The Derivative - Carry, Calendar Spreads, and Climate: Bruce Sinclair on the Future of Grain Markets

Episode Date: February 26, 2026

In this episode of The Derivative, host Jeff Malec talks with South African grain spread trader Bruce Sinclair (Brent Trading) about how he went from a farming background to running a spread-focused commodities program trading Chicago grains from a remote game farm in South Africa. Bruce explains, in plain language, how carry and calendar spreads work, why he believes spreads offer a more manageable risk profile than outright futures, and how he enforces a hard 10% annual drawdown limit for investors. They dig into the realities of global grain markets with Brazil, Argentina, China, and geopolitics in the mix, why commodities aren’t the clean inflation hedge many think they are, and how climate and structural changes are reshaping seasonality. Bruce also shares stories from his off-grid life breeding rhinos and rare game, navigating South African politics and crime, and why he thinks 2026 could bring much more volatility to grain markets than 2025… SEND IT!Chapters:00:00-00:01:01= Intro01:02-12:34= From South African Farms to Grain Spreads: How Bruce Built His Ag Trading Edge12:35-24:22 = Carry Trades, Calendar Spreads, and Risk Rules: Inside Bruce’s Grain Strategy24:23-33:15= Commodities, Inflation Myths, and the Soybean–Oil–Meal Puzzle33:16-46:03= Politics, Perception, and Life Off-Grid: Running a Trading Firm from Rural South Africa46:04-54:53= Weather, Brazil, and the Limits of Data: Why Bruce Still Trusts SpreadsFollow along with Bruce on LinkedIn and be sure to check out Brent Trading's website: brent.za.net!Don't forget to subscribe to⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Derivative⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠, follow us on Twitter at⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠@rcmAlts⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and our host Jeff at⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠@AttainCap2⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠, or⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠LinkedIn⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ , and⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Facebook⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠, and⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠sign-up for our blog digest⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠.Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠www.rcmalternatives.com/disclaimer⁠⁠⁠⁠

Welcome to the derivative by our SAM alternatives. Send it. Okay, everyone. Welcome back. Hope you're well. Finally starting to thaw up. Throw those of us in the Midwest and the northeast. And we're traveling to a warm climate today, talking with Bruce Sinclair in South Africa.

He's way up there near the Botswana border. Bruce has traded large grainhouses. The government there now runs his own shop front trading. So we dive into all of it. What's like trading U.S. markets from that far away, why ag commodities don't work that well for inflation hedges. Everything to do is. Soybeans and Haku Works in the spread and carry trade war.

Send it. Everybody, we're here with Bruce Sinclair. Bruce, how are you? I'm good, good, Jeff. Thanks. Thanks, very well. You're in South Africa. Whereabouts are you in South Africa?

Well, myself, I'm about 300 kilometers north of Johannesburg, but our office is 100 kilometers south of Johannesburg. So we're up in the northern part of South Africa. We're not in the lush area, Cape Town or in the garden route down there. So we're really much. So you've got to be close. How much further north does it go? That's got to be about to the border, right?

Yeah, well, further north, probably about another 300 kilometers, but to the west, probably 80, no, it's 80 kilometers to the, to Gabaron, which is obviously the capital of Botswana. So we're about 30 kilometers from the actual border. that's where I'm sitting. And yeah, it's a little bit of a quiet place, easier to work from here. Kids are out of schools. I don't have to rush to school and those kinds of things.

So it's time to do what I actually want to do. And do you ever have to use that compound bow on the wall back there? It's actually, I meant to use it. I bought it, but now it's become a decoration because I didn't have anywhere else to put it, but to tell you the truth, I haven't been able to shoot anything. with it, at least not accurately.

So, but I'll, it takes a lot of time. It takes a lot of time. So, but I'll get around to that. I had an embarrassing story. I was down in Florida visiting an old high school friend. Her son was practicing with one of those. And I'm like, let me give it a try. I could barely get it back.

And then I hit the trigger accidentally and punched myself in the face, get myself a bloody lip. So I'm like, oh, it's tougher and it looks. Yeah, it can be pretty treacherous. I've seen a couple of guys with themselves. Yeah. So I set the tension right down, so it's just easy to do it. And that's probably why I'm not getting anything targeted.

Probably the arrows falling on the ground before the time. But yeah, at least it's a good way to spend time. Love it. So are you born in Ray South Africa? You've been there the whole time? Yeah, yeah. I was born in South Africa. My dad was a farmer.

He's been most of his life breeding a stud, a Semental breed, which is a cattle breed. And yeah, went on to varsity from school, went into agriculture, did a basic BS degree in agriculture, and went on to commodities and did honors in animal feeds components. So that's pretty clear where my background or my experience comes to, you know, these markets. spent a good time in the Department of Agriculture doing a bit of advisory services. So the government then? Yeah, with the government when it was still functioning. And after that, yeah, they started trading commodities on the Janisburg Stock Exchange. And yeah, I've been involved in that since it started.

And yeah, we were trading electronic, obviously, long before Chicago was. So we do figure ourselves that we're ahead of the market, which we probably not. What does the agriculture in South Africa look like? You got mostly cattle? There's grains as well? Yeah, the grains are the biggest. We'll have white maize, yellow maize, and weeds, and sunflower also a big market for us. That white maize or white corn is probably our biggest market because it's not traded on any other exchange.

