Paul Lambert, president and founder of PL International, talks about his success and shares insights on a marketing year unlike any he’s seen before.

By Dario Bard

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“We’re in December of the current crop year and you can’t find great northerns and dark red kidney beans, hardly any large and baby limas, no cranberries, very limited light red kidneys. There aren’t any stocks!” says Paul Lambert, president and founder of California-based PL International, LLC, one of the leading pulse brokerage companies in the world. “In all my years of pulse trading, I’ve never seen a year like this.”

And that’s coming from someone who has been in the pulse business since 1974. Paul Lambert, a native of New Rochelle, New York, began his career as a trader dealing in nuts, dried fruit and sesame seed.

“Then I was hired away by a large company in New York City, and that’s when I started trading pulses,” he recalls.

From there, he moved to Houston, Texas, and entered into a joint trading venture with Mexican partners. But things didn’t pan out and he worked out a deal with an oil company that was looking to broaden its horizons.

“They didn’t know anything about pulses or nuts or seed, so I started a specialty crops/commodities division for them. That became the Commodities Reserve Company. These people wanted to be really big; they wanted me to take long and short positions of 10,000 tons minimum at all times. I had a very generous credit line and I was doing a tremendous amount of beans, peas, lentils and chickpeas back then.”

One of his clients was California-based Klein Brothers, one of the largest private bean companies in the U.S. at the time. Klein Brothers eventually convinced Lambert to relocate to California and open up an office with them.

“The oil company was very fair to me,” recalls Lambert, and when he moved to the west coast, he took the name Commodities Reserve Company with him. “With Klein Brothers, we were doing a lot of domestic business, but also a lot of international business with Argentina, China, Mexico and Chile.”

In the mid 80s, the Commodities Reserve Company became Klein Brothers International, and in 1992, they were bought by ConAgra Foods Corporation. Lambert remained head of the international division, a role he had filled since his New York days, and he continued to trade pulses in large quantities. But when ConAgra asked him to relocate to Omaha, Nebraska, Lambert wasn’t keen on leaving the west coast.

“And that’s when I started PL International.”

Since its establishment in 1999, PL International has become one of the most respected pulse brokers in the world, serving clients that include the largest canners and packagers in key pulse markets, including China, Argentina and Mexico.

Asked about the secret to his success, Lambert lists three factors that he sees as vital: “Reputation is number one, and then service and contacts.”

He points to his background with CICILS IPTIC as tremendously important in this respect. Lambert joined CICILS IPTIC in 1974, served as executive vice president for nearly 15 years, and as president for three and a half terms. “This reinforces what people know about me—that I’m reputable and know what I’m doing—and it’s an important source of contacts.”  

But when one hears Lambert talk about the challenges of the current crop year, one can’t help but think there is a fourth factor that is equally important. “What do you do, as a broker or a trader, when you can’t find the beans? For me, a lot of it comes down to ideas and creativity.”

Add thinking outside the box to the list.

IFT: Tell me about your early years as a pulse trader.

Paul Lambert: I became a trader by happenstance. But I learned the business and I got good at it. When I started with the oil company in Texas, they wanted to trade very large quantities, so they really checked me out. I had a very good track record.

I remember back in ’86-’87, when I was with Klein Brothers, the pea bean market in North America went from US$ 13 to US$ 73 a bag. The owner turned to me and said, “Paul, where can you buy pea beans?” So I bought the whole South African pea bean crop: 25,000 tons. On top of that, I probably bought about 20,000 tons from Michigan and Ontario. We would take big positions. Around that time, we were also selling 100,000 tons to the Government of Mexico.

One time we imported 5,000 tons of Chilean pinto beans, and we also imported about 4,000 tons of Turkish chickpeas for the U.S. domestic market. We had that capability because of my experience with the international business, and not many other companies would or could do that. Most other trading companies were either mostly international or domestic.

IFT: What were the early years of PL International like?

Paul Lambert: There are a lot of brokers worldwide, so I had to find my niche, which I did because I had a lot of good contacts. A lot of brokers specialize either domestically or on a variety. I export to all countries and import from China and Argentina. I’m different because I’m very diversified. It’s easy for me to go from beans to peas to lentils to almonds to canary seeds. I have a knack for remembering markets and freight rates, and for looking at the big picture. It comes naturally to me. My friends tease me because I can’t remember jokes, but I have all my customers’ phone numbers in my head, complete with area and country codes.

So it’s a learning process, a combination of learning import/export principles, as well as trading. It’s like on-the-job trading. You need a little while to get confidence to take positions. Do you want to sell 500 tons here, or a thousand tons there, long or short? You just have to get comfortable with it. You have to learn all the documentation, insurance, bills of lading and shipping terms. It’s all of that. From my days in Texas onward, I had been chartering vessels to many different parts of the world, so that helped.

There is no future hedging here. There is more risk in a way. But we aren’t trading the magnitudes of corn, wheat, soybeans, sugar and such.

IFT: What have been the keys to your success as a broker?

