Trade Talk with Manuel Hernandez/
What 24 years in the business teaches you about crises

In this interview, we talk with Manuel Hernandez, founder and CEO of Avianje about facing a drought in the midst of a pandemic and why he prefers to sell to manufacturers. Avianje is a Canadian trader of pulses and premium seeds that exports all over the world. 
 

How are things going?

It’s been a very challenging year because of Covid. We are learning as we go. We’ve seen huge challenges in the supply chain and now with all the problems with the port, things are affected even more. And on top of that, as you know, we have a drought in Canada. We don’t know how big the problem is yet, we’ll know more when the crops are harvested. Everyone is waiting to see what’s going to happen, first with the shipments to resolve the transit problems and then the crop to see how affected it is and from there we’ll see.

It’s been a tough year...

Yes and on the other side, I think there will be an issue going forward with structure because of the situation with Covid. Europe, Canada and North America are in better shape than the rest of the world so that’s going to affect the economy. This gap between wealthy and poor countries has widened even more. And if you consider that the same situation is happening within countries themselves, it’s really problematic.

What countries do you export to?

I export to all continents. South America, Asia, Europe and Africa as well as the Middle East. I’ve been in this business for 24 years and in all these years I’ve exported all over the world. Right now I’m focusing on premium products like mustard seeds and flaxseeds, which are affected now with the drought and the prices are higher. But for these, production is smaller, so it’s not comparable to other pulses. They are high-end, mostly for manufacturing companies. It makes it different from trading peas and lentils, which trade in bigger volumes and margins are much smaller. Those are situations where a couple of dollars makes a difference and that’s not so much the case when you are working with manufacturing companies who are going to make an end product. The main thing with premium is to be consistent with quality. It’s an opportunity because the manufacturer is going to be able to pay what he needs to pay to get the products made.

Where are your farms?

In Canada: Saskatchewan and Mantioba.

Do you produce beans as well?

Some beans. Beans have been affected in the last few years mainly because of the restrictions between Europe and the US. People who used to buy beans from the US are now buying from Canada. And the last couple of years has been tough to get any beans out of Canada.

The drought is pushing back our harvesting times, we’re hoping to get some rain! We harvest lentils and peas first, then chickpeas and then beans. The thing is that, because of everything that’s happening, growers are not keen to sell.

Is that because they want to keep the crop for seed?

It’s more that they want to see what they’ll have available. We will only see more activity at the end of the year, the last quarter, and it will depend a lot on how big the demand is and how urgent: if they can wait until next year or if they really want it. That may cause the prices to shoot up.

What are your main export countries for chickpeas?

In my case, most of the commodities depend on the year. Some years are bigger than others and it usually depends on the harvest. I export from Canada to Turkey, South America - Venezuela, Colombia, Peru - and I also do some exports from Argentina to Colombia and Venezuela, depending on the year.

Argentina is a huge market for chickpeas in colombia

Yes, because they produce. They are in the South so they have the harvest during our winter. When they have more availability and product, we don’t. It’s the opposite.  In my case, as a small company it depends a lot on the production of the country. India, of course, has become a huge player and they make a real difference on the prices. If they start buying they disrupt the market and it changes.

But now with the container problem in India, do you think that will affect the market?

Yes and it’s not only in india. China is also a big buyer of pulses, usually peas. They disrupted the market last year and prices shot up. So with all the issues with the freight, it is going to be key to see what happens with those two markets. And India is the main market that will dictate what’s going to happen in most of the products, mostly lentils.

Colombia too?

I really don’t do many lentils into Colombia as they have a demand for greens more than reds and I think Canada is the one who has the market for Colombia lentils although last year there was a big amount of lentils from the US. They have a different value, I think they were going for discount prices over Canadians which is how they got a grip on the market. Colombia is big but nothing compared to India. They’re also buying green lentils from Canada, recently. Before they used to only buy reds then they started buying greens. It’s a different market in India. As far as I know, Canada is still the strongest in terms of lentils.

What kind of chickpeas do you produce?

Only kabuli. I don’t deal with Desi, only Kabuli. I used to export chickpeas from Mexico to India, I think I was one of the first ones, 24 years ago, to start shipping chickpeas from Mexico to India, large ones, 12 and 11 mm. In Canada we dont produce larger sizes, my main export is mixed 7,8,9s and mostly for production of hummus. I’d rather play in the markets where I’m handling a manufacturer’s company which will allow me to become a strategic supplier for them. Right now I’m still in both manufacturer and wholesaler markets..

What’s the advantage of selling to manufacturers?

It allows you to become a strategic supplier, which will strengthen the relationship so the buyers will be keen to keep working with you. The difference in the price of 1 or 2 dollars wont destroy the relationship and you won’t have the issues of a market crashing and them not taking the product whereas in commodities that would be the case. Then you know how strong the relationship is and how to handle the situation but if your market crashes 10-15 dollars once the cargo arrives in the destination you take that risk unless you have a strong relationship with the buyer. Right now, we are seeing higher prices than average, the risk of that happening is getting higher.

So what would you say has been your biggest challenge in light of covid?

The shipping challenge. I guess it was the same for most people. This year and next year I think are going to be very challenging for both sides, suppliers and customers. I think the relationship between them has to strengthen during that time because we are going to see more problems with the shipping and we have to get stronger relationships to try to manage this situation together. This year, for example, it’s possible that the supply in Canada will be smaller than usual, which will mean the customer-buyer relationship needs to be stronger otherwise, if people have to choose who to sell to, they’re going to choose the person they can trust the most.

Do you sell a lot domestically?

No, everything is for export.

Why?

Truthfully, I don’t have any interest in domestic sales! I’m busy enough with exports, which is already challenging enough! Domestic is completely different.

How did Avianje deal with Covid?

We’re still dealing with it! I have lots of containers still in the ports trying to leave but I had to work with my customers to try to minimise the effect. Somehow I had to move cargo from one to another to accommodate the requirements. In some cases, I even tried to help them buy domestically to tide them over until my cargo arrived. The main thing for me is to strengthen my relationships with my customers, try to understand their situation and put myself in their shoes and then try to fix it and minimise the problem. I mean, it’s not only the commodities supply chain that has been affected, the whole supply chain in most countries has. In Canada, we didn’t have an issue with food shortage but in other places it may be different - when imports and shipments were not arriving, they had issues with supply. The only thing that I could do was try to minimise the delay and if I had to buy domestic and sell it to them, I did that.

Do you think a lot of people were helping each other out in the same way with Covid?

Each of the people I’ve been talking to tried to help the end buyers to strengthen the relationship. It’s important for them to know who they can trust because this crisis is going to be here for years.

Would you apply the same advice for keeping strong relationship with farmers in the context of the drought?

Absolutely, but we have faced that before. In the context of everything else, this is new. But yes. With 24 years in the business, I have learned to understand that one of my main objectives is to have strong relationships with my suppliers. I have to be there for them when they need me so that they can be there for me when I need them to. With the drought, I need them more than they need me. Supply is so short so they can sell to whoever. I have to talk to them constantly and look out for them. At the end of the day, it’s not my contacts that are the cause of the issue. The problem comes from elsewhere so I need to understand that they are trying to help me as much as they can and I have to show them that.