So this gives us ample opportunities to look at divergences between white and yellow maize. That's our background. That's where we started. And probably that's our strength, looking into specifically the corns or the white mazes, as we call it locally. And looking into the carry-o that, because we had to grow into that market. You know, we didn't know anybody in the financial markets when we started out. We had to take this agricultural markets and put them on the ball and start working them as financial instruments. So I was trading

As a country you're saying? Yeah, yeah As a whole farming community So luckily I was While I was working at the Department of Agriculture I started trading futures on indexes And on the South African Exchange And when they started adding agricultural products

It was quite easy just to move over to that sector Because there was a real vacuum So then I started working for one of the grain merchants in the country And we did a lot of sourcing mostly on the supply side and yeah we delivered that to most of the processes or factories or silos or

elevators. Is it staying in South Africa? Is it going throughout Africa? Is it man in Yeah, well 80% is local usage but we'll have export to all the northern countries of South Africa. Plus we have a couple of inland countries. We've got

places like Lusutu that Trump doesn't know about and places like Swaziland, which is a country within our country, but it's been there. So we'll, even if we supply them, it's reckoned as an export. Yeah, it's mostly, let's rather call itself a Southern Africa supply. We don't really supply really, you know, internationally. You know, we don't supply to Russia or to the European Union or to, you know, to obviously or not Argentina and Brazil so we're mostly consumers of our products and then what what did those new futures markets look like like in terms of comparing it with

the board of trade at the time like a 10th the hundredth of the size uh yeah um cheaper is it's probably less than a hundredth um a lot i'll have to do the calculation on that but we trade like uh on a good day we'll trade 5,000 contracts, which would probably be, yeah, let's say 5,000 contracts, which is 50,000 tons. Yeah, I think I just pulled it up actually. Yesterday, CME corn was 500,000 contract. Yeah, so. So that's a trick in and of itself to figure that.

That'll be in a good day. It'll be in a very good day, yeah. Yeah. Luckily, the market players are also less, so we have less competition than, obviously on Chicago Water Trade, but we did get into the practice of finding out how the spread functionality actually works between, you know, contracts, specifically the carry and the backwardation. So I've been in that market sense around about 2000, actually when I started working for one of the grain merchants. So and eventually went on to start this company in 2002. So we've been really just been doing

this from 2002 and we were just focusing on spreads not taking a market outrised view i think trading the futures is obviously very volatile and the spreads just takes the edge out of the market for you it just brings it back to a little bit more of a homely sort of position where you can actually manage a position so we went to spreads quite early in our let's say in our history of the company and found that that's where we were good at. And that's where we've been, we've been running since then. And, well, you know, the futures market, you know, it can be hectic and you'll really have to do well if you're going to survive in the futures market.

So, but we've been there since 2002. And I think that's just because we're not doing futures or price speculation. Somebody needed to tell all the people trading silver futures last week. like down 33% in a debt. Yeah, yeah. Welcome to the people. Obviously, it's like Bitcoin. You know, guys trade Bitcoin, but I wonder if anybody's ever seen one.

You know, this is kind of difficult for me to grasp coming from in the agricultural sector. And obviously, this is what I like, is actually to, you know, go out into the lands and see, see how the crop is doing. When's, you know, the time for planting. when the product is getting to a critical stage where it's sensitive to weather and sort of thing. It gives you a real feel of the product you're trading. I mean, I still don't really understand Bitcoin. What's the difference between Bitcoin and black tulips,

before instance? I don't know what's the difference. Everybody's got a hype on Bitcoins because it could be something, it could not be. I think Bitcoin's just, if you're delayed at the airport and you don't have any poker chips and you like tear up a piece of paper and divvy up amongst your friends

and type poker for the pieces of paper. It's just for trading firms and traders to trade something. It's just little pieces of paper they can trade. Well, I know lots of guys that have made good money on it, but yeah, they'll only tell you when they've made money. They won't tell you when they've lost it. Exactly.

So obviously, yeah. And do you, are you actually going out in the fields? And like you said, like as that time comes and it's susceptible to the weather. Are you actually going on prop tours and saying like, okay, here's what I see. We do, Jeff, yes, but obviously locally. So I don't do the Chicago tour or the U.S. tour because obviously it's just too big. Even the guys that do the analysis, you know, they don't get around everything.

So I do, you know, looking at their reports and obviously I am a little bit worried that, you know, you can't get a good whole picture because any farmer in any state or any land that you, if you speak to, you'll tell you the crop is under stress and they're probably not going to get the high yield. If the farm is telling you, he's getting a massive yield and this is looking good, you know, he might be on something. You know, it's just not. They're pessimists usually about the crop, but they're optimists about the price, obviously. Absolutely. Yeah, well, you can't say they're pessimists because obviously they're planting when it doesn't rain.

Yeah. And they obviously praying for the rain, which is, it's difficult for, producer to shorter market. It's really rare for a producer who's thinking about speculating for him to sell the market. It's very difficult for them to get square just to sell what they have because they will. It's going to hold back something. And that's just the nature of obviously of how they work with this product. And they're producing it and they obviously want to get the best for it. But and it's just like psychology behind that is just to hold on to. You know, hold on the product.

