Optimize Your Agriculture Supply Chain with Smart Commodity Management

Optimize Your Agriculture Supply Chain with Smart Commodity Management

John SchimelpfenigExecutive Principal,

AXCELERUS

Michael SchwartzEVP & Chief Marketing Officer,

Eka

www.ekaplus.comwww.ekaplus.com

Agenda

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Featured Speaker: John Schimelpfenig, AXCELERUS

• 2014 trends in commodity markets

• Top 5 customer issues in agricultural trading, risk and supply chain management

• How businesses can address these challenges

• Old business model vs. new business model

Eka Background and Solutions

• About Eka, Customers, Global Presence

• Next-Generation Smart CM Platform

• Eka Agriculture Solution

Join the conversation:@EkaSoftware

#ekawebinar


Featured Speaker

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John SchimelpfenigExecutive Principal, AXCELERUS• 25 years of experience as a risk management

professional and trader in global commodities markets

• Provides expertise as an independent and objective source of solutions for risk governance, trading, operations, shipping & logistics, and technology for commodity markets

• Prior to AXCELERUS, John ran his own successful consultancy with projects covering risk policy/business process improvement; CTRM system functional/technical evaluation; and CTRM system selection and implementation

• 11 years with Deloitte’s ETRM/CTRM practice providing energy & commodity services to Fortune 500 & Mid-Market companies

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© 2014 AXCELERUS, LLC. All rights reserved.

Solutions for Commodity MarketsOptimizing Agricultural Supply Chain Webcast–July 22, 2014

A changing global landscape…

2014: Trends In Commodity Markets

Acquisitions & Investments

Financing Sources

Cross Commodity Asset Plays

Global Commodity Regulation

Uncertain Supply & Demand

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¹ Source: RealEstateRama.com: 6/19/14

² Source: Dow Jones Business News 7/9/14


New Financing Sources


Private Equity investments in agricultural efficiency, farmland, CTRM

technology

Low agriculture debt pushing farmland prices higher (especially irrigated)¹

Vitol + Glencore + Cargill + Trafigura > $100B USD²

New: Cargill/Copersucar JV forms largest sugar trading venture

Mecuria buys JPMorgan’s physical commodities business

Chinese companies continue to acquire commodity assets/producers



THERE’S A FLOW OF CAPITAL ENTERING

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Not all banks have exited: BTG, Macquarie, Wells Fargo, CIBC, Standard

Chartered, Goldman investing in talent and portfolios¹

Merchants (Mercuria, Cargill, Trafigura, Rosneft) taking a greater role in

highly physical part of market¹

Common footprint: origination, supply, transportation, trading and

warehousing

Sovereign Wealth Funds investing land, production, fertilizers (secure supply)

“Best of Breed” CTRM trend in large participants




SUPERBROAD CAPABILITIES

¹Source: Forbes 4/29/14

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¹ Source: Dow Reuters 7/13/14

² JournalGazette.net: 7/13/14


Financing Sources


Mercuria new $2.65 Billion USD credit facility

Freepoint Commodities $1Billion USD credit facility

Private Equity investing in farmland, food producers

Large commodity traders such as Glencore, Vitol, Trafigura and Mercuria

are stepping in to plug the gap in trade finance¹

About $5.9 billion was added to raw materials investments this year²



BANKS STILL LENDING

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Major US/EURO banks exit commodity markets

Regulators turn attention to the “known unknown” commodity traders

EMIR, Dodd-Frank, CFTC impact all market participants (yes, end users will

have compliance reporting)

Regulatory scrutiny collateral of Chinese commodity loans ($160B)¹





RELENTLESS INTERNATIONAL REGULATIONS

¹Source: Bloomberg 3/18/14

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High crop yields forecasted in US grains/seeds = surplus & low/stable prices

Economic uncertainty in China, Emerging Markets & Europe = downward

demand & prices

Bloomberg Index of 22 raw materials down 3.7 percent Apr-Jul 20141

Oilseed crush margins trending lower – & negative in some regions (China)

Forecasted higher global bulk shipping rates squeeze profit margins2


OPERATING IN LOW PRICE/LOW VOLATILITY MARKETS

1 . Source Wall St Journal 6/19/14

2. Source Ag Professional 7/8/14

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Cost management, smart hedging, and efficiencies in supply chain

operations are key client issues in today’s environment.

