HardAssetsInvestor

Written by Amine Bouchentouf  |

May 08, 2012

The Commodity Investor: Commodity Trading Firms Bunge And Noble Offer Investors Good Value

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While Glencore may garner attention and headlines, smaller commodity trading firms can also offer a strong return on investment.

Following my recent column on Glencore, I received many inquiries regarding the commodity trading industry. While Glencore may be the most visible and notorious commodity trading house out there, there are certainly other similar companies with significant global operations worth looking at.

Commodity trading companies offer investors yet another way of getting exposure to the global commodity industry. The industry is truly vast, and you have several different players to choose from.

The first commodity trading houses began to appear in the late 19^th and early 20^th centuries as privately held, family-owned businesses. To this day, several of the world’s leading trading houses are still privately held, such as Louis Dreyfus Commodities and Cargill. Fortunately, a large number of the commodity trading companies are now publicly traded, thus giving investors direct access to this important industry.

The first thing you need to determine is the kind of exposure that you’re looking to achieve. The industry is vast, and you need to focus your selection process based on two critical factors: type of commodity; and geographic exposure. Not all commodity traders are created equal, and each one has different strengths and weaknesses. Identifying these characteristics will help you make the right decision.

If you’re looking for broad exposure to various commodities with a global footprint, then Glencore is certainly a company you should consider. Make sure you read my previous analysis so you get a better understanding of the pros and cons of such an investment.

Noble Group

Another diversified trading company worth examination is Noble Group Ltd (PINK:NOBGY). Noble is little known outside commodity circles, but it is a real powerhouse in commodity distribution and supply chain management. With revenues of more than $40 billion, Noble is a fully diversified company with activities in agriculture, energy and metals. Noble’s activities in agriculture are particularly strong. The company is a leader in global coffee and cocoa production and distribution.

Noble is one of the top three distributors of coffee in the world, with operations in Vietnam, Brazil, India, Indonesia, Colombia and even the United States. It grows and trades arabica as well as robusta varieties of coffee, and has particularly strong relationships with roasters in the United States, Europe and Asia. In cocoa, Noble is present in many of Africa’s leading cocoa-producing nations such as Nigeria, Cameroon, Ghana, Togo and Sierra Leone. Its customers in this segment include many of the world’s leading chocolate manufacturers.

In addition to a strong presence in agricultural commodities, Noble is also active in oil, gas, carbon credit trading, iron ore and aluminum. With Noble, investors get a very broad exposure to various key commodities throughout several strategic geographic locations.