Yeah, we'll see a lot of, in our ag unit, we'll see a lot of groups hedge, but then they'll buy it back on the board and they can't, as you're saying, they can't stay even. They want to reown it. Yeah, yeah, yeah. You were successful in your hedge and then the price came down and they're like, well, now I should bat, it would be good. Yeah, no. Well, yeah, I would love to see how many producers are actually speculators.

And as far as positions concerned, you know, that would be like, you know, really eye-opening. But I think the producers are a really large percentage of the speculators in the market. For sure. We call it headjulating here. Instead of speculating, they're hedging. I'm just going to own some more. So you know that crowd. It's a big crowd, for sure.

So take me back. So you got into the spreads, but you weren't spreading your white maze versus U.S. Quone futures. You were doing month spread, like calendar spread in the U.S.? Yeah, I think to... Or both? Well, it was sort of progressive. But to start, we were like just doing white maize calendar spreads,

you know, buying in the carry spread and, you know, just holding it when it was shown some carry. And we found that there you can actually get paid for patients because you're buying a carry spread. You're long in the nearby month. You've hedged it. And if anything happens down the line in that period, obviously the front month will arise. and then you can actually sell it for a profit. And that's with a sort of a low risk approach. And talk through that, right?

People hear the carry trade and think they're buying, selling yen and buying dollar, whatever, like they think of it in currency terms. So talk through what you mean exactly by the carry trade in the grain. Okay. All right. Sure. When I'm saying buying the carry trade, I mean you're buying the product. If you're buying physical stock or the futures, it obviously doesn't make that much difference,

but you're buying the current or the nearby months, and you're selling that forward three or four months later, selling it as a hedge. So you're actually a hedge, but you're holding the nearby contract. So what you're hoping for is obviously for market to go from a sort of carry, which is presenting it, it's paying you a carry. So it's paying you to carry this product for six months.

So obviously we're hoping for some volatility and that there will be a short supply on the near side, be a bit of a short term rising in the... on the nearby market. So that's typically a safe trade in our books. And it's worked most of the time, except 2025 has been very challenging as far as that's concerned with the tariff wars. But obviously it will change.

Even one of those strategies, if it hasn't worked for one or two years, it doesn't mean it's not going to work next year. Probably the chances that that specific seasonal spread will work the next season is probably just going to give it going to increase. And is that based mainly on rates or storage capacity? What's that, is you're basically saying the back end's not going to move? The cost to carry it. Well, if you were to buy their product and put it into silo and you actually own it,

you would have to be paying for the product so you will have an interest cost that you're carrying and the storage costs because the elevator would charge is storage. So you always see looking to the forward market when they use carry that their prices will be increasing going into the further month to actually pay you for storage. So if I have the product now, I could sell it for X, but I could sell it later for X plus something. And that plus something is obviously something to pay me for the carry charges. And it normally doesn't pay you everything it costs you,

but it does give you this great advantage that you're just holding the products. Futures market, you've got relatively low risk, and you're just holding the product. And you've really just got a large upside. Yeah, I don't want to say that. Yeah, like a little bit of an option trade then. Yeah, no, let's not say that word. But yeah, it gives you,

you've got a sort of limited loss created on a calendar spread. And that's what they do. They give you sort of a backdoor. And if a calendar spread sometimes goes against you, let's say you've bought it at, typically Chicago works on a negative number. So let's say we bought the spread at a minus 20 and it moves to minus 25. It's actually getting to a better position for new entries.

So they always say don't double up, but in the case of spreads and carries, you're actually getting to a lower risk, the more the market goes against you. And at some point, the big financial institutions will get involved in there because they might be able to buy a product and actually sell it as a profit in the future. So, yeah, like an instant ARB kind of thing, right? Yeah, yeah. But that's only if, you know, the world is stable and there's no major upsets because, I mean, it still is a future market. And even though we do these calculations, things can get really, you know, hectic.

Yeah, and talk through that for a second because right spreads are notorious in the U.S. at least for our natural gas. It's a big one, right? like Amaranth went bus because they were, the seasonal trade worked forever until it blew out one year, huge and took down some firms. So it seems like the spreads are always less volatile until they aren't. So how do you protect against that? Or how do you view that? Well, there's two sides to that story.

The first one being that if it did blow up and it went against it, that means it could have. and natural gas is difficult because we don't have this full carry sort of thing but in the range you do have. So if you're buying the carry, as long as you can actually hold that product and carry it forward, it will never blow it down under carry.

You always have something going, carry shooting up. So if you're going to shorter carry, let's say for market's way into backwardation, obviously what I'm saying is where the spot month is a lot higher than the further months. If you're shorting that thing and you're selling the spot months and hoping that this thing is going to go to carry, which it like always does.

And the same would be true for the weeds in for the wheat situation, except when the Ukraine war camp, the July deck on the weeds always moved from zero to a minus win to a carry. Except the year when Ukraine was invaded and it just went ballistic. But it went to ballistic if you were short in the carry. So as far as carry is concerned, we always like to be a buyer of a carry. That's sort of our back door, you know.