* Source: AXCELERUS internal research 2014

22%

15%

10%

26%

27%

Cost/Cash Management

Risk/Hedging Effectiveness

Operational Efficiencies

Accurate & Timely Market Intelligence

Regulatory Compliance

What Are the Key Issues in this Global Context

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Common Business Objectives

Supply Chain

Management

Margin

Improvements

Innovative

Pricing Tools

Client

Relationship

Management

Brand

Enhancement

Cost/Cash

Management

Risk/Hedging

Effectiveness

Operational

Efficiencies

Accurate & Timely

Market Intelligence

Regulatory

Compliance

Key issues impact a number of common business objectives for our clients…

…with supply chain management critical in today’s competitive global markets.

Issue Impact on Supply Chain Objectives

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ePayments

(A/P, A/R)

Inventory & Plant

Delivery & Logistics

Supplier Management

Procurement Strategy

Need Analysis

SettlementsDelivery & Logistics

Risk Management

Analytics/

Reporting

Credit

Risk

Trading & Hedging

Forecasting & Planning

Analysis

Silo 1: Procurement/Logistics/Plant Management

Focusing on operational risks: product flow, inventory,

manufacturing & processing

Silo 2: Commodity Trading & Risk Management

Focusing on trading, price and credit risk

management

Silo 3: Corporate

Accounting/Treasury

The traditional agricultural industry business model bifurcates

functions into separate operational and transactional activities…

…often utilizing

separate tools & spreadsheets to

manage business

operations and develop reports

Old Business Model: Siloes & Spreadsheets

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Inefficient coordination among processes and systems hits companies via

a continual erosion of bottom line margins…

…what we call death by a 1000 cuts: Where the razor nicks:

High, recurring, unanticipated freight & logistics

costs (demurrage, bunker, port/customs fees)

Contract defaults resulting from late shipments,

incomplete L/C documentation

Trading losses from uncovered/under-hedged

inventory positions (WIP, Finished Goods)

Inaccurate P&L attribution (multi-commodity positions)

Interest costs of delays from manual cash processes in AP/AR processing

Extensive (3-4 week) monthly financial closing process

Unplanned cost of plant shutdowns due to inventory imbalances (high/low

stocks)

Unbudgeted costs (technology/processes) for regulatory reporting

compliance

Data quality - duplication and data re-keying

Old Business Model: Supply chain is slow and costly

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The Role of Spreadsheets in Commodity Businesses

…..EKA and AXCELERUS

recently co-authored a

white-paper on the 8

ways commodity

management systems

should be used instead

of spreadsheets and

manual business

processes

*The Information Olympics:, Commodities Now, Vol. 18, Issue 2, June 2014 . Commodities-now.com

Commonly used for:

Data Analysis

Official Reporting

Data Integration

Systems of Record

Manual Data Entry Error

Not Secure

Lack of Audit Trail

Reference Integrity Issues

Stale Business Logic

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Complex markets, multi-asset operations, and global distribution channels are

driving agricultural companies to move toward a more cohesive view of their

supply chain risk management…

…with a focus on improved decision-making, profitable operations,

operational efficiencies driving competitive advantages in global markets

Market Intelligence & Analysis

Procurement Strategy

Transportation & Logistics

Trading & Hedging

Risk & CreditManagement

Accounting, Settlements,

Financial Reporting

Risk Reporting & Compliance

Plant & Inventory

Management

Product

Channel Management

New Business Model: An Integrated Approach

AXCELERUS has several tools (CTRM IQ™ & AppRat™) to assist aligning/optimizing your CTRM value chain

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The sweet spot is a point where processes and systems are aligned as a front-

to-back solution…

… to provide the appropriate level of transparency, efficiency, accuracy to

be competitive and profitable as a player in the global markets.