Paul Lambert: It’s a matter of diversification with reputation. I’m knowledgeable and I tell it like it is. In this business, there are rumors and statements that are completely untrue floating around. People speak their positions a lot of the time. Ask them what their crop is, and if they are short, they’ll tell you it’s going to be huge. If they’re long, it’s going to be a short crop. It happens all the time. Ask around and you’ll get a wide spectrum of opinions on any pulse crop. I go by what I know and what I think.

For about 25 consecutive years, I would give the international run-down at CICILS and at U.S. and Canadian conventions. And what people liked was that I could give them price comparisons, like between white beans in China, the U.S. and Argentina. That juxtaposition, putting it all together, is what gives you a true international perspective, whether on white beans, chickpeas or cranberry beans. Because that is what I do, and almost no other broker does that.

I can be pretty brusque. A guy I don’t know called me up recently and wanted six loads of light red kidney beans, with payment 30 days after delivery. I said no, I don’t know you, I need payment in advance. You see, I’m in the middle between a buyer and a seller. I don’t take positions. But I’m not going to put a seller in a position to give someone I don’t know credit. These days, credit is very important.

I’m a neutral broker, but I’ll give people my opinion, and I’ve been right often over the years and made a lot of people a lot of money. Of course, I’ve taken some lumps and losses. You learn and go from there. In the end, the buyer and seller have to agree. If one thinks the price is too high, I won’t push it. It’s their decision. All I can say is, for instance, that there isn’t any carryover of great northerns or dark red kidneys, and there’s a lot of demand. So people trust me because I’m honest with them.

Also, we offer some of the best brokerage service in the world. For us, it’s about more than the sale and the commission. We follow the shipments and check documents. We make sure everything is running on time, and if not, we find out why. We are a full service brokerage company.

Everything is customer relations. Buyers and sellers argue and negotiate. A rule of thumb for me is that if you reach a deal between a seller and a buyer and they are both unhappy, it’s probably a fair deal.

IFT: What is the most important change you’ve seen take place in pulse trading over the course of your career?

Paul Lambert: When I started in this business, there were as many as 40 pulse trading companies in the world. The major ones were in New York City; they have all but disappeared. Then it shifted to Denver and San Francisco, and a lot in Europe.

Back then, all those trading companies gave great liquidity to markets, so people took bigger positions. That has almost completely changed. There are no longer any companies that just do strictly trading; most companies now have product to back it up, or relationships to acquire the product they need. I don’t know of any trading company now that would be interested in selling 50,000 tons short like there was in the mid-’80s.

In my opinion, the effect of this is that now companies take lesser positions. For example, take pinto beans, the most plentiful variety in the U.S. Say you took a position of 500,000 bags. Back then, you could sell those to domestic canners and packagers, to the governments of Mexico and the Dominican Republic, and to trading companies, because they are always buying and selling. It was another outlet, and an important one, because other trading companies had liquidity, so if they came in for 1,000 or 2,000 tons, no problem.

Another thing is that China was a big question mark. China has come a long way since then, but they had quality issues. But you could take that risk because you knew you had outlets.

Now a lot of traders depend on major domestic customers. There is no more government buying in Mexico and the Dominican Republic; it’s all private-sector buying now, which entails more risk and better quality.

This led to concerns about credit risk. You aren’t selling to a government with a letter of credit. Instead, you are selling to a guy in Mexico that wants large quantities and demands the best color, but isn’t about to open a letter of credit. Same thing in the Dominican Republic and Venezuela. I used to be the largest seller in Venezuela, dealing mainly black beans and some alubias from Argentina. The game was getting import licenses; that’s still the case today, that hasn’t changed. But with the political situation in Venezuela now, you have to be very careful. I don’t do much with Venezuela anymore.

IFT: What would you say are the interesting dry bean markets to watch right now?

Paul Lambert: There’s a scarcity of a lot of different varieties right now. I’ve seen this sort of situation before on one variety, but not as many as now. I’m having a hard time finding great northerns at the moment. Algeria has tendered for great northerns three times in the last month. They usually tender for 5,000 tons, but they tendered for 1,000 and still came up empty. Price doesn’t matter; there simply aren’t any beans. One major canner wanted 50 containers of baby limas, and I can’t find them. Now pea beans have gone up US$ 250 a ton in the last month, and they are getting harder to find. There is going to be low to no carryover on many varieties.

This started when Argentina got hit with that drought disaster. Then it continued in China, where everyone thought there would be a large crop, but it never materialized. So everyone turned to North America, and that’s why we are where we are.

And with the situation like it is now, I’m trading 2014 crop, mainly red dark kidneys and great northerns. Usually that starts later, like in February or March, but it’s only December and I’ve already sold big volumes of both … and the crop hasn’t even been planted yet!

In my younger days, if there was no carryover, I would never pre-sell a forward crop. It’s dangerous to sell forward like that, unless you really know your buyer and seller. If the market goes way down, you need a buyer who is going to honor the deal and still take those beans. And same goes for the seller if the market goes way up. When I sold great northerns to Argentina, they were at around US$ 1400 a ton CIF. Now the market is US$ 2200 to US$ 2300 a ton, but it doesn’t matter, my supplier is still shipping.