So the people mainly get in trouble selling? Yeah, yeah, Jeff, yeah, you could do big volumes, expecting that, you know, this thing is going to not go further. And then obviously it blow up there. That's what obviously will hurt you. And we were short on the wheat spreads, expecting them to go to carry. And when the Ukraine invasion happened, and fortunately, we've got to prove a strict protocol as far as our risk are concerned that when we hit sort of a level and our program is

designed to take a 10% knock and nothing more, when we, when that thing went ballistic and it hit 6%, and it was actually looking like it's going to be, it's even a better trade or it's a, you know, you can actually get in a game because this thing has got to go to carry. Unfortunately, our stops threw us out. So we just cleared everything. We got out there. We went that month in with a loss, but we weren't out.

And so obviously what I'm saying, it doesn't matter how much you think, you know, of the market. You need a big mama there to step in when you're over your limits. Yeah. And you guys kind of have a risk-first approach, right? like speak a little bit more about that so you have that stop position what else you're doing on the yeah we have to have a stop loss in and we'll calculate the risk that the that the program can take and we'll divide that up to between the commodities that we're actually trading so let's say we've

in the grain spread we've got two programs one is the grain spread and one is diversified that includes grains but it includes softs and meats and some energy products as well but in the grains program typically will only take we have total risk of 10% okay that that we never want to override so we'll break that risk down to 2% per commodity and and then we'll look at the strategies and make sure let's say if we've got two strategies running will only have exposure of 1% per strategy so that will be our entry so yeah a very defensive sort of approach to the risk we're not just going to do this program and keep going until it doesn't work anymore.

We've got this program that's working for us now, but we need the risk controls to obviously to develop it and to be able to get into the market at the right spot. So we like to think that's the way we protect ourselves and our clients and yes, it's been successful in the past. Is that based per month?

So if you hit that 10% level on each train? Yeah, no, no, 10% on the, the portfolio, total portfolio. Yeah. In a month or at any point? No, no. That's on a year of performance base. So at any time that the program is down 10%,

it should be closed out completely, the whole program. To the rest of the year? Or you'll start getting back into other things. Until we can go and sit down and figure out what the problem was, can we correct that? But I'm approaching this from an investor's side. I'm saying, you know, if I give this money to Brent Trading to invest in this program, what am I looking at as loss as a client? And then I want to say to you, listen, if you're going to invest in a loss,

you've got to be able to take a 10% drawdown at any time during the year. And that's the risk I'd like you to look at. You know, if you can, you don't, you know, I've got friends. I'm sure you've got friends like that, Jeff, too, that come to the market and they say, Well, Jeff, you know about the market, guess, you know, five grand, can you invest it for me? And we'll say, how much risk can you take? I know I don't want to take any risk, but I want to make a lot of money. That's everywhere.

So the exact same principle applies. If you want to take a 10% we're saying to you, we're taking a 10% risk. If you're prepared to take a 20% risk, you'll have to do that in a notional fund sort of way. Yeah, yeah. Which we can do. So, you know. And I've always had an issue of people say, oh, I have. this 2% stop loss, but then they'll exit the trade.

And then they get into the, they re-enter the trade the next day, where it now has another 2% max loss. If that stops out, they enter it. So I'm like, well, you don't really have a max loss. You're just getting out and putting it back on. So you're saying, no, we're actually stepping aside for a bit and reassessing. Like you won't get into that same trade. Well, no, no, we want, we don't want the yearly performance to be a minus 10 at the end.

or anything bigger than that. So we've been able to do that since inception. We've never been able to, we've never been down 10% or more or it, basically any time in that program on a monthly basis. So, and that's our intention. That's why I say, from my money, I wanted money just like that. You know, I don't want to just basically a program say, these guys say they can make your assets. grow without constraints. I want to be clear.

That's what we're looking at. And do you try to be, right, if you get investors coming to you, like, oh, I want this commodity exposure. I'm worried about inflation. I'm worried about this and that. And you're saying, okay, we do commodities, but it's not necessarily giving you an inflation then. Like, how do you view that people thinking they want to buy and hold commodities versus what you

do and those different kinds of exposure? Yeah. Well, probably, first I'm going to say that doesn't work to hold it for inflation. All right. Let's talk more about that. Why not? Well, yeah, let's just talk quickly about that. If you take the Bloomberg index of commodities or the grain prices as a whole and you take it over

a long term and you adjust it for inflation, you're probably going to see you're just flat. So it is true that you might be able to hedge yourself against inflation by just holding these commodities. But commodities have, you know, they've got a downside and the top side. And between that, they're going to move. Typically, it would be, you know, when it drops, when you've got an oversupply, and when you've got a good demand, it's going to go to the, you know, to the high side. And those, it's not that they're hard limits. They're sort of soft limits.

The market's going to worm its way between that. So you might be getting in one year, expecting yourself to be covered for inflation and actually have a negative figure going forward. I'm not convinced that there's any figures to really say that it's worthwhile investing in soft com, and agricultural commodities specifically to offset inflation. The thing about commodities and is we don't have an alpha for performance. You know, we've got no luck. Can your program do better than the average price of corn or the index price?

