Trends and Challenges in Commodity Procurement Today

Tony Tran – Content Lead APAC – Commodities People
Hello everyone. Welcome to Commodities Procurement Forum online. We are at the first panel discussion trends and challenges in community procurements today. And later today we will also have another panel discussion on digital transformation in and for procurement and subsequently sewing sustainability across supply chain input. Community procurement and this series of webinars is also a preview of a similar track, communities procurement at the upcoming community Trading Week on 23rd and 24th April in London. I hope you will enjoy the panel discussion and thank you, Eddie said, pierre, Ali and jut for joining us today. I will pass it over on to you to start the panel discussion to everyone who is attending this. If you have any question, please pose your question into the q a box so that the speakers can help answer your questions towards the end. Over to you, Eddie.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Thank you. Very welcome. Welcome, everybody. Welcome to this session. Trends and challenges in commodity procurement I'll start off by asking our panelists to introduce themselves. So, Ali, can I ask you to introduce yourself first?

Ali Muhammad Lakdawala, Head Packaging Procurement (Foods Division) at ITC Limited
Hello everyone. This is Ali Mohammed Lakrawala. I head the packaging procurement for ITC Foods, which is FMC company in India. And I've been a commodity enthusiast, so I've been trading, research and all of that. So that's my brief background.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Thank you very much indeed. And Pierre, can I ask you to introduce yourself, please?

Pierre Lebon, Director of Analytics at cQuant.io
Yes. Thank you, Eddie. I'm Pierre Lobo, I'm the director of analytics for the EMEA region at Sequant. I have 20 years of experience in the energy and commodities market and sequant is a valuation and risk management platform for energy commodity trading.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Thank you very much. And Syed, can I ask you to introduce yourself please, to our audience? Yes.

Saeed Patel, Chief Product and Technology Officer at Quor Group
Hello. My name is Saeed Patel. I'm the chief product and technology Officer of Core Group. We are a leading provider of global commodities trade and risk management solutions. I have over 30 years experience within the commodities, fintech and regex sector.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Thank you very much. And Judd, could I ask you to introduce yourselves to our audience, please?

Judd Orr, Commodity Price Risk Management at Mars
Hi everyone. Judd Orr. I'm a price risk manager with Mars Pet Care and Mars Inc. Globally handling energy and packaging. Prior to this, I was a commodities options market maker in precious metals.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Thank you very much, Judd. My name is Eddie Toppick. I'm head of technical analysis and senior markets analyst at ADM Investor Sales International Limited. I'll be the moderator. I'm also chairman of the UK Society of Technical Analysts and also a director of the International Federation of Technical Analysts, the STA. The society looks after technical analysis within the UK and the international federation is basically the United nations of technical Analysts. So welcome everybody, including you, our audience, to this panel session. Now, I'll start with just a basic outline of what we're going to talk about in a number of areas. Trends and challenges in commodity procurement is a huge area, but I'm going to start with some of the specific things, what it means to every one of them. Now, ali, can I look at you and say, supply chain availability, how does that feel fit into in your world at the moment?

Ali Muhammad Lakdawala, Head Packaging Procurement (Foods Division) at ITC Limited
Well, I will put it this way. It's very critical because the unforeseen event which shapes up the overall supply chain. So it's primarily providing an unwanted and uncertain volatility which is happening in the supply chain risk. And we have moved from just in time to just in case kind of a supply chain right now. And that's becoming a major, major, critical source. So availability becomes a challenge with unforeseen events, it gets inflated further.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
We've got situations such as container shortages, the Red Sea situation, and insurance as well. Could you explain a little bit about those?

