Energy reporter Platts will use its purchase of consultancy Kingsman to strengthen its coverage of biofuels but will find it harder to use the acquisition to extend its business model into grains and oilseeds, market sources said on Friday.
Platts, a division of McGraw-Hill, announced on Thursday it was acquiring the sugar and ethanol consultancy.
"Ethanol is something Kingsman is pretty good at, and will become increasingly important in energy markets in the coming years," one trade source said.
Platts has covered the expanding global biofuels sector for several years. The company only recently, however, launched a portfolio of dedicated biofuels information products including a market data package.
The biofuels expansion comes as global regulators back away from direct supervision of oil price reporting.
Under pressure to curb speculation blamed for huge swings in the market, the Group of 20 (G20) top economies last year asked the International Organization of Securities Commissions (IOSCO) to look into the role of price reporting agencies (PRAs).
The lead agencies are Platts, ICIS, a unit of Reed Elsevier, and privately-held Argus Media.
A draft final report of IOSCO’s "Principles for Oil Price Reporting Agencies," seen by Reuters last month, sets guidelines that largely reinforce their existing practices.
Jonathan Kingsman, the founder of the sugar and ethanol group, has said he would extend his business model to grains and oilseeds following the acquisition by Platts.
Kingsman built a wide following across the sugar markets for his daily subscription reports including benchmark sugar prices and forward-looking analysis, which led in recent years to trade-focused Kingsman conferences around the world.
A second trade source said Kingsman could struggle to make an impact in grains and oilseeds, however, against strong competition from established information providers such as Strategie Grains.
"I don’t think people would necessarily think he could easily get through to the head of trading at a grains company in the same way as he rings up the head of sugar at Swiss-based sugar trade houses," the trade source said.
As a wide variety of grains and oilseeds prices are now available, Kingsman was more likely to offer niche prices, such as African domestic farmer prices and local Russian and Kazakh ex-terminal prices.
"If you want to have an authoritative voice in grains and oilseeds, as well as sugar and energy – since those markets are inter-related – you could sell subscription services, focusing more on hedge funds and speculators looking to get into commodities," said Keith Flury, a senior soft commodities analyst with Rabobank.
"Kingsman will likely offer grains and oilseeds prices in areas that are not reported very well," the analyst added, referring to countries such as Morocco, Algeria, Tunisia, Libya, Iraq and Iran.
"To have historic price data that is robust, would be a useful service."
Kingsman is headquartered at Lausanne, Switzerland and maintains a Canadian office in Montreal, along with offices in London, New Delhi, Sao Paulo and Bangkok.
Kingsman also runs a growing number of sugar and biofuels trade-focused conferences around the world, including the most widely attended annual sugar event in Dubai in February.
Trade sources said a similar model was likely to be used as the consultancy expands into grains and oilseeds.
"Kingsman will likely bring trade flow information to grains and oilseeds, and will be looking at where the market is going, and anticipating prices. He will build conferences on the back of that," a third trade source said.
— David Brough writes for Reuters from London, England.