We don't have that. We've only got supply and demand. And when this supply, prices will go to the bottom obviously and when this demand will go to the roof. that button and roof are sort of soft tops because the moment the price goes too high, China's going to buy from Brazil. That's the way they're doing. And at the moment it goes too low, you know, people are going to stop producing it. So this is the saying in the U.S. The cure for high prices is high prices.

They'll figure something else out. They won't pay. I think it's the other way around. The care for lower prices is prices. I'm not so sure about the high side. because I mean some farmers will definitely always plant

I mean this is their way of life and then they produce it and they probably use their grain but when it comes to business let's say agricultural businesses obviously they do this all the time is you know are we going to plant maize

are we going to plant corn or are we going to do some sunflowers or do something else so that will just make if the prices go down and they keep going down, I mean, if the corn prices keep dropping, the U.S. farmers are not going to plant corn. That's, you know, it's just ridiculous. So that's the way it works.

Subsidize them to plant the quorum. Yeah, yeah. Yeah. I hope so. I hope so. I'll finish on your commodity inflation point. I think that all came out of the 70s, huge inflation with the oil spike

and the Bloomberg commodity index, everything was like 50, 60% oil, all those commodity indices, so everyone's like, look, commodities do great during inflation, this is how we cover it. But to your point, unless you just want to have huge oil exposure,

which doesn't always work. No, well, to say it lightly. Since I've been in the market to, now I think about 10, 12 years ago, I was on an interview, and the guys asked me, where you think the crew world's price is going to be. And at that stage, it was $100.

And I said, well, it's just going to keep rising because it's a non-renewable product. And, yeah, it's been painful to watch. So, that, yeah. But in the grains, in our grain program, obviously that's where I'm saying that, you know, the inflation effect is probably not as great just to buy and hold them. You've got to manage that position. Since we're moving between oversupply and demand, you've got these just fluctuations. And that's why I like the market because it can't rock it up and keep going up,

and it can't come down and keep falling down. It's got to stay within those sort of soft limits. And as most commodities, we bit out there. But I think the grain markets, you know, you can actually, you can calculate where they are. Or at least we can do that for the markets that we trade. And tell me again, the market. in that ag program is which grants?

Well, in the ag program, we've just got U.S. commodities and in the diversified, no, I'm mine. In the diversified, we do some sugars on European sugars futures, and we are looking what else we can add there, but it's a little bit more divisive. But the grains program is just Chicago grains. It will be the three wheat classes, the soy beans, the soybean meal, the soybean well, and corn. and talk a bit about soybeans.

I always call it like the most popular market that nobody outside of commodities knows about, right? Like I think if you went up to the average person on the street and was like, what is this? They'd be like edamame, maybe. They had a sushi restaurant. I read they don't know soybeans, but in our world, it's like, right, a main product.

So I don't know if there's a question there. But tell me, in your world, right, soybeans is a main product, right? Yeah, it's a big product and it's a product that really can do very well because it's highly liquid and it's a product that's high in demand globally. So this will always make it relevant. So we like it. We like the liquidity that it has and the fact that it's got a fixed sort of storage. The international picture of the soybeans is getting a little bit complicated. Well, I wouldn't say complicated.

It's getting a little bit more busy with Brazil coming onto the market. Well, they've strong on the market. Argentina is there. So this is creating some competition, I think, for the U.S., which has always had a large amount of soybeans to export. Especially here in Illinois. It's a volatile product. And I think if I'm saying volatile, I don't mean it's totally crazy, but it moves.

The corn market is like very sluggish. And the wheat market is like sluggish as well. So the soybean adds a nice sort of mix to it, you know. And it gives opportunities on the spreads that you can trade. And was it last year or two years? Like the meal was way nobody wanted the meal, but there was a ton of demand for the oil. Was there some, what was happening there?

Did I get that right? I'm not sure exactly which they were looking for. But what we call the crack spread is that's actually where you're looking to buy the beans. And then you're selling the meal and the oil. That's at pretty historic levels. it is a big incentive for process to crush soy beans and sell the meal and sell the soy well. But that won't last forever because as it's an incentive at a time, the guys will be processing more and they'll stop paying more for beans and it'll pick the beans price up.

So there's a sort of interesting three-dimensional dynamic there, which creates a lot of opportunities because you can do backwoodation on soy beans versus the backwardation on Sweden meal, for instance. And this is just giving a little bit more, sorry, a little bit more toys to play with and instruments that you can actually

go and analyze. The US goes lots of statistics. I mean, there's so many statistics available that you can really do some good homework and, you know, get some good statistics out of it and you can actually present a case for that. And did you ever mess around? You don't do any cross, like,

oil versus meal versus oils, perhaps? No, we do. We do. No, yes, we will. Sometimes we will, if there's good an opportunity, we'll have a look at that. But we sort of look at the trades, obviously, continuously, but we've sort of got a trade generation. We've got lots of inputs of trades that are coming, that we'll break down and have a look, and then we'll see how much money we've got to invest, and how can we disperse that between this risk and that?

