Advance Trading Inc.: Agricultural Risk Management and Market Guidance

A group of six grain industry professionals came together in 1980 with a common goal of developing an informational source to assist producers, elevator operators and end-users in the trade of grain and feed. Advance Trading Inc. (ATI) was later formed in 1982. Today, the business utilizes an employee stock ownership plan (ESOP), which allows employees greater involvement in the business’ operations. What started out as a small consulting operation has become a leading marketing and management business in the agricultural sector.

“We’re a transactional broker in agriculture, energy and related commodities,” says Jay Pierce, COO of ATI. “We impart a high level of knowledge in the underlying cash market and its nuances. We mitigate the risk and enhance our clients’ revenue generation by improving sales and purchase points. We run the gamut [of services] with farmers that are large enough to utilize these risk assessment tools.”

The ATI team of 100 includes professionals with a strong foundation in agriculture. Pierce is also proud to note that the average tenure of employees at ATI is more than 12 years. Pierce and the rest of the management team offer a range of programs and incentives to keep employees motivated and dedicated to the business.

Staying ahead of the Industry

While most of the company’s work is within the grain belt due to its Bloomington, Ill., headquarters and 13 branches, the balance of the team’s efforts take place anywhere in the U.S. that produces, feeds or processes commodities. Pierce notes that ATI has traditionally focused on domestic business, but there has been and continues to be growth in working with international clientele, as well.

Pierce also notes that the key to a continued reach into the market lies in innovation. “We have a number of tools that we are continually trying to refine and introduce,” he elaborates. “We are working on new tools right now that we are waiting to debut. There is a lot of software work that has to take place.”

To keep everyone on the same page, ATI’s employees have access to a strong range of educational resources. “Our driving forces are analytical skills and curiosity,” says Pierce. “We work with several Land Grant Universities in order to help generate individuals who might be interested in this area. We will support any bona fide and good educational program that will further the industry; a lot of our technology is new and new professors are training these students.”

With the ongoing fluctuation of both the national economy and international commodities markets, financial stability has been integral to keeping ATI afloat. “The biggest challenge the industry faced in recent years were failures by two clearing merchants,” Pierce explains. “The failures affected everyone in the industry. We have had the challenge of trying to re-establish confidence in the custodial nature of the clearing system so the customer feels that their money is looked after and safe. There is still a lot of confidence to be rebuilt in the system. We are taking part in the industry’s efforts to rebuild confidence through rule setting and telling the story of how the industry may prevent these failures from happening as they had.”

Company Confidence

ATI’s ESOP offers big benefits to longtime employees. “Our plan provides that all of our employees have access to shares, if they choose to do so,” says Pierce. “The ESOP is a great recruitment tool, as well. The stock is available, and many potential employees see the benefit in that; thus, the SOP makes our people feel franchised and more invested in the company and its future.”

There are many additional benefits that being an ESOP provides Pierce and his team. “Being an ESOP allows the company to manage its working capital in a more efficient manner,” he details. “Now, being a public company would probably add more managing efficiency, but it is very expensive to be a public company. It helps us do internal development. The board is elected from the shareholders and they have complete authority in terms of the governance of the company. It rotates every year, so everybody who is a shareholder ultimately can be elected to the board.”

Through employee involvement and vertical integration, ATI is a growing business. “Over the next couple of years, we’ll expand our expertise into different markets,” he notes. “We want to get deeper into agriculture and we are implementing a move into energy. We see great opportunity internationally, and we’ll try to do it by applying our traditional skills and embracing innovation. We are a risk mitigation firm who provides revenue and profit maintenance for our customers. We help to remove elements of risk to make our clients more profitable.”

That is not all that ATI has to offer. “We have programs where, for example, the farmer knows his cost of production, expected revenues and has many of the things that he’s good at tied down,” Pierce continues. “He doesn’t know what the price of the crop will be. Our program hedges floor prices on the producer’s crop and then manages that for up to an 18-month period, culminating at two months prior to the next harvest. During this time, he can go to the bank with some assurance that his minimum price is X, and this allows him to make budgetary decisions for his farm. It stabilizes the expected revenue and allows him to concentrate on his production expertise.”

ATI offers a sense of security for producers in a commodities market, which is a very desirable service. With decades of experience, the team is able to offer unique insight into the market and help clients stabilize despite fluctuating commodities prices. As the recovery continues, Advance Trading Inc. will continue to bring security to the agricultural industry.
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