Canadian Shipper

Feature

Wheat Kings


With its global footprint, BroadGrain Commodities trades in wholesale grains and foods, moving them around the world with ease.

Earlier this year, as Canadian grain farmers were sitting on a record yield of grain, unable to get their product by rail to market because of a combination of extreme winter weather and a shortage of rail cars, Zaid Qadoumi, sitting in his office in downtown Toronto, wasn’t overly concerned.

As CEO of BroadGrain Commodities—a leading global marketer and handler of grains, oil seeds, by-products and specialty crops for both feed and food markets—Qadoumi and his team were prepared. Been there, done that.

In 2013-14, when the same issue— too much grain and not enough rail cars—first appeared, BroadGrain sought an alternative shipping method to avoid costly missed shipment periods. The answer they came up with was source loading.

“From our perspective as an originator of the product, [source loading] is the better way of doing things because we control the quality of the product—it is packed at our facility—instead of sending it by rail where some may be lost while being transloaded,” explains Qadoumi in an interview with Canadian Shipper.

“You also have better control of the schedule because once we’ve put something in a container we have contractually fulfilled our obligation as opposed to rail/transload where if it is delayed, we’re still on the hook.

“It created a new option that exists today in our supply chain.”

As part of the plan, BroadGrain upgraded some of its Western Canadian operations to include a machine that is able to tilt the container such that it is vertical, fill it, close the doors and put it on a flatbed. Then it’s sent to a container yard, close to their facility, so that the railway is able to put the container on a much larger, shuttle-style train configuration.

What also happened four years ago was the beginning of a conversation between BroadGrain and the ocean carriers.

“We said to them, ‘You guys have so many containers that come inland filled up with things like electronics and appliances and those containers are empty, so it’s more cost effective for you to send them back full.’”

“We incentivized the ocean carriers to pull more containers inland to the western provinces because of the rail limitations we were facing at the time,” says Taimy Suarez Cruz, BroadGrain’s director of logistics. “That allowed us to develop the program of positioning empty containers in our yards, being able to continue the flow of bringing product in, cleaning it, bagging it and loading it.”

Keeping it in the family

You could say Qadoumi was born into the business. His family began in the grain-trading business in the 1950s in Jordan, where he is originally from. He immigrated to Canada in 1992, graduated in commerce from McGill University, then returned to Jordan to learn the family business.

He and his father, Ghazi, founded BroadGrain in 2003, buying a grain elevator in Seaforth, Ont., near Stratford, to establish a domestic division while simultaneously developing a global trading unit. Today BroadGrain has more than 100 employees in Canada and abroad, with more than $700-million in sales and two million tonnes of grain shipped annually. Its commodities come mostly from North and South America and Eastern Europe, with demand worldwide but focused in the Mediterranean basin and Red Sea, covering North Africa, the Middle East and the Arabian Peninsula.

After the Seaforth acquisition, BroadGrain grew its domestic business, which was primarily focused on Ontario and the U.S. Midwest (Michigan and Ohio), using rail to ship product from the U.S. to Ontario and distribute for feed, ethanol and farm use.

In 2009 the company launched its international division, where it traded product that came from North and South America and the Black Sea, by vessel load to the Mediterranean basin and Red Sea.

Eventually, in 2010, a food division was added to focus on the sale of pulses and specialty crops, which includes lentils, peas, chick peas and mustard and flax seeds from Saskatchewan, where they buy from the farmer, process in their facility and trade within Canada, the U.S. and internationally. In contrast to its international division, the food products are not shipped as dry bulk, but in containers in bulk or bagged.

Since 2010, BroadGrain has seen a 13 per cent compound annual growth rate (CAGR) in revenue and an 11 per cent CAGR in tonnage.

BroadGrain is involved in the supply chain from the farm side, which goes out to various supply chains, whether it’s consumption here, in the U.S. or around the world. Cruz adds, “On the food side, product gets processed so it can be packaged or distributed to wholesalers. On the feed side of the equation, which includes corn, soybeans, soybean meal and wheat, where the volumes are much higher, we originate again at the farm level and move our product through our facilities before arriving at their final destination.”

Where products are sold into countries in much larger quantities (up to 50,000 tonnes), BroadGrain charters bulk vessels through its freight arm—Everdere Logistics—a vessel operationg wholly owned subsidiary based in Amman, Jordan. The company operates vessels ranging in size from 7,000 to 65,000 metric tonnes to move approximately one million metric tonnes of bulk cargo annually.

A dangerous world

With offices around the world, including in China, Nigeria and Argentina, BroadGrain has experienced many challenges, some unique to the areas where they deliver.

