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Every morning, millions of Americans sit down for a breakfast with coffee, orange juice and cereal without giving so much as a second thought as to how that food ended up on their table. Behind the scenes, a complex web of farmers, millers, crushers, grain elevators, traders, and shippers works in tight coordination to ensure what is grown is sold and then ultimately distributed to consumers’ pantries and refrigerators. 

The world of commodity trading goes back millennia, believed to have originated as far back as 4500 BC when Sumerians used clay tokens to aid in the exchange of goats. It is not an overstatement to say that agricultural commodity trading helped build modern civilization, as vast interconnected global trade routes led to the spread and advancement of human societies and cultures. It even led to Christopher Columbus’s expedition to America, as he sought a western sea passage to the East Indies, looking to profit from the spice trade.

Today when people hear “the markets” – cue images of electronic tickers and screens filled with digits flickering red and green – they think stocks and bonds. But for centuries, there was only one game in town: agricultural commodities. Grain, soybeans, spices, fruit, vegetables, you name it. The securities markets are relative newbies in comparison, tracing their lineage to 1531 (Stock Exchange of Antwerp, Belgium). It was more than 250 years later in 1792, when 24 New York traders first reached an agreement in front of a buttonwood tree on Wall Street to organize rules and regulations for a modern stock market (which would later become the New York Stock Exchange). 

Financial markets have long driven and adopted cutting edge technology, whether pioneering news wires and ticker tapes to accelerate the flow of information or using IT to reduce data latency to increase the speed of transactions (all done to make trading more profitable). 

What started with digitization and fractionalization of equities, leading to greater efficiencies, volume and global participation, has taken a bit longer for the physical world. First came the energy commodity markets, where former electricity trader Jeffrey Sprecher reinvented global energy commodities trading through the creation of Intercontinental Exchange (ICE), evolving from humble beginnings into a global colossus (which eventually bought the NYSE).

Then came the digitization of the derivatives and agricultural futures markets at the Chicago Board of Trade (CBOT) and Chicago Mercantile Exchange (CME), which subsequently merged. This digital transformation has barely begun, with the CME permanently closing its physical grain trading pits only just last year. But the dizzying array of contracts that trade hands today on CME or ICE are for (financial) commodity futures.

In contrast, the multi-trillion dollar physical agricultural commodities industry has stubbornly refused to be digitized. Nearly all is still traded over the phone, executed by email, made binding with various hard copy contracts and involving many different intermediaries. 

Wait, what? 

Yes, that’s correct. Pen, paper, phone, email. Several trillion dollars per year in essential products transacted using only slightly more advanced technology tools than a spouse might use to remind themselves (or be reminded) to purchase a gallon of milk.

WHY this relic of history has continued is where things get interesting. In our globalized world, much of our food — as well as the animal feed and other inputs that become the food we eat — is produced far from where it is consumed. Most countries aren’t self-sufficient and rely on imports for food. They depend on several breadbaskets — countries like the U.S., Brazil, Russia or Ukraine — that produce more crops than they consume domestically.

For hundreds of years, the trade of global agricultural products has been intermediated by powerful (and often reclusive) commodity trading houses: the ABCDs as they are known in ag (ADM, Bunge, Cargill, Louis Dreyfus). These firms are the Goldman Sachs and Morgan Stanleys of agricultural commodities — buyers, asset owners, distributors and powerful market makers and fixers in a complex, disaggregated and far-flung global supply chain. Essential market participants and traders that help absorb market volatility, quickly shuttling commodities around the world from surplus to deficit regions.  

But there is room for improvement, and that will almost surely come from modern technology tooling. Today’s system results in high operational costs, complex execution and a lack of transparency with little market data to enhance decision-making. The UN estimates that more than 275 million emails are exchanged annually to ship about 11,000 vessels of grain across the oceans. That makes 25,000 emails per shipment.

Enter Vosbor

Today we’re sharing that Lux led a $7 million seed round for Amsterdam-based Vosbor to build the first digital agricultural commodities exchange. We are joined by industry heavyweights Chris Mahoney, former CEO of Glencore Agriculture and Soren Schroder, former CEO of Bunge, who are both investing and joining the company’s board – as well as our friends at Market One Capital, FJ Labs, 7percent Ventures, Athos Capital and Nucleus Capital. 

Vosbor is bringing the physical agricultural commodities markets online, to better manage risk and commodity flows in a world where supply chain and climate risks are ever increasing. The company is also unveiling its flagship trading platform, which allows buyers and sellers to connect, communicate and trade corn, wheat, soybean, palm oil and 14 other agricultural commodities in a transparent and secure environment. The platform is currently being piloted by 35 of the leading global commodity trading firms and food manufacturers. 

Founder and CEO Maarten Elferink and the Vosbor team are making agricultural commodity trading cheaper and markets more accessible. Maarten has been fixated on bringing agricultural trading into the 21st century for much of the last decade, first as a trader before feeling the pain point and recognizing the larger opportunity to develop a modern platform to serve the entire market. By digitizing the agricultural trade, Vosbor is effectively taking the first critical step in alleviating the threats to global food security, as existing offline markets are inadequate to build systemic resilience. 

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