Macquarie Podcast Series featuring Commodities and Global Markets
Speakers: Chris Cusack with Filipe Moscoso
Recorded on 6 October 2020.
Voiceover: Welcome to the Macquarie podcast series.
Filipe Moscoso: Hello everyone. My name is Filipe Moscoso and I'm a Senior Vice President in the Agriculture Over-The-Counter Sales team in Asia. I'm delighted to welcome you today to the seventh episode of our Macquarie Podcast Series featuring Commodities and Global Markets in Asia. Today, I'm pleased to be joined by Chris Cusack, Managing Director for the Energy and Agriculture sales teams. Chris, welcome!
Chris Cusack: Thanks Fil.
Filipe Moscoso: Very good, Chris, let's start off with a brief overview of your career to date, so where you started and how you got to where you are now.
Chris Cusack: Thanks Fil and it's great to be with you here today. So, my background is actually a little bit different. I'm from the UK originally, but after my studies, I actually started off life as a professional golfer and the professional golf didn't go too well, unfortunately. So, following on from that, I got a job as a tax consultant for Ernest & Young. The time at EY was really, I did enjoy it, but ultimately it wasn't something that I wanted to do for the long term. So, following on from that, I moved to Australia to do an MBA. The MBA was really done to switch careers and hopefully find a job in Asia, which was somewhere that I've always loved. But on completing my MBA back in 2009, I was pretty fortunate to land a job with Barclays in Singapore doing cross commodity sales. And then finally I joined Macquarie back in 2013 where I've been ever since. So, I guess my background is not the most traditional route into finance, but then I guess there's no real one size fits all approach for everyone.
And how about yourself, Fil? I know you've been with Macquarie for around 12 years now and you've had quite a journey starting from the back office, then moving into front office in the sales team, and then changing locations from Sydney to Singapore. How were some of these experiences for you?
Filipe Moscoso: Yeah, I started at Macquarie pretty much right after I left university in Sydney. I had a very brief stint at an Australian domestic bank and then came over to Macquarie, where I worked in the back office in the settlements team for what was called Agriculture and Investor Products at that time. So that job gave me a really good grounding and understanding of the technical sides of the trades that we typically do in agriculture. But of course, I always had a great interest in furthering my skills and learning more about front office functions. So I was very surprised and grateful that the team in Sydney at the time, which was a couple of traders and salespeople on that desk, were extremely generous with their time. And they were willing to teach me the greater context of what I was doing as it related to the business and kind of upskilling me to do my job better.
And it was actually them that gave me the heads up when a front office sales position came up and recommended that I should apply for it internally. So, I went through that process and yeah, the rest is history. I've been in sales ever since. So, majority of the 12 years at Macquarie in sales and in Sydney, but five years ago, I did make another move, which was coming to Singapore. And to be honest, that's probably been the best career move I've ever made. Now, just on you Chris, a little bit more about your golfing career - I'm not going to let you get away with just the answer you gave before. Now, while you may no longer be pro, I know for a fact that you are the best golfer in the Singapore office by far. Can you tell me if there's anything you miss from your life as a golfer?
Chris Cusack: Sure. So, I think professional golf is pretty much like all professional sports - it’s probably the best game in the world when you're doing well, but it's not that much fun when you're struggling, and although golf looks quite relaxing from the outside, there's actually quite a lot of pressure when you're there playing competitions, when you've got to play well to make a pay check. And for me, it really kind of felt like I was always swimming upstream against the tide really. It’s something like equivalent to having a trader at Macquarie that keeps coming into work and losing money every day. It's not the best feeling. So, although for me it was a great experience where I got to travel the world and meet some fantastic people playing competitions, I think ultimately I'm better suited to what I'm doing now rather than trying to make a living on the golf course.
Filipe Moscoso: Yeah, very good. Now just moving on from golf, but sticking from your career. One of the questions that I've loved in the previous podcasts that we've done and I wanted to cover here today is; ‘What's the best piece of advice that you've ever received in your career?’. We've had some absolute gems discussed by our colleagues in episodes one through six. I guess I'll start with my one, which is probably a little bit more organisation specific. So, this is a great piece of Macquarie specific advice that I got early on in my career, and that was to listen and take lead from our clients. We're a relatively young bank, by global standards, and our growth and success has always been driven by being as relevant as possible to our clients. So listening to the clients and listening to their needs has unlocked a number of new markets that we've pioneered.