In 2011, during the Arab Spring uprisings, one of BroadGrain’s ships was scheduled to unload a shipment of Brazilian wheat in Libya, but the chartered vessel’s owner and captain were reluctant at first to make the delivery.

Qadoumi says he advised them to cut ropes and leave if they felt the danger was too great. The ship reached Libya on March 9, “smack in the middle of all the trouble,” Qadoumi recalls, and it safely unloaded and left on March 24, five days after NATO bombs began falling in the region.

“You need to resolve the problem of how you’re going to discharge your vessel once you reach the port if there is a security issue,” he says matter-of-factly. “We have a deep customer list in the MENA region and were prepared to divert the cargo to another customer if the security situation proved too difficult in Libya.”

Security issues are more prevalent on the drybulk side, adds Cruz. “Containers and product that moves in smaller lots is more controllable. Once it’s placed on the ship, the carrier has the responsibility to deliver it as opposed to bulk, where we charter the vessel, so the product is our responsibility until it reaches its destination.”

On the international side whether it’s China, Argentina or Nigeria, each of those countries has their own supply chain options, according to Cruz. “In China, for example, we ship some of the product we ship to the U.S. for distribution, and some of it we keep there for local distribution. It’s the same for our other international hubs.”

What gives BroadGrain a very unique view of the ability to move product is the fact that the company is in so many different countries at the same time, moving the same product. For example, BroadGrain sources dry beans out of Argentina, Canada, China and the United States.  “Sometimes, what you learn in China, for example, you take that and apply part of it here or open up the market to the people who are involved in that supply chain to an idea,” says Cruz.

The same thing applies here at home. “We could resolve a problem here that we haven’t thought of in Argentina or Nigeria. “It’s that diversification of information throughout our supply chain that gives us the opportunity to be able to change how things are being done within a normal structure in a country to take advantage of our costs.”

Logistically-speaking

Making sense of the supply chain or as BroadGrain views it “making as efficient as possible the process of taking a product from the farm to the final destination,” is key to the company’s continued success.

Logistics are an extremely important, large segment of the cost required to take agricultural commodities from their origin to the final destination. BroadGrain’s philosophy is that it’s easy to sell something and it’s easy to buy something, but to take it from A to B—that is where a lot of the money is.

Accordingly, the number you get from a 3PL or a freight forwarder will never be competitive if you are not able to dissect that supply chain into different parts.

“We have a capability to originate. We have a capability to sell. And those exist because of demand and supply. What we have really invested in over time is our logistical capabilities,” Cruz explains, adding that the bulk of BroadGrain’s staff move product, as compared to those who buy and sell it.

“We’ve invested a lot in these segments of our supply chain to continue to communicate, and to continue to think about how can we move the product in a more cost-effective manner and that has given us a competitive edge as time goes by.”

Some companies silo or isolate the origination, logistics and sales groups, Cruz continues. “What we try to do is bring them together. As our people are buying and selling from different parts of the world they are discussing this through this logistics bridge that we’ve built.

“We can now arbitrage our buys and sells for the next six months.”

With all of that knowledge came the need to put it to use across the company, so a few years ago BroadGrain began investing in automating its information to give it the ability to plan capacity and foresee its ability to move product. The company began to implement ERP software to better manage trading, positions, risk, P&L, inventory, costs and logistics. The system has been implemented in its dry bulk operations and BroadGrain is currently implementing and testing it for the domestic and container side.

Containers as commodities

Source loading containers with agri-commodities began before the first rail/grain crisis in 2013.

Before 2008 many industry players wouldn’t consider containers as a mode of transportation for agriculture products. But when bulk rates increased that allowed the container world to get into bulk agriculture product movement and that increased the supply of containers and container ships. When bulk rates eventually dropped that supply didn’t evaporate. So that forced containers to continue to compete with bulk rates and that changed the dynamics of the market.

In the beginning, it was BroadGrain who approached carriers about their willingness to allocate containers for source loading, giving the company an advantage, but that has changed as the carriers began offering source loading to BroadGrain’s competitors.

In terms of container availability, North America is a relatively stable market because there is a strong two-way flow, but China is a different story altogether.

“Because China is such a big seller of containers, sometimes they just don’t exist. And if they don’t exist, you have to pay up,” says Cruz.

“There is a direct relationship between ocean rates and container inventory. Containers are a commodity.”

While using containers to source load has given BroadGrain more options when it comes to shipping their agricultural products around the world, sometimes you don’t look a gift horse in the mouth, according to Qadoumi.

“At Christmastime when North America is seeing a huge influx of small consumer goods from Asia, the result is a larger-than-usual number of empty containers, which in turn opens up an opportunity for us to leverage that overcapacity into our source-loading strategy.”