Ali Muhammad Lakdawala, Head Packaging Procurement (Foods Division) at ITC Limited
Yeah, so more than that, I'll put it this way. Because of Red Sea Cris, the availability of the booking of the load has become a challenge. Even if one gets the booking, the insurers are not willing to get the insurance done because they are very worried about whether it will follow the route from the other side or it will be going to the Red Sea itself. So that is something which is a major crisis and also the availability. So even though the vessels have, as I hear from the people that the China has introduced many additional vessels, but to get that booking is also becoming a challenge. So yes, moving the goods, it's become a major. And in fact, even getting the goods from India. So I've come from India. We are majorly, primarily energy deficit in terms of petroleum, we have fiber deficit, so we don't have a paper. So we have huge amount of waste paper coming from us and EU at the same time, we also edible oil deficit, right. So all of this supply chain gets impacted big time if there's a risk of such nature.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Thank you very much indeed. Now, Pierre, from your background, I would imagine something such as energy companies securing funding and trends in that, et cetera, for PPA. And could you explain a little bit more about that, the securing of the funding and also the.

Pierre Lebon, Director of Analytics at cQuant.io
I mean, these situations have created new era for volatilities on the energy and commodities markets. Certainly if we look back at a few years, we have seen unprecedented market behaviors. And so that generates difficulties from the people which are procuring the commodities because they now need to value and understand the commodities with more of a deeper financial understanding of what a portfolio of commodities represent. So from where we stand at sequent, it means that you need to be able to properly value either the physical side of your portfolio or the financial side. And definitely to your point, Eddie, they need to understand what sort know, count, party or credit risk exists within the portfolio. Because before this era of very high volatility and uncertainty on the long term, it was less of a problem for people procuring commodities to think about this type of credit and counterparty risk.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Thank you very much indeed. And if I move over to you, Saeed, I know your specialization in this area is around the digitalization and technology. Could you explain a little bit more of the sort of things you're seeing as opportunities and challenges, specifically in procurement?

Saeed Patel, Chief Product and Technology Officer at Quor Group
Yeah, sure. In terms of the trends that we're seeing and the opportunities out there is from a very low base in terms of adoption of technology and digitalization, we're seeing a real move to using really smart technologies such as smart contracts, artificial intelligence and machine learning, to automation to really improve the whole supply chain management and the procurement process to improve efficiency and automation. But the challenges are that there is a need for standardization around systems and processes. There is a need to invest in people and the know how for that. But there's opportunities in terms of really making revolutionary changes around the procurement process. So let me just elaborate further. The whole supply chain management is a wholly complex process. By introducing smart contracts blockchain, there is the opportunity to really revolutionize and having that very efficient contractual management process. And I will just further add that there's a whole prefiller of new regulations that have come into play with regards to supply chain management, such as there's the new EU carbon adjustment mechanism which has come into play this year for reporting of carbon emission of imports into the EU for metals products. But there's also the EU disclosure regulation as well. And I know that certain commodities exchanges like the LME have implemented responsible sourcing requirements with regards to really making big changes with regards to ethical procurement of goods and products.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
One of the things I wanted to ask you actually was about blockchain on logistics, how you feel that works, especially within a holistic risk management, which is another thing that's been mentioned a lot. Can you expand on that a little bit please?

Saeed Patel, Chief Product and Technology Officer at Quor Group
Yeah, absolutely. And increasingly, as a leading provider of CTRM solutions, what we're seeing is that we're being approached by companies providing holistic solutions from supply chain management into the commodities trade risk management space to have a one stop solution with regards to their technology requirements. And where we see smart contracts and blockchain fit in is around that whole supply chain management, having an efficient contract management solution, having that data then through whether it's APIs or integrated solutions into your CRM solution. And the key thing here is straight through processing automation. And when you couple that with AI and machine learning, that really provides a transformational change into the procurement world of commodities.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Thanks a lot on that. Now Judd, I wanted to speak to you because you're very much more involved with the prices of commodities themselves and how the challenges that happen on procurement. Can you talk to me a little bit about what you see as for example say volatility in prices, how that's been affecting you and what challenges there you might see specifically? Great.

Judd Orr, Commodity Price Risk Management at Mars
Well, yeah, I think that what's interesting is sometimes people in the industry forget that volatility is two directions, up and down. And with the exception of one very good tasting commodity in western Africa, everything has been down. Exactly.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Cocoa.