And at Macquarie, we've got a really strong culture of bottom up identification of opportunities. So keeping an eye out for opportunities that our clients, most of the time, give us and letting management know. As we're a very nimble organisation we can get things done really quickly. As an example, you know, we're pretty involved in the agriculture side in some exciting new markets like rubber and dairy. These are not markets that we traded five years ago, and now they're really exciting and unique businesses that we've got. And both of those started from feedback from clients saying they've got a risk in these assets, they don't know what to do about them and us kind of working backwards from that. So, I wanted to ask you what the best piece of advice that you've been given is?
Chris Cusack: I think some of the best advice I've ever had is actually from one of my old golf coaches. And the advice is actually related more towards golf, but you can apply it to kind of, I guess, life in general as well. When I used to play golf; I used to be really hard on myself. And when things didn't go well, which happened to me quite often on the golf course, I'd be really harsh on myself and beat myself up a lot. And my self-talk, I did really used to give myself a hard time. So, my coach used to advise me that the way you talk to yourself internally should be the way that you talk to your own best friends. So if you were talking to your best friends and they were having a tough day, you wouldn't smash them when things go wrong, kind of berate them, you'd be a lot more supportive and constructive.
Filipe Moscoso: Just finishing off on your career Chris, was there any one moment, one pivotal decision that you made, one person in particular, that was a turning point or super influential in your career to date?
Chris Cusack: It sounds a bit corny, but to be totally honest, probably joining Macquarie was one of the best career moves that I actually made. I joined Macquarie back in 2013 and, at the time, I was working for Barclays bank and they were a top three global commodities bank. And I guess when Macquarie approached me to begin with, I really didn't know too much about them, other than that I’d heard that Macquarie was a great place to work and it had a very friendly culture. It was actually Andrew McGrath from Macquarie that was the one who really helped me and convinced me to join. And after joining, probably six months after that, Barclays bank shut down the whole commodities business. And since 2013 Macquarie’s commodities business has continued to see massive growth. So, I think joining Macquarie is definitely one of the best calls I've made. And yeah, I'm feeling pretty fortunate for that move for sure.
Filipe Moscoso: It definitely was a great call in the commodities market. Chris, now I wanted to turn to the sales team and what we do. Can you give us a quick snapshot of what our team does in Asia, specifically in the commodities markets?
Chris Cusack: Sure, I'd be happy to. So our main business here in Asia is really to provide the risk management solutions to corporate clients all around the region. And now our typical client would be someone like an airline, an oil refinery or a sugar producer, basically anyone that's got exposure to commodities price risk. We can offer them tools and solutions to help them manage that risk. And to do that, there's really kind of two parts to our role. The first part is where we act something like a consultant, where we'd speak to our clients and really try hard to understand their business and the kinds of issues that they may be facing. And then for the second part, we go on to try and tailor risk management and financing solutions for their specific needs and solve some of the specific problems that they're facing. So I guess that's kind of a big picture, a few of the things that we're looking at. But moving on to the agriculture side of things where you're leading the business here in Asia, Fil. Asia is obviously a huge region when it comes to consumption. In fact, it's actually the largest agriculture market in the world. Can you tell us a bit about the market and the kinds of clients we support here?
Filipe Moscoso: Absolutely. Yeah, largest agriculture market in the world, largest population in the world. It's certainly the number one place in many markets, but I just wanted to go through agriculture as a first step because agriculture works a little bit differently to the other commodity markets that we cover at Macquarie.
So you've got energy and metals, which are mainly demand driven markets. And what I mean by that, is we have a reasonably good idea of how much oil or iron ore there is on planet earth and how much it will cost to extract that; explore new reservoirs, build new mines, etc. So the big driver of price in those two markets, notwithstanding geopolitics, comes from the demand side of the equation. So you've got stable supply, the question mark is on the demand. So things like; how well is the economy doing? How many cars are people buying? How much are we traveling? How much has been invested in infrastructure projects? These are the factors that typically drive the price of energy and metals.
