Ecom enters cocoa and coffee top league

Even within the publicity shy commodities industry, Ecom Agroindustrial is considered one of the least known of the trading houses.

Yet the 164-year old company is about to become one of the leading players in cocoa and coffee after it acquires the trading arm of London based Armajaro, the commodities and hedge fund group co-founded by veteran cocoa trader Anthony Ward.

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Ecom's purchase of Armajaro Trading is regarded as a good fit by some commodities executives. The two companies in the second tier of agricultural trading houses are focused on similar commodities, especially cocoa and coffee.

Armajaro Trading's jewel in the crown is its cocoa business, with veteran traders as well as extensive on the ground operations. It is said to have a top client list which will open doors for Ecom, which already counts household names such as Nestle, Starbucks and Mars as its clients.

Ecom was founded by Jose Esteve in 1849 as a cotton trading business during the industrial revolution in Spain. From its humble origins of supplying raw cotton to the mills around Barcelona, the company has transformed itself into the world's second largest coffee trader, the fourth in cotton and a top-ten player in cocoa.

The trader moved into coffee in 1935, opening an office in Sao Paulo. After buying the operations of Cargill in 2000, it joined the top players. In 2012, it handled about 13m bags of coffee - or about 9 per cent of global crop output - second only to Neumann, and ahead of other players such as Volcafe, part of ED & F Man, and Louis Dreyfus.

Ecom entered the cocoa sector in 1985, and now handles about 280,000 tonnes of the raw material used to manufacture chocolate - about 7 per cent of the global crop. But it is rapidly growing, with processing plants in Holland, Malaysia and Mexico. Ecom also trades sugar and oilseeds and raises hogs.

With its Spanish foundations, Ecom is still a player in the cotton market. In 1885, the Esteve family moved to the US, the world's top cotton exporter. Ecom trades roughly 2m bales of cotton - equal to about 2 per cent of global production - in a sector led by Dreyfus, Glencore, Cargill and Singapore-listed Olam.

The philosophy of the company is simple: get close to the farmers. "We go to the source, we buy from the producer whenever we can, we are the local exporters," Ramon Esteve, a sixth-generation member of the founding family and the group's chairman, told a Swiss magazine two years ago.

In his late 50s, Mr Esteve, a Spanish national who was born in Dallas, Texas, and now lives in Switzerland, recently said that "Ecom currently employs more agronomists than traders".

Its focus on sustainability and traceability of crops has gained the trust of the IFC, the World Bank's investment arm, which has invested $154m over six years in Ecom's various projects involving small holder farmers.

The trading house, which has a reputation of being well run, says it "prides itself on having fostered a tight-knit company culture". Ecom remains controlled by the Esteve family which holds a 94 per cent stake.

Although it is increasingly likely to be under the spotlight now that it has entered the soft commodities trading big league, it is unlikely that it will stray from the Esteves mantra, said to be "volume is vanity, profits are sanity". As Teddy Esteve, head of coffee trading, told an interviewer last year, "What we've been taught is: Forget about the volume, the only important thing is profitability."

The Commodities Note is a regular online commentary on the industry from the Financial Times

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