And it's always nice to have something else like a soybean versus corn ratio that might be, might be able to add some value. So you're looking at Brazil, China, America, like, how do you do all that from your seat in South Africa? It's that hard? You think, right? One, you just have this huge time difference. But two, do you think it's, could you have done this 10 years ago? Or do you think the internet and all the information today is... Absolutely not.

No, we couldn't have done it. If Chicago would have trade didn't go electronic, we would have never been able to do it. I would have to move to the U.S. boat there and sort of, you know, set up the business there. Could you handle the Chicago winter, you think? The Chicago? The Chicago winter? No, definitely not. No, no.

It was like negative 20 Celsius here. weeks ago. I can't believe people can actually love there. Really, I can't believe it. But it helps me to be here. And if I'm looking at the sort of the bigger picture, because this is normally what happens when you're day trading, you're so focused on the small picture of prices moving up and down that you get in and out and eventually you either lose or you break even. There's not many guys that will make money on speculating their day trades. But when you look at a little bit the screen. If you're looking from South Africa and you're looking through the US and you're looking at the whole of it and you're looking at the weather patterns. I'm not looking for something specific.

I'm looking for the global effects that are taking place and the same with the supply and demand. So it's easier for me to sit far away from a market and to be able to look at it. It gives me sort of a big picture I like to think. I can see the horizon better than what I were. If I was a farmer in anywhere in the U.S. planting and it's minus 20 degrees. How can you have a positive a positive feeling about your crop if it's minus 20?

I don't know how that's possible, you know. Yeah. And it seemed like you get rid of all the biases too, right? Like you don't have the U.S. farm bias or the Argentinian. Yeah, there's a lot of noise. There's a lot of noise, obviously, coming out of the agriculture markets from various sides. So, and obviously one of them being the weather, so like we've just mentioned, it's minus 20 or it doesn't rain.

It's kind of difficult to take up a market position against your current weather. But yeah, being here, I can filter out. Well, I suppose I could filter out if it was the US as well. But just to take away the noise, find out what's important to you. Get that data, get it updated and make your decisions from that. Because, yeah, there's obviously too much noise and too much bias nest that you can actually. pick up yourself. Where do you see the most noise these days?

Like what do you find yourself discounting more than? Wow, absolutely the politics. The politics is obviously you're in there. So you try to try to not listen to the politics, but obviously it's expecting our markets. And it didn't do that before. So this is really, really been challenging, actually, the last while. Have you heard we call it the Taco Trade?

Trump always chickens out, T-A-C-O. Okay. Well, it sounds like that's going to realize today. But people have been trading that, right? It makes a big move on an announcement, and they take the other side of it, and after a few weeks it gets unraveled, and it's been a good trade. I can't understand why people don't understand Trump, because I think I understand me.

It makes a big noise, like you say, makes a big noise. Everybody sits up straight and gets scared, and he comes in and makes a deal. Well, it sounds like a good strategy from that point of view. So that's good. And what about the Chinese part? Like, you think they are playing chess when we're all playing checkers? Like, are they just manipulating this? And they come out, like you said earlier, they'll just, if price gets too high, they'll switch

or they'll change their buying patterns. You think they're in the market also, like manipulating that or not? Yeah, Jeff, that's a difficult question. I just know there's not much to know. Not much info to get from them. The info coming from China is limited and it's not creditable. So that's probably one of the noises I try to ignore because if you're going to try and figure out what's happening there, they seem to stick to fundamental moves or fundamental things that change.

But I don't want to risk something on that. It's just that's just too unpredictable for me. Do you look at their futures market at the prices there? Yes, I did look at the futures market. But yeah, it's, well, except the fact that the NFA, I think, has got a crack down on there. We can't trade it. You might maybe look at it. We can't trade it, I suppose.

But just on that, let me just, it's not, I'm not alone in the business. And I'm not looking at, you know, there's noise and stuff alone or China. I have three guys of me, Juan Dreher and Louis van Baik. And the three of us are sort of the, well, we are the pinnacle of the company. It's committee managed. That's what I'm trying to say. It's not in a whim of what I'm saying. There's three of us involved in this process besides the people that are helping us with the administration and the analytics.

So. Yeah, good point. You have global offices, right? You're in a few different cities. Yeah, I wouldn't say global. It's just nationals here. Just national. Okay.

I thought you had London. No, we were a member of the ice exchange in London through the old energy exchange. So that was previous. That's where we're not there. We're not a member of the exchange anymore. But yes, our officers are now just local. In Johannesburg? Well, yeah, it's not Januszberg.

One is in the free state and one is in Lumpopo. And, well, there's actually two in the free state, so to say, and one in Lumpo. Yeah. But once again, if we couldn't do this, 10 years maybe, but 20 years ago, we probably couldn't because now we can just all just get on a call like me and you are doing now and we can discuss this. And we can actually have our compliance department turnkey trading partners. They do all our compliance. They do all our performance measurements. And they've been doing a very good job of that. So we get them on board and we can discuss whatever issue we have quite easily. It's becoming a lot easier to do. do this business as for a logistic. Right. You didn't, in the past, where there were people who said they needed to come have it on site and then they didn't want to do the travel and all the of investors saying, like, I can't get them. That's probably the hardest part for us as a South African business.

