Frauds in Commodities in Brazil stay tuned !!!

It is fundamental to say that commodity transactions (trading and futures) happen every day between traders and traders and traders (especially the BMF, in the case of Brazil).

There are, however, a whole series of operations involving commodities that have no support or simply, even if they seem plausible, do not happen when they are not true frauds. These operations often involve soy or sugar, but I have also seen coffee and other commodities (wood, meat, leather, minerals, metals, fuels and orange juice ...).

The classic scheme is you receive an offer to sell or buy for a very large amount of some commodity.

Sometimes the offer comes in writing (in the form of LOI - Letter of Intent) and even accompanied by bank references from foreign banks (almost always false). From there there are numerous variants.

In some cases the negotiation goes to the end, with signing of contracts and issuing of letters of credit etc ... and then does not appear the merchandise at the time of delivery or any inspections.

In other cases, the alleged buyer requires payment of a "performance bond" (amount deposited by the seller to guarantee delivery) before issuing the letter of credit ... the seller deposits the bond performance, the letter of credit does not arrive and the performance bond is used improperly or as ballast for other alleged buyer's picks.

There are, in the end, the real brazen frauds, with false (but apparently perfect) letters of credit delivered to the seller so that he releases the merchandise, which soon disappears. In the latter case the seller cries at the time of the withdrawal of the letter of credit.

In another variant, this time to damage the buyer, the seller requires a transferable letter of credit, then within the deadline for delivery of the goods, he leaves trying to discount a small portion of the letter with some bank (usually foreign), usually with the Sorry for having to fund the bond performance. If he does, he will have achieved his goal of pocketing some money in advance and disappearing. If you can not, you'll just end up there, but the seller will never deliver the goods because he does not have it.

Usually these operations, when consistent and good, are conducted by professional traders who know the market well.

The board, if you really want to enter into this type of business, is to personally and independently verify every word, information, reference and document submitted by the counterparts. If there are discrepancies or omissions without valid justification, immediately drop out.

Another fundamental advice is not to believe in miracles. Almost all commodities have certain prices on stock exchanges that exist precisely for this purpose.

The stock price is, in practice, the price that at that moment can be obtained by selling the product through the stock market itself. It does not make sense for anyone to offer absurd discounts for the same product for sale out of the bag. To make a simple comparison, it would be like saying that I can safely sell my car at any dealership for the average price of "4 Wheels" (say 10,000 R $) and instead of doing so I try to sell to private individuals for 20-30 % less (not more !!), that is for 7-8,000 R $. It would be crazy to do this, because it's the same as working harder to earn less ... but that's exactly what is often falsely proposed in these commodity "deals."

Finally, it is important to point out that many times those who make these proposals do not have the minimum of logical consistency (not to say a sense of ridicule) of verifying the real numbers of availability of such a commodity.

I have already seen, for example, proposals from supposed sellers who said they had ready and available 8 million tons of Brazilian sugar for export. In Brazil in 2005, about 27 million tons of sugar were produced and 17.5 million tons were exported. In other words, these gentlemen claimed to have in their hands "ready and available" almost half of Brazilian exports of sugar of the year or, if you prefer, almost 30% of the annual production of the country !!Vale a pena visitar o site da empresa F.O. Licht (www.fo-licht.com)which conducts and publishes research and statistical studies on world trade in commodities.