'Potato futures market takes next step'

Monday, May 22nd known that agricultural broker DCA Finance is being acquired by Archer Daniels Midland. One of the largest raw materials companies in the world. This gives the company access to the EEX potato futures market on the European mainland. What does this mean for the dynamics of the market, and for the players that DCA now serves? CEOs Kees Maas (KM) and Edwin Burgers (EB) about the takeover of their company.

To get straight to the point: proud of this takeover or an emotional moment after eighteen years?
KM: "We are especially very happy that this deal has been completed. To be honest, it feels like you have been promoted to the Champions League and you can now play football with Manchester United. In terms of DNA, DCA and ADM fit well together. We have both 'commodity genes'." EB: "You should really see this promotion as a next step in the professionalization of the potato futures market. This guarantees continuity and that offers a lot of perspective for the participants, our customers. I have been active in the potato futures trading since 1990 and Kees has been active for two years. started later, so emotion certainly plays a role. We are just very proud."

Why is it that the continuity of the potato futures market is increasingly threatened?
KM: "Several factors play a role. One of the most important is legislation and regulations. There are more and more rules, more requirements. That demands more from a broker - such as DCA Finance - and will only become more important in the future. Do you want Joining as a new account holder requires a lot of work." EB: "This process has been going on for years. We always worked with BinckBank for the necessary clearing. They were taken over by Saxo Bank. The futures market has suffered greatly from their policy, which has prevented trading on both the old crop (June contract) when the new harvest (April contract) has become almost impossible for us. That is particularly frustrating when a market is historically high as it is now."

This is how the relationship with ADM came about?
KM: "The aforementioned laws and regulations, Saxo Bank's policy, but also a safe haven for our customers and our personal ambitions, all played a role. Earlier this year we made known that Archer Daniels Midland Investor Services International (ADMISI) wanted to take over the clearing for our major clients. This party is now taking over all shares of DCA Finance."

ADM is already active in the agricultural raw materials markets from the United Kingdom. Why was this deal necessary for them?
EB: "Due to the consequences of Brexit, it is no longer possible for parties in the UK to attract new customers in the EU. This has affected the company. With this acquisition, ADMISI gains access to the European mainland. We already have the necessary permits that are required to be allowed to trade. Applying for these is a lengthy process. This takeover was a much shorter blow."

You speak of a next step for the potato market. What will we notice in concrete terms?
KM: "The potato market has become highly professionalized in recent decades. The number of growers as participants has decreased and speculators have almost completely disappeared. At the same time, potato processors and trading parties have a greater need to cover risks (hedging). They enter into more fixed price contracts and therefore run more risk. They can hedge this on the futures market. In addition to purchasing the potatoes as a raw material, there are also factors such as energy and currency, but also capital to take into account. ADM also has all of these in its portfolio. These customers can We will soon all go to the same company for multiple markets. It also means that we will have access to global know-how and databases, which we can use to better serve customers."

And what does it mean for the potato growers who now participate directly or indirectly in the market, for example via a pool or click contract?
EB: "The existing customers will probably not notice anything about the takeover, which we hope to complete this summer. However, the name DCA Finance will disappear. The new company will remain in Lelystad and in the near future we will also be present, together with Pieter Post. New customers will probably come in in a different way. The old-fashioned trading as we have always done - where we physically acted as a broker and closed the deals - is changing. That is also the next step. If the market receives new impulses, this will create an attractive effect. Growers can cluster in groups or pools to be active together on the futures market, but we also see opportunities for other branches of the potato market."

After a very long quiet period, the futures market for potatoes has shot up to €50. Is that movement also part of the change you are talking about?
KM: "The potato market remains volatile, but we see it moving in slow motion. With onions you have seen the speculative nature this season. For potatoes that movement comes much later, but the ingredients are present (small harvest, high demand, late spring) , then things can also go very fast. You can currently see that there appears to be no ceiling. Don't forget that the market completely collapsed when corona came. A bottom is barely present. The market is moving at a different pace. way. This acquisition allows us to respond better to this. The most important thing is that continuity for our customers is guaranteed."

When you are no longer involved with the market on a daily basis, where will you focus?
KM: "DCA Finance is only one part of the DCA Group. So we have plenty of other companies to deal with. This acquisition does not change that."