October 23, 2015 / 12:47 PM / 3 years ago

Freepoint sows seeds for first move into ags trading

NEW YORK (Reuters) - Freepoint Commodities founder David Messer, a force in oil, gas, power and metals trading for three decades, is now poised to plough a new furrow.

The Stamford, Connecticut-based merchant trading firm is in “deep discussions” to hire agricultural traders for the first time, its latest move to capitalize on the withdrawal of banks and other rivals from trading in physical raw materials, Messer told the Reuters annual Commodities Summit.

The firm may hire agricultural traders over the next few months and form a new ag group, Messer said. He did not offer details on which agricultural products Freepoint plans to trade or where he has been recruiting, but said the expansion could be global.

Masters of logistics and arbitrage strategies that can be profitable in highly volatile markets, merchants have made a steady move into agricultural trading in recent years. The expansion has come as some large banks exit commodities markets due to new trading limits and poor returns, broadening the talent pool of traders that merchants are able to recruit.

Freepoint would be the latest merchant to reach beyond its historical roots. Vitol, the world’s biggest oil trader, began trading grains two years ago, while metals giant Glencore leaped into the agricultural big leagues with the purchase of Canadian grains merchant Viterra a year earlier.

The move would mark Messer’s first foray into crops, following a career focused primarily on energy and metals, first at Drexel Burnham Lambert and later running power utility Sempra’s vaunted commodities division.

Now in its fifth year, Freepoint is also stepping up hiring in other areas, with plans in the coming months to bring on more oil and natural gas traders and power traders in Europe and North America, he says. “The exit of banks is having an acute effect on available trading talent,” Messer said. “Some other trading firms are also scaling back, which has amplified the opportunity.”

Some bigger trading rivals have suffered deep drops in their share prices. Freepoint, which is privately held, is a “more appealing platform,” offering stability and annual bonuses in cash instead of stock, he said.

Shares in Swiss mining and trading giant Glencore (GLEN.L) and Hong Kong-based merchant Noble Group (NOBG.SI) have both dived more than 50 percent this year, due to a mix of slumping metals prices and shareholder concerns.

Freepoint now has more than 280 employees, versus just over 250 a year ago, and has opened three new offices over the past year in Calgary, Canada’s oil hub, as well as Portland, Oregon, and Excelsior, Minnesota, where it employs a team of traders recently hired from Black River Asset Management, a hedge fund unit being spun out from agricultural giant Cargill.

Messer declined to discuss the company’s financial details, other than saying that it was “on plan” and that Freepoint was beginning to benefit from its staying power in a market where new trading shops can rise and fall fast.

“It’s a longevity factor. We’re established. Customers view us differently than a few years ago,” he said.

Reporting by Jonathan Leff, Josephine Mason and Joshua Schneyer; Editing by Chizu Nomiyama

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