Thu, Jun 17, 2021

The need to have a Commodity Management strategy


  • 05/15/2021 - by José Luis Reyes Escriche

Unlike the Latin American economies (and especially those of South America), which today face difficult times. Although in the last decades they have made important efforts not to be so affected by the international cycle, the truth is that their growth continues to be highly dependent on what happens abroad

When I created BCI Commodities, I began an adventure that led me to combine know-how as a consultant for ten years throughout Latin America and part of the Maghreb and Mashrek that made me seek a balance between the world of investment and the world of business creativity. For this reason, by creating an investment bank for entrepreneurs, we managed to find this bridge between the two worlds.

Due to the alliance in a new project with the OSI Occidental Studies Institute foundation, I began to know the state of New Hampshire and found that it has one of the highest percentages of citizens with university education and a highly attractive tax system at the business level.

Unlike the Latin American economies (and especially those of South America), which today are facing difficult times. Although in the last decades they have made important efforts not to be so affected by the international cycle, the truth is that their growth continues to be highly dependent on what happens abroad. And, unfortunately, we have entered a phase in which the three main variables that have historically pushed or weakened growth in the region (commodity prices, international liquidity conditions and dynamism of international trade) are becoming increasingly adverse. Fluctuations in the prices of various commodities represent a challenge in business, as they need to be administered and managed day by day and in the future. This market volatility can lead to uncertainties in company costs, product prices, earnings, and credit availability, among others. All factors that can affect the competitiveness of the company.

An effective commodity management strategy considers a flexible and holistic approach, aligned with the strategic objectives of the business and adapted to a particular situation. There is no single strategy in particular to consistently improve performance. For example, if the objective is to achieve the lowest costs in the market, the strategies to use are different from those that would be used if the priority were to stabilize the margin. Clearly, the definition and selection of these strategies depends on business objectives and risk appetite.

As China recovers from the impact of Covid-19, commodity flows suggest that the country may already be unleashing a new boom in this asset class.

Among the factors that contribute to a super cycle of commodities are: forecast of strong GDP growth in the Asian nation; consistent fiscal stimulus by the Chinese government; and the relatively high level of interest rates from the People's Bank of China.

The low growth of total factor productivity, the fall in the growth rate of the working-age population and the reduction in investment make it even more difficult to anticipate higher growth in the future.

The long-term challenges go through an improvement in structural policies. But, as happens so many times, now there are no public funds to finance them. For that reason
That is why BCI Commoditygroup plans to establish a representative office in the United States, specifically in New Hampshire, from where it will be able to combine the Canadian, United States and Latin American markets, in this way it will be able to provide greater coverage to all its future clients.

We hope that this new phase will be completed between 2021 and 2022, this new commitment being an open door to new business alliances. 

José Luis Reyes Escriche.
President BCI Commodity Group