Judd Orr, Commodity Price Risk Management at Mars

So everything has been up and down. So it's more about let's plan accordingly with what makes sense to our budget from a hedging perspective and what can we be competitive with and also what's the consumer doing? Because as these prices flow through to consumers, they're making different choices. And that's something that we have to be cognizant of.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
I appreciate that. If I could expand on this whole volatility situation, and I'd like to include in this Pierre, Ali, and also Judd, explain to me the volatility and specifically with regard to counterparty risk, what are your thoughts on that? And can I start with you, Pierre, on that?

Pierre Lebon, Director of Analytics at cQuant.io
Yeah, so the financial theory, or if we look at the market with a bit of an academic hat, market can't really sustain prolonged period of very high volatility. There will be actions taken by either regulators or players on the market to actually reduce that. Because when it comes to for example counterparty risk or exchange traded products, then the margin need to post or the guarantees that you need to provide to the market to actually be a player becomes unsustainable in these high volatility periods. That is one of the key challenges right now is to essentially be able to forecast what that volatility would look like. Knowing that we just experienced a couple of years with very high swings in volatility, both up and down, as jet just mentioned. And then now we are back to, especially on energy commodities prices, we're back to more reasonable levels on the wholesale market. Is this going to last? What precautions should I take and what sort of tools do I need if I have to manage a portfolio of both physical and financial products? And you were talking, Eddie, a little bit about ppas earlier as well. Ppas are no exception to this problematic because the traditional way to procure energy, specifically power, was through going onto the markets and buying and selling financial products and less so going through OTC products. But now ppas are the number one products and growing to actually exchange and procure, buy and sell electricity on the european markets. Now, how to value them, how to analyze them, and what sort of guarantees do you need to set in place to be able to actively trade them is a challenge.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Thank you very much for that. Now, I would like, Ali, if you could explain a little bit more about how you see counterparty risk and volatility in the areas that you're involved in.

Ali Muhammad Lakdawala, Head Packaging Procurement (Foods Division) at ITC Limited
Yeah, definitely. I mean, considering in procurement, what does it involve? It involves having a desired product with a desired quality when it is required. Right. I would have a contracts in place which would be fantastic while basis the market, but availability would be a challenge. Hence in that case, the counterparty risk is very high because the industry also is not very well organized. If you say in this physical side of it, the manufacturers who has to manufacture or the process the commodity. Right. In that case, the strategy which we apt, besides artificial intelligence, which we put to improve the processes, we also have the human intelligence of negotiations, which goes into the table. So day in, day out, what's happening across with the stakeholders, what are the supply chain, which issues which they are facing, how it can be navigated. And also having a diversified supply base actually helps to minimize the impact to an extent that you can spread out your risk instead of putting your eggs in one basket. So that's how we tend to do that.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
That's good. I appreciate that very much. And can I go through to you, Judd, what do you think about the situation regarding to counterparty risks, et cetera? I mean, especially we're talking about just mentioned in passing the cocoa price, what are your thoughts about the other commodities and the hedge?

Judd Orr, Commodity Price Risk Management at Mars
Sure, it might not be counterparty credit risk, it's more counterparty credit risk. Adjacent interest rates matter now and they haven't mattered for a long time. And we're only really one year into this. So that's really what our conversations are about when we're reevaluating counterparties, or whether we're looking at counterparties, or whether we're doing stuff through an exchange or wherever we're trying to hedge. It matters now.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
So I think out of that, I appreciate that. I mean, it's the end of the zombie companies, the ones that survived on a no interest environment. Okay. Dear audience, we have a poll question for you. But before we do that, if you have any questions to us, please put it in the Q A box. My job is to collate those questions and put them to our panel. So please put any questions you have in the Q A box. We're happy to look at those and answer those. Now, can I please have the poll that we have which we'd like you to take part in? All right. It's trends and challenges of commodity procurement, which is what we're about. Which of these are your major challenges in commodity procurement? Firstly, supply chain availability. Secondly, securing and finding products. Thirdly, digitalization and technologies. Fourthly, market volatility. So, supply chain availability, securing and finding products, digitalization and technologies, and market volatility. Please vote now. Please don't forget, also, if you have any specific questions for the panel, the q and a box is there for that. And I'll be happy to put those to our panel. I'd like to move on now to another part of what the challenges could be. And that's really to look at sustainability. Now, Ali, to look at that, one of the things is how can sustainability work? Will it be sustainable for a business, shall we say? Could you kindly expand on that a little bit? If completely.