It's the so-called political or logistical point. South Africa is one of the BRICS countries, which is obviously not politically correct for the US at the moment, the local government or the ANC government, you know, corruption and crime is the order of the day. So them flirting with Russia and flirting with Iran doesn't help our business. Even though the same way you might not be agreeing with everything Trump says, the same way I'm definitely not agreeing with anything the ANC says. So to try and convince somebody in the US, you know, to invest with ours as a South African company, does have that challenge here. So we we try to try to be as honest as possible about this and yeah we've all got governments that we

don't always like what's the prognosis there is that for the foreseeable future they'll be in power or there be a switch well they still empowering but they barely holding on but i don't know what's going to come after that you know so this that's the question could be worse yeah it could be worse but currently you know this is my home if i wanted to go somewhere i'd really like to to Texas if I was going to immigrate or immigrate. But just because I don't think it's as cold as Chicago, but currently this is my home, you know, this is where in my feet are, this is where I'm planted? You know, I'm not going to wait just because, you know, some crime and corruption is

taking place in the country, you know. But that's, that is definitely the challenge for most of Africans. Can you, can you live of the crime and corruption? And where I'm situated, I have, obviously, I have a start. R-link internet connection. I'm totally off the grid. We have our own power supply. We're all solar, all water's own supply.

So we're not depending on any municipal or government sort of structure. Yeah, but I'm happy to do it during the trading hours are, it's in the evening. So I'm quite, you know, working from home. It's not. Yeah, what's your day look like? Well, yeah. In the morning, I'm farming and maybe using the bow. not. So I'll do the farming sort of structures. We have a forming on your land.

Yeah, yeah, on the family, yeah, it's on our land. So we're forming basically they were rare game species. We do have a number of game species that we, we've built over a couple of years to turn bold, you know, herds that are disease-free and what you would call highly valued animals. Yeah. So yeah, that's what we try to do. to breed game that other people would buy that they've got a high value. That they'll buy and put on a game preserve or a ranch, hunting ranch or something? Yeah, for different reasons. Some will be for ranching, for hunting, and others will be for like safaris.

Well, I suppose it's not, no secret, but I can tell you, we breed rhinos, and rhinos are a sensitive subject, obviously. Yeah. But the guys that will buy them, you know, it's like, you know, you. You don't want to let anybody know you've actually got rhinos because it's something that can attract poachers and sort of that type of right. Yeah, so we breed them and we'll sell them to wherever who's looking to, you know, increase their herds. We'll be in nature reserves.

Nobody's hunting rhinos and nobody's slaughtering rhinos for a rhino horn. So at least the guys that are buying because, I mean, why buy something if you can poach it? You sort of things. But we sell them. we sell it we sell how do you breed them no i got 10 minute questions okay now it's quite easy yeah yeah it's quite easy you just let them go and you just feed them you feed them so that they're happy and so yeah they're not intensive i mean they're not if you're asking that they're not in small camps you know one bull and two cows or sort of thing they roam

the whole farm and we've got a couple of cows and we've got a couple of bulls walking so we just yeah we just let them be and we just look after them I think that's the probably the biggest thing we need to do. And you got any hippos around there? No, no. Those are more dangerous, right? Way more than the hippo. We would have loved to have them, but it's a little bit drivers.

We don't have a river. So, yeah, we don't have, we have them. We've got to, now and again, we get elephants coming through that have broken out from some reserve because most of the elephants in this region are in reserves. They'll come in, they'll break a couple of things. and then they'll go off again. And that's about probably the biggest.

We've got resident leopards and stuff like that and other sort of predatory animals sort of thing. And then we've got in the normal planes game that you would basically be using for meat processing or for interest in that. They might be even interested for hunting purposes. What's the thing you're most scared of? What's the animal you're most scared of there?

It's a little one. They call it a scorpion. That's the one I don't like. It's just that size. But I'm not afraid of a black mamba, which is probably the one, this black mamba snake. People don't like that.

Yeah, I'm afraid of that. They can get very, very ugly. But those are the ones. They'll send you to ICU. And you won't be enjoying it. And you can find them anywhere from under your carpet, you know, in your shoes or anything. Check your shoes.

You're best best, best be looking. looking out for them. All right. Let's finish it up. What do you see for the grain markets moving forward in? Yeah, as far as the macrocompensitions or the view is, I'll still stick with grains as far as on my programs. I like grains because of the physical things I've mentioned earlier.

And we've had a lot volatility in the grain market really in 2025. But I think 2026 is going to be the recipient of that. And, yeah, you've got to, you know, the equities, the U.S. equities have always been strong. I've been strong for a long time. It's like you don't get into the market when it's on top. You know, when it's on top, you actually should be thinking about getting out. And it's the same when you join a program. You don't join a program that's been doing very well for the last year.

You know, you sort of wait until that good program is relaxing a bit, and then you're getting to sort of that, the same as you're buying a product. But I think there's going to be still a lot of interest as soybeans and the corn. These are products that people need. As the world is getting bigger, obviously, and more people. Food supply will still always be there. So it's going to always be a commodity that's worthwhile training. And do you see, do you look at climate change in different environments?

