As the Arab Spring surged into Libya early last year, two Canadian shipments of wheat were steaming toward the Port of Tripoli. It was a tense time in the country and the region, as well as in the Toronto offices of BroadGrain Commodities Inc., a private company that trades in wholesale grains and foods including wheat, corn, soybeans and lentils.
One of the ships made land in early February, unloading BroadGrain’s cargo of 25,000 tonnes of Brazilian wheat over the next several weeks and leaving as the Libyan uprising spread. But a second shipment was still a few weeks out, with the chartered vessel’s owner and captain reluctant to venture any closer.
Watching the situation, BroadGrain chief executive officer Zaid Qadoumi was firm but reassuring with the crew. He noted that it was important to deliver the wheat as contracted, given the country’s shortages of bread and basic supplies. But he advised them to cut ropes and leave if they felt the danger was too great, and he offered extra compensation for discharging the load. The ship reached Libya on March 9, “smack in the middle of all the trouble,” Mr. Qadoumi recalls, and left on March 24, five days after NATO bombs began falling there.
The conditions were not for the faint-of-heart, but they were also not altogether unusual for BroadGrain. With three generations of history in the region, the company is built on delivering agricultural commodities to emerging markets and hot spots such as Libya, Syria and Yemen.
“We are comfortable with risk,” says Mr. Qadoumi, 35. “It has worked out very well.”
The family began in the grain-trading business in the 1950s in Jordan, where Mr. Qadoumi is from. He immigrated to Canada in 1992, graduated in commerce from McGill University, then returned to Jordan to learn the family business.
He and his father, Ghazi, founded BroadGrain in 2003, buying a grain elevator in Seaforth, Ont., near Stratford, to establish a domestic division while simultaneously developing a global trading unit. Today BroadGrain has some 100 employees in Canada and abroad, with more than $600-million in sales and 1.8 million tonnes of grain shipped annually. Its commodities come mostly from North and South America and Eastern Europe, with demand worldwide but focused in the Mediterranean basin and Red Sea, covering North Africa, the Middle East and the Arabian Peninsula.
Trading in the region can be challenging, with massive volumes and transactions, significant volatility and a tendency to default, Mr. Qadoumi says. BroadGrain competes in this new global economy by building strong relationships with customers while developing market knowledge, understanding regional cultures and accepting “a mix of risk and margin,” he explains. “We don’t go into the game and play in it unless we understand the rules.”
It’s a combination that isn’t necessarily for everyone, says Peter Clark, an international trade strategist in Ottawa.
“Canadians tend to take the path of least resistance. We’re so accustomed to the U.S.,” he explains, although he adds that intense competition and the strong Canadian dollar have made it necessary for exporters to change course. Small Canadian companies are increasingly selling into emerging markets they know, aided by family ties and regional savvy, Mr. Clark says. “They’re looking at every possible market.”
Most Canadian companies concentrate on markets closer to home, says Todd Winterhalt, group vice-president of international business development for Export Development Canada (EDC). But exporters are increasingly taking advantage of so-called foreign affiliate sales, such as BroadGrain’s shipment of Brazilian wheat to Libya. This allows Canadian exporters to tap into booming “South-South” trade, he says, where goods originate in one developing country and are sold to another.
“The opportunities certainly are there,” Mr. Winterhalt says. “It’s definitely broadening the definition of what we look at as Canadian trade.”
Companies interested in so-called frontier markets should seek assistance from the Canadian Trade Commissioner Service and consider EDC’s insurance products and financing support, he says. “Whatever homework you can do and whatever risks you can mitigate … that’s a prudent course of action.”
Mr. Qadoumi says that since the Arab Spring, BroadGrain is moving back into the region “a little more cautiously,” with some customers even in Syria. There are no restrictions on trading food staples in such contexts, he notes. “People should not go hungry because they are fighting for their freedom.”
Indeed, many companies shipping goods to Libya at the time of the conflict last year declared force majeure, he says, diverting their vessels and liquidating their loads elsewhere or renegotiating prices “at a significant gain.”
In holding to its deal to deliver the 50,000 tonnes of wheat to the Libyan flour mill as war broke out, BroadGrain has “a customer who trusts me a lot,” Mr. Qadoumi says, adding that his company limits the losses that can come from defaults and cancelled contracts by maintaining its commitments, regardless of market and other volatility. “We don’t turn our backs very easily,” he says, adding that BroadGrain has recently moved into the Sub-Saharan Africa region, with sales of corn to Ghana.
Mr. Clark says that Canadian exporters promote the quality, reliability and cleanliness of our products, as well as looking for niches. “You have to differentiate yourself,” he says.
But companies interested in countries where there is political risk should start with a good intelligence base, he warns. “Otherwise, you may as well go to the casino.”
Some promising emerging markets include Burma, which has long been closed to trade, as well as Laos, Cambodia and Vietnam, where there is demand for resources, food and high-tech products, Mr. Clark adds. “There’s no limit on what we can sell.”
Canadian exporters looking at frontier markets should proceed cautiously and be prepared for challenges, says Todd Winterhalt, group vice-president of international business development for Export Development Canada. Here are his suggestions:
Seek advice through local legal counsel and financial institutions, “whatever you can do to raise your comfort level,” Mr. Winterhalt says.
Make the most of partnerships on the ground and use the resources of the Canadian Trade Commissioner Service or local chambers of commerce.
Bear in mind any regulatory impediments to doing business in a market.
Follow the “know your customer” adage, Mr. Winterhalt says, and “if it seems too good to be true, then it probably is.”
Editor's note: An earlier version of this story gave an incorrect figure for the volume of grain shipped yearly by BroadGrain Commodities Inc.
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