Ali Muhammad Lakdawala, Head Packaging Procurement (Foods Division) at ITC Limited

I mean, sustainability is a buzword, right? Mean. And especially in case of India, right. But overall, our organization has been very much in forefront of opting the sustainable strategies since the beginning. When I say sustainability, what one need to also look into is how the sustainability can be made commercially viable. To educate the people that what exactly the sustainability means. Because there could be many things around packaging which can be sustainably done, but is the consumer ready to pay for it? That becomes the first challenge. Second is, is the ecosystem or the infrastructure developed to roll out the sustainability? It shouldn't derail overall supply chain while rolling out the sustainable plants. So that is something which needs to be looked into. That overall ecosystem is ready to gear up to support that idea of the sustainability. Second thing, the consumer awareness, so that the consumer also appreciate what exactly it means. And does it really mean, what does it mean to pay for that sustainable effort which has been getting done by the organization?

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Thank you very much indeed. Now, if I can also go on to something else related that, and I'd like to put this through to you. Oh, we have the answer to our panel at the moment. Right. And I'd like your reactions on this, panelists.

Ali Muhammad Lakdawala, Head Packaging Procurement (Foods Division) at ITC Limited
Right.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
So coming first with just over half is market volatility. So, Judd. Very much so. Market volatility is the challenge for us there. Coming in a second with close to 40% is supply chain. I don't see how that's really weird because I don't think did they actually add up to 100%? Didn't add up to more than that. Anyway, coming second, supply chain availability. So it's actually the products that we all need for our customers. Then comes digitalization and technologies and then finally securing and finding products. So it's not so much that we can't find what we need, but it's the price of how much it is and supply chain volatility, the whole thing of the whole supply chain. Now, if we can keep that up for a second, I'd like a quick run through. Ali, what are your very quick thoughts on that answer?

Ali Muhammad Lakdawala, Head Packaging Procurement (Foods Division) at ITC Limited
Availability. That's a major thing, availability. It market can be volatile, but if the material is not available, then how much ever is one willing to pay and to get it at the right time to manufacture that product? That remains a crucial part of it.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Thank you very much. And Pierre, what are your thoughts immediately on that first reaction?

Pierre Lebon, Director of Analytics at cQuant.io
Well, I'm happy to hear that market volatility is a key player from my perspective at SQL. That also means that a lot more financial knowledge, quantitative analysis and portfolio management analysis is required. And that's, I think what this Paul is saying.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Don't forget technical analysis and technical analysis.

Pierre Lebon, Director of Analytics at cQuant.io
Yeah, correct. And then I think digitalization and technologies as well. Well, it comes through, but I think it resonates with what Saheed was saying. And I really think that being able to put together a best of breed kind of commodities risk management solution that does everything front to back is a challenge. And yeah, it seems to be less of a number one priority, but yeah, I think this one seems to be quite important when we're talking to our prospects.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Thank you very much. And Saeed, your immediate thoughts on that poll.

Saeed Patel, Chief Product and Technology Officer at Quor Group
Yeah, I think it's a fair reflection. It's where the market is today. I think digitization and technologies has a much larger part to play going forward, largely because adoption is at a lower rate today. But I think one should look at this strategically, that with adoption of better technologies, you can reduce your complexities around supply chain availability by having, for example, real time information around the supply chain, and then you can have more efficient decisions around that.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Thank you. And, Judd, what are your immediate thoughts on that? I mean, you're head and shoulders above everybody else there, I think, with market.

Judd Orr, Commodity Price Risk Management at Mars
Volatility, well, I love the technical analysis reference. Now, what it reminds me of, thinking of supply chain issues and market volatility reminds me of what a senior partner told me my first year in the business was. There might be plenty of commodities out there, but just none for you. So it's more about securing it. And it's the whole puzzle, I guess you could say, volatility and getting it from a to b.