Like it's going to stress the crops or you think technology will keep up with that and will be okay? That's very confusing because some, You know, some guys will tell you, the climate change is hitting them negatively. Other guys, once again, once again, we might say it's hitting them positively. But if there's going to be a child change, and obviously I'm not saying there isn't going to be one, it will impact the food security tremendously. Yeah, I'm quite sure of that. Yeah, or at least more volatility.

Yeah, and then you'll always want to be longer carry spread. You know, you'll always want to be there. And the markets, you know, we say in the markets, as being quiet in 2025, the agricultural markets, but it's given the opportunity to buy carry, you know, for a good period. And you can, this is where you'll get rewarded if you actually, you know, have patience

and not waiting for some, you know, something just to run, you know, or trying to get up on a breakout. You know, you just have to have patience. And that's why I say it's seasonal. These things will change seasonally. Wow. How does this, should ask this before, but with all the different, right with Brazil and Argentina

are growing and harvesting while we're in the winter and like does that eventually become seasonality goes away because everyone's all, there's always someone harvesting? Yeah, I suppose Brazil is throwing that into the equation now that obviously getting almost three crops of corn a year. So this will probably make that the carries, will probably mean not always giving you full carry, but it will always be a safe trade if you can get it. That won't go away. But it will mean that we'll have markets and a lot more

backwardation than what we currently do. And as I said, you can play and look at the backwardation of one product against the back quotation of another product and therefore try and limit your backwardation effect. There will still the opportunities in that. So it's not a, you know, strategies or certain strategies being working for 20 years is going to carry on working. You have to work these markets. It seems like I'd be more dependent on, right? You have to be a Brazil weather expert in the U.S. weather expert in Australia. You have to know what's happening in each of those spots.

Yeah. No? Yeah. Well, if you're getting three crops of a year, I'm not sure how Brazil's weather is going to be that challenging, especially when they're producing that amount. I think that changes the effect. And it is true. I mean, look at the weather in the U.S. at the moment.

It looks bad. From where I'm sitting, it looks bad. But we're not seen anything on the price effect of that. So maybe that's a little bit of noise. You need to try and filter out and have a look. So, yeah, I think it's a change in market, Jeff. And obviously we need to look at what Australia is bringing right. We need to look at what Brazil specifically is doing and how they can move that.

And that I think to get away from the risks involved in that is to do the sprays, not do the features because this is where you're sitting on the edge of your seat, you know, or looking at you've got your one eye on the TV to two years. What is happening, you know, with the weather in Brazil. The way to get away from these things is to do. spreads. Like, I don't care. It seems to me everyone, it's probably less edge than it used to be.

Like if you had the weather team and you had, right now that data seems to be all out in the open. Like anyone and everyone can get weather data in Brazil? Well, I'll tell you what. I've had analytics teams. I've had weather teams, satellite teams in the past, even when I was working for those grain merchants. And we were paying a lot for satellites things.

and we were never able to make money of that. Like the satellites trying to see what the yield's going to be and measure the shadow length and all that? Yeah, looking at the satellites, looking at, you know, the crop quality, you know, and the condition of the crop specifically. And we may have been right that we never got our timing correct on that. You see maybe there's a large area that's stressed and it's going to increase. So you start buying the product and then the prices go down.

And then eventually get kicked out. the market and then suddenly everybody realizes it's dry and then it goes up so you know that's a to to be there so i like the spreads i can sleep i can sleep um pretty calmly i have no proof of this but i spoke of the energy trader once we're using they were analyzing bps like oil tanks to see how much storage there was and whatnot and then bp like painted them with some paint that would not let the satellite penetrate the tank. So it was like a arms race to be like, okay, how can we? So yeah.

Yeah, I can you look at that. It's a lot of trouble to get all that data. And obviously from the agricultural, it's probably because you've got a very wider sort of place that it can come from. So I think you're going to make that a choice, you know, is that worth the effort to get that data? And can you use it timely? I found other things that work for me,

that work for us that work for us better. Well, and mainly just spread it out. Don't worry about it. Art Bruce, I think we'll leave it there. Thanks so much. I'm going to make it to South Africa one of these days. We got a, we worked with the lady I told you all to scream in a Hootspur. Am I saying that correctly?

Hootspright. Yes, footspright. So, yeah, now I can visit two of you out there. Okay, good. No, you're welcome. Let me know when you're coming. I'll organize to pick up for you at the airport. But, yeah.

So, no, more than welcome. Anytime. Love it. All right, Bruce. Thanks so much. Thanks, Jess. Thanks for the interest. I really appreciate.

Okay, that's it for the show. Thanks to Bruce. Thanks to Jet Forgraf for producing. Thanks to RCM for sponsoring. We'll see you next week. We've got a good one with Patrick KZE, One River. Coming on to talk risk responders, trend following total portfolio solutions, Portable Alpha, and all the rest.

See you then. Peace. You've been listening to The Derivative. Links from this episode will be in the episode description of this. channel follow us on Twitter at RCMaltz and visit our website to read our blog or subscribe to our newsletter at rcmaltz.com if you liked our show introduce a friend and show them how to subscribe and be sure to leave comments we'd love to hear from you this podcast is provided for informational purposes only and should not be relied upon as legal

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