apparently "spherical" in shape and now this US malarky. Bah!
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