Ali Muhammad Lakdawala, Head Packaging Procurement (Foods Division) at ITC Limited
Perfect.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Thank you very much indeed. Okay. Thank you very much for the poll, for everybody who took part and for putting up the answers as well. Now, going back to. We can take that off the screen. Going back to what I was going to talk about earlier on Saeed, traceability and transparency, specifically in the metals markets. And personally, I was thinking of EUDR. But if you go a little bit about the sustainability and the traceability and transparency elements, especially in metals markets, what are your thoughts on that?

Saeed Patel, Chief Product and Technology Officer at Quor Group
Yeah, absolutely. And I think in the metals market, specifically, LME, which is the largest exchange in terms of trading metals commodities, they've really taken the champ lead on this with regards to incorporating the OECD framework on due diligence and responsibility, supply chains of materials from conflict affected areas and high risk areas. And I think this is a really important move, not just by the LME, but the exchanges in this marketplace are going in that direction. It's about having really strong ethics, combined with ESG reporting that you're now seeing a real transition of exchanges and commodity merchants taking a real close look at the sourcing of those raw materials. And is it coming from ethical sources? Are they in breach of human rights regulations? Are those mines being mined by child slavery? And these are really hot topics. And it's great to see that exchanges and commodity trading firms are now bringing this at the forefront of their agenda.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Got it. Thank you very much. And now, Pierre, can I go to you? Let's talk about renewables. And there's been quite a rush to renewables, but is it still carrying on? Will it grow stronger? Will it diminish, or will it maintain the same? What are your thoughts on that?

Pierre Lebon, Director of Analytics at cQuant.io
It's a very interesting question, because over the last couple of years, we've seen a significant amount of new players investment. There's a lot of money flowing into the renewable energy space, especially with war in Ukraine, the need to secure new gas supplies, and the replacement of the russian gas, the decarbonization I mean, all these topics I've just pointed in the same direction. The build of a significant amount of renewable farms across Europe, whether that's wind farms or solar farms. And then that addresses some of the sustainability and sourcing of supply. When it comes to energy procurement. Our government certainly have done a great job at sort of maintaining Europe on their feet in terms of energy supplies. We saw how quickly Germany put together their regasification terminals for the LNG ships. So all of that is a lot of very good positive signals now trending forward. There is a little bit of a question mark above everyone's head at the moment because the energy prices have settled back down to more reasonable levels. And what was really driving to date the evolution of the Renewable generation sort of creation was the fact that the prices were high enough to sustain this growth. Will it be the same? And will the build of the new renewable project able to finance themselves going forward at this price level is a big question right now.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Got it. Thank you very much indeed. Ok, our audience, we have our first question from our audience we're going to put forward to the panel. Please put any questions you have to our panel. And this one's from Surya. How supply chain for commodities can be optimized using technology. Now, and I'd like this part, if you could actually concentrate or think about any specific user cases where AI can be applied. And Ali, can I start with you, if I can, please, how the commodities can be optimized. And does AI, have you seen AI play a role or can you see a role where AI will be used?

Ali Muhammad Lakdawala, Head Packaging Procurement (Foods Division) at ITC Limited
Yeah, it does. So I'll just put it across. So I come from an FMCG company wherein the consumer behavior is a big challenge. We have quite volatile swings in the demand side as well. And we've already implemented the AI, which is in place from blue yonder, which actually help us demystify the demand dynamics in the market. And that actually helps us in advanced planning as well. So as I discussed previously, availability remains a challenge. How much in advance I can plan my supply chain and secure the supplies by stocking it, by making it available to my manufacturers and at what price. So that becomes the challenge. So AI, I think, has helped us in doing a forecast at once and getting the supply chain in place.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Thank you very much indeed. And Pierre, can I go to you and say, can you see how the supply chain and commodities can be optimized using iI? And have you seen any cases where it's been used?

Pierre Lebon, Director of Analytics at cQuant.io
Yeah, at the very top are the sort of portfolio composition strategies, where people look at their portfolio from a financial aspect and they need to optimize what sort of physical contracts they need to put together to actually flow a commodity from a to b. What is a combination of both the financial products and the physical products to actually procure and have in their portfolio to achieve that target, subject to obviously maximizing the value of the portfolio while minimizing the risk associated with it. In these cases, then I've seen people starting to use AI in their optimization frameworks and that's the main way I've seen it being used.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Great, thank you very much indeed. It's a succinct answer there on that, and said, how can you see that with the optimization of commodity supply chain and specifically any AI uses in that that you've seen or you think will come about?

