June 20, 2013 / 2:01 PM / 7 years ago

Swiss firm Afegra cuts trading after losing Iran cereals business

* MD and team of at least six traders to depart -sources

* Afegra was once a key food supplier to Iran

* Small traders struggle to compete with ABCD giants

By Emma Farge

GENEVA, June 20 (Reuters) - Geneva-based agricultural trader Afegra - an exporter of cereals to Iran until last year - is parting company with its managing director and its trading team, sources familiar with the matter said.

Gert Bosscher, a former Glencore trader, has resigned as managing director, and a team of at least six traders will be made redundant this summer at Afegra, which was launched in 2010 and specialises in wheat, barley, corn and rice, the sources said.

The company, which is privately owned, has issued no public statement.

The sources said Afegra had lost a vital source of income after encountering difficulties with obtaining payment from Iran for agricultural deliveries, which were at least partly a result of Western financial sanctions aimed at Iran’s nuclear programme.

Swiss laws allow commodity firms to supply food to Iran and even to trade Iranian oil, as long as they register with the relevant government authorities.

But in practice, western sanctions have made it difficult for transactions to be completed, because Iranian companies are frozen out of much of the global banking system. This makes smaller suppliers of commodities particularly vulnerable.

Big companies such as U.S.-headquartered trading houses Cargill and Bunge, which also have been active in exporting agricultural commodities to Iran in accordance with relevant sanctions, are seen as more able to absorb the extra costs.

“They (Afegra) were stuck between a rock and a hard place. They had the choice between making a delivery and not getting paid or making costly demurrage (shipping) payments,” said a senior source at a trading house.

The departure of Afegra’s trading team also points to the difficulties of small traders in competing with large, integrated rivals such as the so-called ABCD majors (Archer Daniels Midland, Bunge, Cargill and Louis Dreyfus ).

This has led to consolidation, with more of the world’s cereals trading business concentrated in the hands of fewer companies.

“If you’re small, you have to have some sort of foothold to be successful, either in the producing country or the destination market. They had a foothold in the destination market, Iran, but that didn’t work out,” the source said.

A different source familiar with Afegra’s strategy said another factor contributing to the closure of the trading desk was its unwillingness to invest in strategic assets such as storage terminals and grain silos, which can help companies gain flexibility in their trading operations.

Afegra is still registered in Geneva, and the sources said it would continue to exist, although details of its future strategy were not immediately clear.

Bosscher has sold his shares in the group, the sources added. (editing by Jane Baird)

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