Commodity Trading
At the Heart of Global Commodity Trading and Risk Management
Commodity trading is part of Cofarco’s DNA, and has been central to the firm’s development since its inception. Recognising the strategic importance of this sector, Cofarco established itself in Geneva ten years ago — one of the world’s main hubs for commodity trading — to be at the heart of its clients’ operations. Today, the sector represents a significant share of the firm’s business.
The sector is characterised by very high volumes and low gross margins, which makes counterparty risk management critical:
- A single buyer or supplier default can significantly weaken a trader’s balance sheet.
- Credit insurance is often a prerequisite for bank financing, the primary driver of return on equity for commodity traders.
- Political risks in cross-border transactions — currency transfer restrictions, expropriation, contract frustration — add further complexity.
In this sector, surety is increasingly used as an alternative commodity trading liquidity tool, helping traders free up bank lines while securing contractual obligations.