Business Goal: An Integrated Solution Architecture

…Good CTRM vendors may provide much but not all of

required functionality!

…spreadsheets used for analysis,

but limited as reporting tools and definitely not as primary repositories of

data

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Summary

5 Key Sign-Posts to Watch For:

Are you “old business model” (silos/spreadsheets) or “new

business model” (integrated data and reporting from

centralized, reliable sources)?

Are you re-aligning functional processes to improve

integration across your entire supply chain?

Are you focused enough on the bottom line? - margin/cost

management is important for trading, logistics, plant

operations, and payments processing

Do your systems and tools fully support agile, transparent,

and profitable business activities or are they impediments?

The rise of the Stoners – when will the world’s most valuable

cash crop evolve from private bi-lateral trades to OTC?

Commodity risk management is now a total supply chain effort. Success will

require agility to respond quickly to the known-unknowns and new

opportunities of the global marketplace.

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5 Key Measures of Optimization In Smart Commodity Mgmt

1. What is your MTM exposure today and everyday –

aggregated and by commodity?

2. How accurate and detailed is your P&L –

aggregated across commodities, by strategy, by

trader, by vessel?

3. How closely do cost estimates match cost actuals

and what are the trends?

4. How long is your monthly financial closing process?

5. Do you have the comprehensive reports you need,

when you need them, to understand your risks and

execute profitably in response to market signals?

Ask yourself how efficient is your organization to manage and profit

in the reality of competitive global commodity markets…

…if it takes more than five minutes to respond, ask yourself why.

Daily Exposure Data

Detailed P&L

Trending Information

Efficient Processes

Risk Awareness in

Decision Making

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We are an advisory practice, led and staffed by people with experience in global

commodity markets. We specialize in technology, process, risk advisory, and

regulatory compliance solutions for companies who transact, regulate, and/or

make significant profits via commodities. We have deep competency across all

commodity classes, agriculture, energy, metals, and financial.

AXCELERUS is currently comprised by 3 principal partners from consulting and

industry backgrounds with a combined total of over 60 years of experience in the

following:

We are your Trusted Advisors:

From strategies to projects, we are the experienced commodity transacting and

risk management advisors you need.

StrategyRisk

Management

ETRM/CTRM

Technology

Project

Management

AXCELERUS: Who We Are

Eka Smart Commodity Management

Eka Agriculture

www.ekaplus.comwww.ekaplus.com21

Timeline – ETRM to Smart Commodity Management

1990 2003

2003

2014

2008

2008 2014

ETRM

Energy Commodities• Oil• Power• Natural Gas

Additional Commodities• Ags• Metals• Biofuels

Broader Footprint• Supply Chain• Compliance• Manufacturing

Data to Foresight• Predictive Analytics• Visualization• Optimization

CTRM

CM

Smart CM


Eka Software Solutions: Company Profile

Position: Global leader in on premise & cloud served Smart Commodity Management solutions

Founded: 2004

Employees: 315

Global Offices: 7 offices. 3 development & support centers

• Americas: Stamford CT HQ, Calgary AB

• Asia Pacific: Bangalore India, Singapore, Adelaide & Perth AU

• Europe: London UK

Investors: Silver Lake Partners - GP Group - Nexus Venture Partners

Customer Base: >50 leading global enterprises on 4 continents• Cargill, Rio Tinto, Mitsui, Bunge, BMA, EDF Trading, Graincorp, Viterra, Louis Dreyfus, Noble,

CBH, Mitsubishi, Pinnacle Foods, Twin Eagle, Boliden, Tata Steel

Solution: InSight Commodity Management (CM) Platform• End to end financial and physical transaction management• Cross asset trading and position management – Ags, Energy, Metals, and Bulk• State of the art enterprise risk management

Commodity Analytics Cloud• Analytics specific to commodities• Multiple data sources internal and external to Eka• Prebuilt and custom apps

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www.ekaplus.comwww.ekaplus.com 23

Customers

A G R I C U LT U R E

M E TA L S & M I N I N G

E N E R G Y


Perth

Global Market – Global Customers – Global Engineering & Support

Singapore

London

New York (CT)

Adelaide

Development & Support Centers

Bangalore

Eka Offices

Calgary

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Intelligent. Integrated. Innovative.


