* Trading houses expanding into new commodities markets
* Agriculture, oil markets more connected due to biofuels
* Grains margins seen as much higher than oil returns
By Emma Farge and Sarah McFarlane
LONDON, Feb 20Top oil trader Vitol is building a
global grains desk and has taken advantage of Glencore's
takeover of Canadian grains giant Viterra to hire a
team of its traders, trading sources said on Wednesday.
Vitol, which has an annual turnover of nearly $300 billion,
will vie for market share along with rival trading firms Gunvor
and Mercuria, which have also expanded in agricultural commodity
markets as they seek to expand across new markets.
The Swiss firm's advance into agriculture could help it spot
niche opportunities in both energy and soft commodity markets,
which are seen as increasingly connected due partly to the
growth in crop-based biofuels.
"Markets are now linked in ways that they never were before.
Ten years ago an oil trader could lead a happy existence without
ever knowing what was happening to the corn price. Those days
are gone," said Robert Piller, director of Aupres Consult and
commodities lecturer at the Geneva Business School.
Vitol, already present in the sugar market, is hiring around
15 staff as part of the expansion, one of the sources said.
The trading sources said it had hired at least five traders
from Viterra's Geneva, Hamburg and Singapore offices following
Glencore's $6 billion takeover last year.
The first grain trading staff are expected to join next
month, two of the industry sources said.
Vitol declined comment. Glencore officials could not
immediately be reached for comment.
Industry sources cited relatively high margins on
agricultural markets compared with other commodities as a factor
behind Vitol's expansion as well as a bullish demand outlook for
grains as the global population expands.
"You could expect a pure oil trader to get a gross margin of
3 percent or 1 percent net, whereas with agriculture and metals
you could get 5 to 6 percent and 3 percent net," Piller said.
Vitol's expansion in the agriculture market follows an
upturn in the fortunes of dominant companies in the global
Archer Daniels Midland Co and Cargill Inc,
both members of a club of top grains traders known collectively
as the ABCDs, have reported stronger profits in the fourth
quarter of 2012.
Cargill said it had quadrupled quarterly earnings, while ADM
reported a six-fold increase in profits despite lingering
challenges caused by a U.S. drought.
By comparison, some traders have struggled to make money in
an oil market structure known as backwardation, in which spot
oil prices trade at a premium to more distant contracts, wiping
out opportunities to profit through storage.
In the Glencore-Viterra tie up - one of the largest deals in
the global agriculture business for years - many Viterra traders
discovered that Glencore traders had similar roles to their own,
the industry sources said.
"A lot of the main grains people at Viterra are not being
taken on by Glencore because of direct overlaps," said a trader
who formerly worked for Viterra.
"Hamburg and Singapore are being talked about as offices
because of their regional grain trading strengths and the
existence of Viterra offices in both cities."