Saeed Patel, Chief Product and Technology Officer at Quor Group
Yeah, and what we're seeing is real patterns within how AI is being adopted within that commodity supply chain, particularly around operations analytics and the whole way in managing that supply chains, the logistics management, and this is a very data hungry area there. And being able to use advanced data analytics coupled with AI with regards to using adaptive AI models to predictive analysis, to find those deep contextual insights around your inventory levels. For example, layering that with information coming from market intelligence, whether it's disruption that we're seeing through the geopolitical events that we're describing earlier, that is really powerful because what you're doing is we are bringing together your transactional data and then your unstructured data together, then layering that together with AI models, which is then finding those deep contexts behind the data. But fundamentally, it's giving you the foresight around using predictive analysis. And that's the big benefit because you then have something where you can start looking at and supporting your decision making on your trading floor.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Thank you very much. And Judd, in your use for pricing and the supply chain, and even maybe looking to how it can anticipate volatility, have you seen any thoughts about how AI is being used either within Mars or outside of that group and where it could be used?

Judd Orr, Commodity Price Risk Management at Mars
Yeah, I would say at a high level, it's very helpful from a market perspective. I don't have a crystal ball, neither does AI or machine learning necessarily. But it acts as a great filter because there is so much information out there. Whatever market you're looking at, and to be able to filter out what's important and what's noise is really helpful.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Thank you very much indeed. Now, dear audience, you are able to ask some more questions if you want just type in and I have one now come up from nihal open. I am curious to hear the thoughts stroke critics of panelists around the new regulations like EUDR, CBAM, et cetera, in terms of the impact on commodity sector and what kind of solutions they think will companies look for. So he's curious about the thoughts around the new regulations. EuDR has actually been in effect from about 2020. It's already been in effect from the middle of 2023. That's already happened. I'm not very familiar with CBAM, but I'm sure you'll enlighten me and the audience about that. EUDR is European Union deforestation regulation and what kind of solutions they can have towards that. Now, I know it's a very deep question in many ways, but ali, can I throw it to you to start off with? And then I'll go through Pierre, Saeed and Judd on that respect.

Ali Muhammad Lakdawala, Head Packaging Procurement (Foods Division) at ITC Limited
Really on EUDR I feel. So we are also into the various segment of the paper, manufacturing and everything. Right. Just to add in the previous questions on the AI, just going back, using AI for the weather or the climate forecast and then building up a supply chain would actually give a good protection or insulate from any kind of volatility. Similarly, coming to the EUDR or the policies which are around it, yes, there are many disclosures and very much the vendors who are selected are actually been thoroughly audited on the process which they're opting for. So that is something which is a mechanism which we are opting from the indian perspective when we onboard a new vendor base.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Thank you very much. And Pierre, from your point of view, the regulations that are coming in, new regulations generally the impact on the commodity sector and the kind of solutions you think the companies are looking for.

Pierre Lebon, Director of Analytics at cQuant.io
Yeah, I can't talk much about the regulations themselves, but what I can say is when talking to the risk management departments, this actually flows into the portfolio risk management as a financial constraint that people need to work with.

Ali Muhammad Lakdawala, Head Packaging Procurement (Foods Division) at ITC Limited
Right.

Pierre Lebon, Director of Analytics at cQuant.io
These new regulation, they do have a financial impact and you need to essentially factor them in. That means you need to be able to have a risk management framework that is capable of being modular and accept these type of new constraints to your portfolio. And they may ultimately flow into physical constraints and generate difficulty of actually procuring the commodity in the end. And they do exist across obviously all commodities, whether that's energy, metals or agricultural products. They just come in different forms. So EuTR probably are more of the agricultural side of things. Maybe in the energy, it's the regulation from the decarbonization co2 emissions and every commodity has their own set of regulations and they transpire through the risk management as a financial contract.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Thank you very much. And say, from your point of view, what sort of things do you think the new regulations, how it's going to affect companies in that respect, specifically anything you can with EU and CBam.

