Marex Spectron Makes Dairy Foray in OTC Business Expansion

(Bloomberg) -- Marex Spectron Group Ltd. is expanding its over-the-counter agricultural commodities business by entering the dairy market.

Paul Barre was hired from rival INTL FCStone Inc. to develop and lead a global dairy team for OTC unit, Marex Solutions, the London-based brokerage said in a statement to Bloomberg. While the foray will initially focus on European and U.S. markets, the company plans to include New Zealand “shortly,” said Eugene Faller, head of commodities at Marex Solutions.

Marex is entering dairy as small farmers in states such as Wisconsin are being squeezed out as alternatives like almond milk erode the beverage’s popularity. Processors are also struggling as retailers such as Walmart Inc. step into the market. Still, U.S. fluid-milk prices have recovered this year and Chinese consumption is accelerating as the population expands.

“We actually see global dairy consumption remaining quite strong over the next decade and beyond,” Faller said. “It’s true the industry is facing a challenging time with shifting regulation and subsequent increasing volatility. Our customers face the combination of tighter operating margins along with this increased volatility, which only increases the need for effective hedging instruments.”

While Barre will be based in London, Marex has plans to service clients in the U.S. first by tapping customers that already deal with the company’s subsidiary in Chicago. There are also plans to hire dairy specialists in the U.S. next year, Faller said in emailed response to questions.

Marex is expanding as banks retrench. Societe Generale SA said in April it was shutting its OTC commodities business and its proprietary trading subsidiary as part of a global move to cut about 1,600 jobs. That followed the closure of BNP Paribas’s U.S. commodities derivatives desk earlier this year. In July, Marex Solutions hired former SocGen’s David Cohen and Nicholas Burke for its agricultural desk, already dealing in grains and soft commodities.

--With assistance from Lydia Mulvany.

To contact the reporter on this story: Isis Almeida in Chicago at ialmeida3@bloomberg.net

To contact the editors responsible for this story: Tina Davis at tinadavis@bloomberg.net, James Attwood, Patrick McKiernan

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