Ana Fernández Arimany – Director-General, MFAO

One of the most notable differences between the work cultures of Europe, Spain in this case, and North America falls under the general category of ‘labour mobility’. This is to say that the relative ease with which people move from opportunity to opportunity west of the Atlantic Ocean is countered by the very typical old world custom of getting your first job, hopefully with the government, and proceeding to stay there until retirement – with all that this might imply as to the flexibility of economies on this continent. Directly contrary to this stereotype, The Olive Oil Gazette presents to its readers the dynamic young woman who honoured us with an hour of conversation at her office at the olive oil futures market, MFAO, in Jaén last Wednesday.

Ana Fernández Arimany took on the role of Director General of the Sociedad Rectora del Mercado de Futuros del Aceite de Oliva in September of 2006 following a ten year long career in the stock futures market, in her home town of Madrid, that began as a telephone order clerk for market makers at the financial futures and options exchange, the MEFF. From there, she moved to institutional sales at Grupo Santander national banking subsidiary, Banesto, and finally, before assuming her present post, to that of sales manager at the brokerage house, Nordkapp.

The interview was conducted and edited by Charles Butler Mackay for The Olive Oil Gazette - The Spanish Olive Oil Industry News Source.

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C.B.: How did you get involved in the financial markets?

A.F.: Basically, it is because I’ve always liked numbers. When I was a child, I always thought I would end up being a mathematician so, having an affinity for business and the markets comes naturally to me.

C.B.: What is your educational background?

A.F.: I graduated with a combined degree in law and business.

C.B.: Law? Where does that come from?

A.F.: My father is a lawyer, so it’s in the family. But, more importantly, I knew that I was probably going to be taking more career risks than are normal, so I wanted to have something I could fall back on in the event that things didn’t work out as planned.

C.B.: And the MFAO? Managing a futures market in a small provincial capital probably did not figure in your original plans.

A.F.: No. Certainly not. It all came about from a very small ad I came across in a newspaper. I followed up on it only because it sounded interesting. The selection process was very slow, however, and in the meantime I had moved from Banesto to Nordkapp.

C.B.: That, in itself, was quite a change.

A.F.: Yes. But it appealed to me because working in a smaller brokerage you end up doing a bit of everything and learning it all. In the big houses, you end up with your specialty and that’s all.

C.B.: It must have been quite a shock, accustoming yourself to the world of olive oil.

A.F.: Yes, it took some getting used to. This is a very different business and culture than what I had come from.

C.B.: In what sense?

A.F.: I think that agricultural people are fundamentally different than financial types and it’s our task to convince them of the benefits of an innovation.

C.B.: Has the MFAO progressed during your period at the helm?

A.F.: I believe so. To this point we have seen more or less 20% more volume transacted than last year.

C.B.: Is the MFAO self-supporting financially?

A.F.: No. Not yet. But my personal goal is to have the exchange turn a profit soon, which will happen if we continue to grow at the current pace.

C.B.: Are the users of this market primarily nationals?

A.F.: As it stands, yes. But we have recently opened accounts for various Italian interests which have been active in the market. For us, it is fundamental that we sign on buyers and sellers from that country. They, after all, continue to be the big players in the commercialization of olive oil.

C.B.: I know a couple of American importers that are interested in participating, but the conditions for opening an account are not to their liking. Are you aware of any cases like this?

A.F.: Yes, I am. We are a new market and are only beginning to be of interest to the American brokerage houses. In the meantime, our customers currently have to operate through facilities provided by our shareholding banks. This, of course, requires the opening of a bank account in Spain in order to trade and this system has too many requirements for North American investors.

C.B.: I imagine that plans are being made to facilitate this process on the other side of the Atlantic.

A.F.: Yes. We are currently talking with the BBVA, which has various American subsidiaries and an extensive branch network in the U.S., to see if we can come up with some workable plan. We very much want to attract business from over there because of the very long experience they have with agricultural futures markets.

C.B.: Following the closing of the May 2007 contract, the MFAO sent a notice possibly expressing its displeasure at the very high level of open interest on delivery day. Can you comment on this?

A.F.: Sure. As it stands, market participants are holding for delivery around 25% of the total volume for any given contract. We would prefer that they use the MFAO as a hedging/price protection mechanism rather than a secondary cash market.

C.B.: What would you consider an acceptable level for deliveries?

A.F.: (firmly and with conviction) Ten percent.

C.B.: How are you going to accomplish this?

A.F.: By opening more accounts from the olive oil sector, teaching people how to use it, and attracting speculators to the market.

C.B.: Do you have any other goals for the near term?

A.F.: Yes. We would like to see more participation in the MFAO on the part of the Spanish olive oil co-operatives, seeing as they effectively control the production end of the equation here.

C.B.: I have to agree on that. Producers seem to have missed an opportunity to lock in a very good price between February and April of this year.

A.F.: That’s true. We are really just starting out and people from the olive oil sector do not yet know our market.

C.B.: I’ve noticed over the last few months a fairly large discrepancy between the cash price for olive oil, as published by PoolRed, and the futures prices. Can you explain this?

A.F.: That may stem from the slight difference between the contract specification and the measures used by PoolRed. We have just finished making some adjustments to the specs, taking effect on the March 2008 contract, that bring the two more in line. You can note that the recent upward movement in contracts dated from that month outward have brought the two figures closer together.

C.B.: I have heard various complaints from sellers of olive oil that the figure published by PoolRed is not representative of real cash prices, causing perhaps some confusion in the market. Is it a reasonable proxy for spot?

A.F.: It is and it isn’t. PoolRed calculates its quote on the basis of figures voluntarily provided by industry participants and then publishes a five-day, volume-weighted average as today’s price. In this sense, it is more useful as a tool to view the trend of prices, rather than a hard number.

C.B.: Among the first thing one notices, when looking at the contract price arrays, is that the distant months seem to trade at the same price as the nearby, at least in the same crop year. Why is there no financial calculation made for time by participants?

A.F.: That was exactly the same question I asked when I first got here. Why is there no carry? The answer was, basically, ‘Because there’s no carry’. And it’s as simple as that. The players are simply buying and selling at a price, thinking about the next crop and the carryover, and ignoring storage, interest and whatever. It’s just the way it is.

C.B.: What an opportunity that presents to an investor, being able to place your order as far out as you want and wait for the price to come to you – no contango, no roll.

A.F.: Sure it is.

C.B.: Your vision for the MFAO?

A.F.: That’s easy. That it stand on its own two feet.

C.B.: Thanks very much for your time.

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For further information about the olive oil futures market, contact:

MFAO
Calle Nogal, 62
23006 Jaén
Spain

Telephone: +34 953 24 52 50
Fax: +34 953 23 13 43
mfao@mfao.es
www.mfao.es