Julie Lerner got her start in sugar. As a trader for Cargill earlier in her career, she learned firsthand how antiquated and unclear commodities trading can be. She ran the Latin American sugar desk for Cargill. Finding a fair price, or any price, at all in a cash economy is a challenge.
“Most trading is done by phone or instant messenger. Whether you’re talking agriculture, energy or metals, the lack of transparency is holding back producers, refiners and traders.”
She’s using her insider knowledge to create fairer trades that are friendly to buyers and sellers both. Her company PanXchange launched in 2011. It operates in United States and East Africa, with millions of dollars of trades pending every week. The Futures Industry Association just named her among the top innovators of 2016. Former Secretary of State Hillary Clinton recently visited the firm’s Denver headquarters.
Farm to market, made new
“Underneath every futures contract are producers, millers and refiners,” she says. “Real people with real products–often perishable products. If you want to buy the raw product—like say, cow peas in Kenya—it’s almost impossible to find out who has them and at what price, especially if you are a new entrant to the market.” Today, most ag markets are loosely controlled by “a guy who knows a guy who . . .”
This lack of access to actual information hampers trade. To add to the struggle, by the time you get that information by phone, email and messenger, it may be out of date.
What if you could see real prices online in real time?
The ‘Amazon’ for agriculture
She founded PanXchange to shine a light on what’s available when and where, at what price. Think of it as the Amazon of agricultural and other wholesale commodities like fuel oils. The platform provides clear, real time pricing straight from the source—farmers, refiners and other wholesalers with physical product ready to trade. Buyers and sellers are anonymous, both signaling what they are selling and what they are buying in firm terms. When all the terms match; quality, quantity, delivery, pricing, payment, etc, the platform executes the trade and puts the buyer and seller in touch for the final logistics of transfer.
Since its launch, the platform has been offering different products, including grains and beans, and has its sights on US energy products like NGLs and fuel oils.
Next month, due to demand from traders involved in PanXchange’s US feed grain platform, they’ll be launching a second US grains market, this one focused on corn, wheat and soy that travels down the Mississippi for export.
“It can be confusing to an outside about why PanXchange is needed. Anyone who trades commodity futures contracts on a listed exchange like the Chicago Mercantile Exchange would think of PanXchange’s markets as the underlying markets, the physical markets, or the cash markets,” says Julie.
The regulated exchanges, like ICE and CME list derivative contracts. Norman Hay, formerly CEO of Cargill International, was an active advisory board member since the company’s inception.
“Global physical energy markets, particularly petroleum, suffer from significant inefficiencies, often due to fragmentation and opacity. With the growing need to interconnect markets, there’s an increase in demand for simple tools, such as PanXchange, that can provide an efficient and comprehensive overview of where prices are at any moment,” he says.
The long road to a short exchange
While the business case is clear, changing habits in the trading industry isn’t easy. For example, users quickly flocked to PanXchange’s East Africa platform, but trade is suppressed due to the current savage drought in the region. The US feed grain market welcomes a more transparent structure, but the sheer volume of trades makes user adoption a long slog, not an overnight process. In each market PanXchange launches, the platform surfaces the inherent irregularities and discrepancies of each market. Which is, of course, what it’s designed to do.
“We’re one of those ten year overnight success stories,”
Julie jokes. Along the way, traders, futures brokers and others are discovering the real time price information on the platform is a gold mine of information.
“We’re the only trading platform actually built by a trader for the trade,” she says.
“Ultimately, free markets need price transparency. It’s unbelievable that in this day and time, it’s hard to discover the real price for actual commodities like food stuffs and (non-hub) crude oil products. It’s exciting to be on the forefront of changing that. Just like ecommerce changed everything for finding what you want and knowing how much it costs, PanXchange is positioned to change the way markets work—for good.”