Saeed Patel, Chief Product and Technology Officer at Quor Group
Sure, with regards to EU's CBAM, and that's the carbon adjustment mechanism. The first reporting obligations actually come into force this month and it's the reporting of carbon emissions on imports related to metals into the EU. So the specific challenge there is being able to have a calculation engine for calculating your emissions exposure for the materials that you're importing and being able to then correlate that to the transactions that you are undertaking. So every transaction must have a carbon report associated with it. Being able then to enrich your CTRM solution with that metadata being to have the necessary template in plain for reporting into the regulator. And although there's a soft launch, there is no doubt that the regulators will put punitive damages on commodity trading houses for non compliance. And we've seen that with the whole pressure of other regulations in the past that's coming around. Transparency and reporting such as EMEA remit and Don Frank. And this is really the latest raft of regulation coming into play.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
EMEA 3.0 is already being mentioned now, I think.

Pierre Lebon, Director of Analytics at cQuant.io
Absolutely.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Oh boy. Anyway, and Judd, we spoke about mentioned just in passing. Eudr, what are your thoughts about what you can do to handle the coming regulations and what kind of solutions there may be for that?

Judd Orr, Commodity Price Risk Management at Mars
Yes, with respect to some of the kamais, I feel like I could add on to what Pierre was saying. I think that as a lot of these, I would call them new markets essentially as they evolve, you will see volatility in those. Whether you're talking EU carbon credits or something in the US, like rins or Rex or something like that, you kind of have to take a holistic risk management approach to your supply chain. So it's not just price, it's price and this other component now. So you have to balance the two.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Yeah, there's a lot in there. And for anybody who's not involved in the cocoa industry, please have a look at a chart for cocoa if you want to see something that's volatile. I think that really is. And that's purely Eudr, I think at the moment. Okay. I want to move on to difficulty of products and specifically I want to talk about the impact from climate on agri products. Ali, can you talk about what you've seen in India itself the effect of climate on the agricultural impact in products in India specifically.

Ali Muhammad Lakdawala, Head Packaging Procurement (Foods Division) at ITC Limited

Yeah. Particularly I would just before the session started, I was just browsing through and I'm located right now in Bangalore, which is in south India. And we are having a water crisis. So the next big thing, which is a hydropolitics is something which is going to be a major, major issue going forward. Last year we had seen untimely rains. Indian agriculture is completely dependent on the rains. It's not too much of irrigation which is the case. And right now we having a water shortages across. Right. So we are moving from El Nino to possibly Alanina phenomena. So El Nino has disrupted the water availability which means the crop yield is getting impacted and the availability of the crop as well is not as per the desired quality. So yes, a big risk on the indian front and also globally.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Yeah. I'm going to put you a little bit on the spot and I think we mentioned this in a pre interview. We had a little chat. The impact of a lack of domestic indian futures markets with price transparency and being able to see what are the prices in the local market. What are your thoughts on that?

Ali Muhammad Lakdawala, Head Packaging Procurement (Foods Division) at ITC Limited
I completely agree. The futures markets does bring in transparency right now as a very opaque. I mean, many agriculture commodities which was future traded has been banned. I just read an article last two days back wherein the indian government is considering relaunching the futures for agricommodities. But right now they have not defined the scope for it. But yes, it does bring in transparency because an institution manufacturer, just like us need a visibility. Right.

Saeed Patel, Chief Product and Technology Officer at Quor Group
Today.

Ali Muhammad Lakdawala, Head Packaging Procurement (Foods Division) at ITC Limited
If I'm getting in the contractual terms, fine. I mean, a palm oil is something which is globally traded, which has a visibility. I don't have a visibility of other agri produce which is in domesticatedly manufactured. Right. So that brings in that scope of visibility and transparency into the pricing dynamics of the commodity. So yeah, it does play a very vital role and also to hedge the futures. So it does give that insulation from the volatility and availability of the supply chain challenges.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Thank you very much. Okay, can I go on to sayd and the transition to ev? This has put a number of pressures on shortages in the supply chain of certain specific metals. Could you kindly expand on that a little bit if you've got any thoughts?

