CSC's Steve Markham has 21 years in commodities trading and marketing

Markham started with Pillsbury after college in 1981, now leads disitllers grains marketing powerhouse in Minneapolis
By Tom Bryan | October 01, 2002
After 20 years as a marketer and trader of agricultural commodities, Steve Markham, of Commodity Specialist Company (CSC), has simplified his professional advice to five words: "Work hard and be honest."

It's a down-to-earth statement that characterizes the reputation Markham, and others at CSC, have earned among ethanol producers who rely on distillers grains sales for up to 20 percent of their total revenue.
Following his own words of advice, Markham, 43, has helped CSC become one of the nation's most recognized marketers of distillers grains, a coproduct of the ethanol dry-milling process. The Minneapolis-based company has a projected goal of marketing over one million tons of distillers grains in 2003, more than any other U.S. company, and Markham's presence in the ethanol industry has helped drive that success.

Farm background
Markham has been close to agriculture his entire life. The 6'6" tall commodities marketer was raised on a farm near Whitewater, Wis., where his family raised dairy cattle, hogs and crops. He began trading with Pillsbury Co. in 1981 after earning degrees in ag business and economics from South Dakota State University, in Brookings, S.D.
Starting as a junior trader, Markham learned the basics of commodities trading during several weeks of training in Minneapolis and Chicago before being assigned to a senior trader in Kansas City, Mo., where he traded mill-feed (a byproduct of flour milling) for three years. "Working in Kansas City at that time was a great place to be as a young trader," Markham recalled. "We had a good crew in that office. We were all eager and aggressive and learning the business at the same time. I really enjoyed my time there."

Back to Minnesota
By the mid-1980s, Markham had been transferred to St. Paul, where he began trading corn gluten feed and corn gluten meal from the U.S. ethanol and corn sweetener industries.

"That was essentially the beginning of the work I do today," Markham said. "Although I largely trade distillers grains now (rather than the corn wet-milling products), the basic principles apply to all commodities trading. . . margins, supply and demand, emotion, spreading and arbitrage, and freight.

In 1989, Pillsbury's feed ingredients division was acquired by Grand Metropolitan. The division was split up and sold off into separate parts, much of it going to ConAgra and Archer Daniels Midland (ADM), while Grand Metropolitan held on to the commodities trading division Markham belonged to until 1993. That year, seven investors, including Markham, took part in an employee-management buyout. CSC was created, and to this day, the company still allows its employees to invest in the business.

CSC has 125 employees worldwide and does about $1 billion in sales every year. The company is a world leader in domestic and export markets for both food and feed commodities. On the feed side, CSC is one of the world's largest traders of distillers grains, soybean meal, cottonseed meal, hominy, wheat mids, brewers grains, edible beans and other feeds.

Markham works directly with two other traders-Jim Montbriand and Sean Broderick- who market distillers grains almost entirely, along with a support staff of six.

Markham said his office today specializes in marketing distillers grains (both wet and dry) because the ethanol wet-milling market became largely consolidated over the last two decades, while the number of DDG suppliers has grown substantially.

"In my work, the opposite of consolidation is to my advantage," Markham explained.

Distillers grains trading is no job for those who don't like to talk. When Markham is not on the road promoting distillers grains, speaking at seminars or meeting with customers, he's busy on the phone.

"Some days I'll have a hundred calls in eight hours," he said. "My day can include sales, purchases, inventory control, freight negotiations, management of the rail car fleet, and most importantly, market development.

"I have been in the same job for many years, but It's still very exciting because the business is constantly changing and growing," he said. "The market has changed, the product has changed, and I learn something new every day."

The future of distillers grains
As expected, Markham has a lot to say about distillers grains marketing and its relation to ethanol production. He said he believes the future of the market could not be brighter.

"Despite concerns some people have, we believe the distillers grains market will steadily grow at a predictable pace in the years ahead," he said. "Our growth will be methodical, yet rapid."

But will the growth be rapid enough to keep pace with an ethanol industry expansion fueled by a renewable fuels standard?

"Without question. No problem," Markham responded. "The feed industry is interested in the least-cost ration within the nutritional parameters (of the livestock they are growing). If distillers is competitively priced with other feeds, we'll have no problem growing and developing the market. Price solves everything, and we won't have to cut our prices in half to do it."

As an example of the massive feed markets that distillers grains have yet to penetrate, Markham described the results of a poll he took of 21 dairy farmers in California a while back. When he asked the farmers how much distillers grains they used at $116 per ton, the average response was 3.2 pounds per cow, per day. When he asked the same farmers how much distillers they would use if the price was $110 per ton (a 5 percent price drop), they said six pounds per cow, per day (on average).

"And that's just one of many examples," Markham explained. "The lesson is that DDG is price elastic - and it doesn't take much of a change to get a response from our customers. So, you ask if I am worried about the future of distillers grains marketing. . . Not a chance."

Markham also pointed to the forward-thinking research that is taking place at several Midwest universities, including the University of Minnesota, where Dr. Jerry Shurson and his colleagues are conducting monogastric (non-ruminant) feed research that is changing the way poultry and swine farmers look at - and buy - distillers grains. For example, he said, CSC markets feed to a hog operation in Minnesota that buys in excess of 700 tons of distillers grains per week, Markham said, adding that more hog farmers are following suit.

"The truth is," Markham said. "Our industry is so far from saturating the market that it is unbelievable. The possibilities are staggering."