I had a question related to exporting grains & specialty crops. I understand most of this subreddit deals with financial trading rather than actually moving goods – but my someone here can explain the market to me.
I am trying to understand how specialty crops, specifically lentils, markets work for export.
What I know so far is that Canada is the largest producer of lentils in the world and has significant exports to regions where lentils are consumed. The logistics cycle seems to be as follows:
Farmers (producers) sell the crop to Processors who in turn clean, dehull and split the lentils. The Processors then in turn sell the value-added lentils to exporters or export them themselves. The Processors thus make profit in two ways: (1) value addition (2) potentially trading only when the market is hot
My initial thought was that since Processing plants export the lentils directly, there would be no room in the market for dedicated exports. However, this does not seem to be the case and I have found 5-7 companies that exclusively export lentils. From what I've observed, it does not seem like exporting companies have storage units and never actually handle the commodity themselves. They are thus spot trading with importing companies across the ocean but it takes two months for the lentils to actually reach their destination.
My question is – how is exporting in such a market viable? When Processors also export themselves, how can an exporter – effectively a middleman – which buys from a Processor and then, in turn, sells it on the international market be able to keep any margin? The lentil buyer can simply purchase the lentils directly from the Processor (& they do). So how are exporters able to survive in such a market?
I ask this because I am interested in setting up an exporting company myself.