Saeed Patel, Chief Product and Technology Officer at Quor Group
Yeah. First of all, the energy transition is changing the dynamics of the commodities industry. The shift towards global net zero by 2050 is the target set that we're seeing a move towards renewables energy, but also a move towards electric vehicles, power, battery, storage systems. And that is creating a huge demand for rare earth metals. And in fact, we're going to see that explode by sevenfold, by 2030. And that's the prediction by the sevenfold. Sevenfold. Wow. Yeah, indeed, indeed. And therefore, the challenge is that, is this really sustainable? Where will the new rare metals be sourced from? And some of these regions are highly volatile regions as well, where they're mined. So there's some deep questions to be asked with regards to sustainability here, but also that one eyes definitely on the shift in terms of the trends around rare earth metals.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Thank you very much indeed. And can I go to you, Pierre, your thoughts about difficulty of securing product. Have you any thoughts regard from, we've spoken about the climate side and also the transition to rare earth. Is there anything you can add to that and or maybe expand in other areas?

Pierre Lebon, Director of Analytics at cQuant.io
Yeah, sure. Especially well, when it comes to climate change. So the penetration of renewable energy to the market, which comes from the high pressure of going net zero, means that the traditional energy market that was essentially reacting to demand with an oversupply of energy, it had like power production means or gas supply means everywhere. Now we are more dependent on what the weather is doing. So that brings a volume uncertainty into the market that didn't exist before. So now there's still the demand uncertainty, but now the supply is not just provided by a certain amount of capacity that we need to guarantee. It also is completely random based on whether there's going to be significant wind into the wind turbines or good solar production. So that volumetric uncertainty, people are not used to it, and it's only going to grow with a higher penetration of the renewable energies into the market.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Thank you very much. And Judd, very quickly, if you could give some thoughts from your point of view on the difficulty of products.

Judd Orr, Commodity Price Risk Management at Mars
Yeah, well, from my perspective, I think that quality matters. And as supply chains adjust and we have different things and the consumers change and their wants change, whether it's some environmental issues or whether it's here in the States, a specific state, wanting something different, it matters. So we have to kind of change with the consumer there.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Thank you very much. And I can imagine that maybe tastes will change purely because of what's happening to the price of commodities. Okay, we're coming towards the end of our session. We're in the last minute of our panel session now. I've asked all our panelists to come up with a seven word or phrase, or saying seven words or less if they could leave, if there was one thing they could leave with the audience. What would it be? Seven words or less. And, Ali, can I start with you? Seven words or less. What would you leave?

Ali Muhammad Lakdawala, Head Packaging Procurement (Foods Division) at ITC Limited
I would leave across that consider procurement as an internal consultant for strategic driver of growth.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
I think that's seven. That'll do. Thank you very much indeed. Pierre, can I go to you?

Pierre Lebon, Director of Analytics at cQuant.io
Yes. Organize proper risk management of commodity supplies.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Thank you very much indeed. A very timely thing as well. And say, can I go to you as well now, please?

Saeed Patel, Chief Product and Technology Officer at Quor Group
Digitalization will revolutionize commodity procurement, enhancing efficiency.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
I think that's eight, but I'll let that one go. But thank you very much indeed. And, Judd, with you, seven words or less.

Judd Orr, Commodity Price Risk Management at Mars
I would say, don't sleep on volatility or don't get complacent.

Eddie Tofpik, Head of Technical Analysis at ADM Investor Services International Ltd
Six words. Thank you very much indeed. Ali. Pierre said, judd, thank you very much indeed. Thank you, dear audience. It's the end of this session. Please don't forget we have another one coming up very, very shortly. And I'm looking forward to seeing that as well. So this is a great day. Thank you very much, audience. Thank you very much, my panelists. Have a great day.

Saeed Patel, Chief Product and Technology Officer at Quor Group
Thank you.

Judd Orr, Commodity Price Risk Management at Mars

Thank you. Take care. Bye.