Now, when you look at agriculture, it's almost the opposite of that. Demand is very, very stable. It's what we call inelastic demand in economics. So the money that everyone spends on food, it's typically going to be the last money that you rationalise no matter what's going on economically around the world. So we've got a market where demand is super steady, pretty much in line with population growth globally. And at certain times it's buoyed by trends like dietary shifts, that we're actually seeing in places like Asia. So what really drives the price of agriculture is the production side. And this is due to yearly crop cycles, substitution of one crop to another and of course weather events, which is the big one. So due to these factors, large portions of supply can be wiped out on any given year, which leads to very sharp increases in prices across the world. Now, these sharp increases in prices are usually only felt for a short period of time though, because due to high prices because of a weather event wiping out production of say, corn, in one part of the world for example, these high prices are actually giving a signal to other corn farmers in unaffected parts of the world to plant as much corn as possible. So you've got sharp rises, production responses, sharp falls in prices. Now all of this creates a huge amount of uncertainty and price risk for both consumers and producers, who are the clients that we help in the region manage this risk, be it through a derivative, through financing or through a physical solution.
Chris Cusack: Thanks Fil. That's really interesting. You mentioned something there about dietary shifts in the region. Can you just talk a bit more around that?
Filipe Moscoso: Yeah sure. I mean, one of the longer-term dietary trends we're seeing is the increase of protein in the diets of Asian and Southeast Asian countries. So these increases happen very slowly, but once they happen, once people are used to eating a certain way, it's very difficult to actually take that demand away. As I mentioned before, demand is super inelastic once it's there. For dairy for example, in places like China, demand 20 years ago was mainly driven by infant milk formula. But in the last few decades, it's things like yogurts and ice creams and milk beverages, that traditionally that region of the world hasn't really consumed much of, that's really taken over the demand piece of that market. This leads to the further need for imports, which leads to more price risk for the companies that are actually making these products, which is where we step in most of the time.
Chris Cusack: Thanks Fil, and given what you've just said, so how does the Macquarie platform actually help us to provide solutions to clients?
Filipe Moscoso: That's a good question, Chris. I think first it's really our pedigree in the market that helps us be as relevant as possible to the clients. You know, we have such a deep knowledge in the industry across the entire supply chain, and that's been driven by our tenure in the market. You know, we've been in the agriculture market for over 25 years with an unbroken run in that market. In fact, we pioneered the OTC [Over-The-Counter] market in agriculture, in Australia, and that was the beginning of Macquarie’s business 25 years ago. And it's grown now to many offices around the world. We are one of the only banks that have, to my knowledge the only one, that has dedicated ag [agriculture] only specialists sitting in China, sitting in places like Brazil, these really key markets for the agricultural supply chain, which means we really took our time and put a lot of effort into understanding the market.
Secondly, it's our very broad product base that we can specifically tailor to a client's risks. So in the agriculture market in particular, because of the inherent volatility that we discussed earlier with the production disruptions, and then over supplies that normally follow afterwards, the market has always lent itself to the use of more exotic construction derivative solutions. And we've definitely been at the forefront of developing those for the last two decades. And finally, I think it goes back to the culture, you know, listening to our clients, developing new products, getting into new assets, just to assist them in hedging their specific risks. So turning on to the energy side of that now, can you tell us what we're doing in energy in the region?
Chris Cusack: So our real focus for the energy business is offering price risk management tools to customers to help them manage the volatility in the energy markets. And to be fair, there's really been a lot of volatility this year, so much so that we even saw crude oil prices going negative early in the year, which was something that nobody really expected. And so the majority of the energy business that we do is focused on some of the more liquid markets, things like crude oil and refined products, such as gasoline and diesel, but as well as trading some of the more traditional markets. We also focus on some very specialist areas, things like petrochemicals, electricity, and carbon, and now these are much more kind of smaller niche markets and more difficult to navigate, but these are markets where Macquarie is really best in class and where we can really offer some fantastic hedging solutions to our customers.
And one good example of this is probably worth mentioning. Previously, there was no hedging tools available for PET, the raw material that's used to make plastic bottles, but from working with our clients and really seeing the need for risk management solution in this area, we worked on an innovative solution to be able to help them. And we were the first bank to go into the market and offer PET hedging for customers. And I think finally, what sets Macquarie apart from a lot of our competitors, is that we're something between a bank and a trading company. And when I say that, what I mean is that we've got the ability to offer our risk management solutions to customers, both physically, as well as financially, which again is a real differentiator for us
Filipe Moscoso: Just to expand on some of those niche markets you mentioned and understand our kind of heritage in the standard oil products. Can you tell us a little bit more about these niche opportunities that we have and if you're seeing any new opportunities that we're exploring in the region?