Functional Map

Origination Grownet Physical Trade Management Derivatives Risk Analytics General

SetupGrower Mgmnt

General Features

Trans-action

Mgmnt

Physical Trade

Logistics InventoryCOG-M2M-

P&LSettlement

Commodity Derivative

Derivative P&L

Risk Limits/

Exposure

Stress Testing

Derivative Analytics

Fx & Cash Flow

Analytics

Grower Analytics

P&L Analytics

Position Analytics

Alerts & Reminders

Market Data

Grower Acquisition

Setup

Grower Cash

Payments

Portal User Account

Management

Delivery, Invoice, Payment

Allocating Sales to

Purchase/ Stock

Back To Back

Movement

Discrete & Pooled Stock

COG A/R & A/PBroker

Management

Commodity Derivative

P&L

Counter Party Risk

Stress Testing

Reports Reports Reports Reports Reports AlertsCommodity derivative

prices

Grower Profile

Grower contracts

Online contract writing

Contract Amendment

& Cancellation

Processing and

Blending

Negative Inventory

Physical M2M and Unrealize

d P&L

Cost Accruals

Exchange support

FFA Trade P&L

Credit RiskWhat-If Trades

Domain Domain Domain Domain Domain

Alerts/ Reminder Managem

ent

Freight Derivative

Prices

Price Setting & Publishing

Grower Deliveries

Portal User

Requests

Contract Approval

Flow

Commodity Movement

Order

Stock Holds

Realized PNL

Credit & Debit Notes

Hedge Allocation

To Physicals

Fx Trade P&L

Derivative Trading

RiskVaR Dashboard Dashboard Dashboard Reminder

Fx & Interest

Rate

Interaction with

Grower Portal

Grower Pool

Payments

Published Price Sheet

Contract Capture

Documen-tation

Stock Insurance

Monthly Costs

Instrument Support

FFAMarket

Risk

Loans to Grower

Contract Confirmation

Flow

Domestic & Export

Movement

Stock Swaps

Payments &

ReceiptsMargins

FxForwards, Options

Risk Limit Setup

Pool EPR/ Equity

Contract Price Fixing

Internal Movement

Stock Transfor-mation

Prepayment

Invoicing

Options Valuation

Settlement

Risk Measure Tracking

Basis Manageme

nt

Ocean Freight

Management

Weight Adjust-ments

Provisional & Final

InvoicingSettlement

Trade Capture

Ticket Handling

QuotationsTrade

Capture

Trade Managem

ent

Title Transfers without

Movement

Secondary Costs

Trade Managem

ent

Weight Finalization

Washouts, Strings, Circles


Typical Process Flow

Credit Risk

Market Risk

Trade life Cycle

Operations Risk

Business Intelligence

CP Limit

Trader Limit

Quality Deviation

Accurate costs for M2M

Real-time Pos

Real-time PNL

SimulationWorkflow

Component PNL

Signed/Unsigned Alerts

Pending ShptAlerts

Pending Price Fixation Alerts

Contract

Quality PD

Est. Costs

Der. Hedge

Ship. Inst

Recv. Shpt

Cost Accruals

AP Invoicing

Sales Cont.

Allocation.