Chris Cusack: So the market is always developing, but we really try and stay close to our clients and offer them solutions that fit their needs. And currently, one of the key themes that we're seeing here in Asia is a move to lower carbon fuels and renewables. LNG has proven to be a very important fuel as part of this energy transition and are the fuels that we are very much focused on in the region here. And so to give a bit more background on this, LNG stands for liquefied natural gas, which basically means natural gas that's been super cooled to make it easier for transportation. And what we've seen is that on the supply side there's been a lot of new gas coming from the U.S, given the shale boom that's happened there. And there's also a lot of new gas coming from Australia. So much so that Australia actually overtook Qatar as the largest LNG exporter globally last year.
Then when we look at the demand side of things, the four biggest energy importers globally are all located here in Asia, with Japan and China as the two largest. So really, kind of given this macro backdrop in LNG, it has to be a big focus for us here in the region. And again, what I think sets Macquarie apart from our competition is that we're able to offer someone liquid hedging products around LNG, but we're also able to look at some more specialist products around it. So for example, we can offer some of the risk management solutions to customers in both the financial or physical formats. We recently traded our first LNG freight deal for a customer a few weeks back now. And we're also looking at some carbon neutral LNG physical supply contracts for customers, which could be a very interesting space for us. There’s a few other markets that we've seen develop recently here in the region. We've actually seen some deregulation in a number of country’s electricity markets, and we started trading power in Singapore a few years back. And then at the end of last year, we did our first power trade in Japan, which looks like a really interesting market for us just given the size of the market over there. So overall we're really looking at wide variety of products but we're very much led by what our customer's needs are.
Filipe Moscoso: Very good. And a lot of that stuff sounds exciting. And speaking of excitement in a word, it's been a very interesting year for us in the sales team here in Asia. Now, on any given year our feet barely touch the ground, where you and I are kind of on planes around the region, having face-to-face meetings with all our clients quite often. That hasn't been the case this year, it's been very different to the norm. Can you tell us a bit about how we've managed to navigate these challenges of running such a geographically wide and diverse business during these COVID-19 disruptions?
Chris Cusack: Yeah, sure. So this year has really been a year like no other, and there's definitely a lot of new challenges that we've never really faced before. And I think probably the first main challenge that we faced was the transition of going from working in the office to working from home. And I've got to say that I do really think all the team here in Asia and the team in Macquarie in general really did a fantastic job.
Filipe Moscoso: I want to talk not so much about what your day looks like, but what excites you the most about your role?
Chris Cusack: Sure. So I think the part of the role that I enjoy the most is building long-term relationships with the customers and really working with them to help them solve the problems that they're facing. I do think we're very lucky at Macquarie that we are in a flexible environment, that has a very entrepreneurial culture where we've got the freedom to look at new things and come up with new innovative solutions for clients, which is pretty exciting and something that keeps me coming back to work motivated every day. How about yourself, Fil? What do you enjoy most about our job?
Filipe Moscoso: Yeah, actually pretty much what you said, Chris. You know, I get lots of pleasure from really getting to know our clients, learn about their businesses so that we can, you know, pitch the best solutions possible for them and really service them in the best possible way. That's a huge part of it. I guess, on top of that kind of role enjoyment and excitement that I get, I definitely love being in Asia. And secondly, it's just the energy of this continent. You know, it's been the growth engine of the world for the last 10 years. It's most likely going to be the growth driver of the world for the next 10 years. And there's just this really positive can-do optimistic attitude that our clients have and it's just awesome experiencing that every day. So, before we wrap up the podcast, Chris, how would you describe, or what's your view for what the next 12 months holds in store for the energy and agriculture sales teams?
Chris Cusack: So I expect the next 12 months to be very interesting and volatile for sure. So I think what happens in the market can play out very differently depending on what the path of the virus is like and how the potential vaccines available kind of play out. So the outlook is definitely very uncertain for now, but I think overall from our team here in Asia, we're really looking for more of the same. We want to continue growing our business and we'll do this by staying as close to our clients as possible, understanding the issues that they face and then working hard to provide them with innovative solutions wherever possible.
Filipe Moscoso: Chris, thank you for that. Thank you for the insight into your career and the team. For those listening; thank you for joining us for today's podcast. I hope it's provided some inspiration as you consider your own careers and given you a bit more of a snapshot into the Commodities and Global Markets team here in Asia. We look forward to welcoming you to the next episode of the podcast series next month.
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