Sales Planning

Sales Delivery

AR Invoicing

Payments

Overfill/Underfill

Over/Under accrual correction

Overdue Payments

CP Limit

Stop Delivery

Update Credit Risk

M2M Exposure

Flat Price Risk

Basis Price Risk

M2M Exposure

Unhedged Pos Risk

M2M Exposure

Flat Price Risk

Basis Price Risk

Hedge corrections Leverage on

tolerance

Overfill/UnderfillUnallocated contracts

PNL Attribution

Trade PNL


Strong P&L Analytics

Unrealized Open

Contract P&L

Realized P&L

Component P&L

Combined P&L

Allocated P&L

Trade P&L

Top /Bottom 5 P&L trades

On Demand

P&L

P&L Attribution

Realized but not price

fixed

P&L By Counterparty

P&L by Trader

Month End P&L

M2M Exposure by

Counterparty

P&L By Product

Customer/ Supplier

Analytics on P&L

Loss Limit Valuation

Simulated P&L

P&L Trend


Global Risk: Empowering Best Practices

Eka.Risk

DECIDE: Configure A Risk Policy

SET: Set Limits by Dimensions

ACT: Monitor and Alert

Decide Best Practice Risk PoliciesManagement can define policies on which risks need to be covered across the entire organization.

Set Limits by DimensionsDefine quantity or monitory limits across multiple dimensions such as profit center, customer, corporate, strategy, line of business and commodity.

Act on RisksEmpower corporate users to monitor and act on Managements Risk Policies by monitoring breaches.

Senior Management & Executive Levels

Risk Managers and Business

Heads

Permissioned Users

Single, unified access to all risk information across all

businesses.

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Global Risk: Configurations

Functional Limits

Quantity LImits

Daily Contract Limits

Limits to buy at a price

Don’t exceed Unpriced quantity

Don’t exceed priced

position

Value Limits

Don’t exceed contract

value xxx#

Loss Limitation value for

realized P&L

Value at Risk

P&L Limits

Physical M2M

Derivative M2M

Credit Limits

Open Contracts

Stop Deliveries if credit limit

not available

Organizational

Structure

Corporate-1

PC-1

Commodity-1

Commodity-2

Corporate-2

Corporate-3

CEO

VP-1

Trader-1 Trader-2 Trader-3

VP-2 VP-3Group it here

Receive Alerts at these levels

1

2

3

Setup Risk Policies

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Summary

Single

version of truth

High functional fit

Leverage on Enterprise

Web based solution for multi user accessibility Integration with ERP & Accounting sys. Electronically store the documents Email output documents from the system Extensive reports on Position, P&L, Exposure

eliminates use of EXCEL Global consolidation for reporting and risk

management

All commodities in one system All Business Units: Origination |Processing |Trading Well defined workflows for seamless data flow Good coverage on physicals and derivatives Advanced Risk Management Real-time analytics for decision making

Very high product fit Global Risk Management specifically for

commodities User configured reports, alerts & reminders Heavy focus on analytics Leading next-generation Smart CM


Intelligent. Integrated. Innovative.


• S top the information Olympics - gain confidence in the data

• M onitor coverage in real-time and understand needed actions

• A nalyze performance versus market

• R un real-time, complex simulations and scenarios

• T rack variances from budget and forecast

• C ompare suppliers performance vs. plan and forecast

• M anage with real-time or near real-time decision making information

Compliance / Risk PolicyBenefits

Eka Delivers:

USATwo Harbor Point Square100 Washington Boulevard,Stamford, Connecticut 06902United States of AmericaT: +1.203.810.4250

EUROPE2 Sheen RoadRichmond , TW9 1AEUnited KingdomT: +44.208.973.2683

AUSTRALIALevel 5 185 Victoria SquareAdelaide 5000 SA AustraliaT: +61.0.4479.77831

SINGAPORE17 Phillip StreetGrand Building 05-01Singapore 048695Tel No: +65.8363.2635

INDIAEmbassy Tech Village, Phase IIAster Building 2A, East TowerDevarabeesanahalli, Outer Ring RoadBangalore 560 103 IndiaT: +91.80.40819200

CANADASuite 730, 734 - 7th Avenue SWCalgary, AB , T2P 3P8T: +1.403.237.7740

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Optimize Your Agriculture Supply Chain with Smart Commodity Management

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