So people are buying up 2014 crop right now because they are scared. What if what happened this year happens again? Are the U.S., Argentina and China going to plant enough to cover demand? There could be seed difficulties. Growers may plant other crops. It’s almost scary that a lot of end users, packers and canners are short.

I got a bid last week for U.S. dark red kidney beans at US$ 100 a bag. No sellers! In December! I’ve never seen anything like it. I wish I hadn’t sold everything I had when the market was at US$ 60 a bag.

IFT: Can you discuss the Argentina crop disaster a bit more and what it has meant for the white bean market?

Paul Lambert: Last year, when the Argentina crop failed, I had the idea to sell new crop, this year’s crop, of great northerns. This was before most people realized the catastrophe that was unfolding. I sold a lot to Argentine exporters and to European canners. Something like 15,000 to 20,000 tons.

If you can’t find alubia beans and you can’t find large-sized Chinese light beans, what do you do? You buy great northerns. But I’m one of the few who does lots of business in both Argentina and China. So I saw the handwriting on the wall. I sold a whole bunch of new crop, and I’m doing the same for 2014 new crop. As a broker, if I can’t find 2013 crop, I’m selling 2014 crop.

Argentina almost never buys great northerns, but many of the exporters used it as a hedge this campaign. One major company down there told me my reasoning was faulty, that there was a big difference between alubias and great northerns. But if buyers can’t get one, they’ll take the other. They might say no originally, but eventually they’ll take them. And that’s what a lot of Argentine exporters did; they ended up shipping great northerns in place of alubias.

So it’s having ideas and understanding your buyers and sellers. That’s very important. I only deal with people I know and trust.

IFT: How do you see the situation in Mexico? They are expecting a big crop there and there is a lot of unrest in the agriculture sector because of prices.

Paul Lambert: It’s a typical year in Mexico. The government there does all it can to protect Mexican growers. Even under NAFTA, things don’t always go smoothly. The past two years, a lot of rail cars full of beans were being turned around at the border because they found, like, a speck of dirt on some beans, and so they rejected the whole load. It’s happening again this year. It’s very frustrating and puts a lot of risk on sellers because they don’t know if the rail cars will make it past the border.

Right now, I’m trying to sell Mexican black beans to the Dominican Republic. You won’t see many North American brokers do that … get involved in deals where both the buyer and seller are outside their home turf. I have a lot of contacts in both those countries.

In fact, a year and a half ago, when Mexico allowed the import of foreign beans, I did half to three quarters of all the bean imports from Argentina and China. I took the biggest buyer in Mexico City, flew him over to China and showed him that my supplier was very reputable.

IFT: How about India? That has been mentioned as a big potential market for pulses. What are the challenges there?

Paul Lambert: I don’t do much with India. A lot of the major companies do vessel loads of peas and maybe lentils to India, but they have control of distribution and payment in India. I’ve had too many problems in the past with unreliable buyers there. In the early ’80s, I used to do a fair amount of business from Turkey to India. I had a problem once, so I went to Mersin and checked into the Mersin Hotel. The place was like half booked with traders from India looking to renegotiate or settle contracts. What would happen is that, if the market went down, in India they wouldn’t open their letters of credit; and if it went up, in Turkey they wouldn’t ship. So there was this constant back and forth. Things are better now. Is it an opportunity? Yes. The Indian subcontinent is the fastest growing market in the world. But at this point in my career, I won’t sell directly to India. I don’t control anything there.

IFT: What would you say is the biggest challenge facing the pulse industry right now?

Paul Lambert: Stocks need to be replenished in the U.S., Argentina and China. That could take two, maybe three crop cycles. Right now, a lot of people are short for the rest of the campaign on many varieties. It’s mid-December. What are people going to do for the rest of the campaign? It’s very strange.

IFT: One variety that has good supplies is black beans. What do you see happening with that market?

Paul Lambert: You’ve got good supplies of blacks because Mexico isn’t buying black beans and Brazil has had currency issues and couldn’t get their Argentina black beans, so the market went up. There is also domestic business on black beans in the U.S., and they occasionally ship to Costa Rica and other countries. Blacks and pintos are the only major varieties you can find without difficulty. Everything else is a struggle.

One thing I should add is that with these very high prices, buyers can change varieties, they can go to meat or chicken and get out of their pulse requirements. Just recently, Turkey, which almost never buys pea beans, bought about 10,000 tons of pea beans. Why? They couldn’t get alubias, great northerns or Chinese white beans. Do they want to buy pea beans? No. But it’s a white bean. And some of those are probably going through Turkey to Iraq and Iran. That’s unusual, but they have no alternative.

Yet I offered Algeria 5,000 tons of pea beans two months ago; 20 years ago they bought pea beans from me. But this time they said no, they insist on a large white bean. Well, guess what? They’re not there! You can’t find any, but they seem to think they are going to come out of the woodwork. Why would a seller of great northerns refuse to sell at US$ 2200 a ton? Either they don’t have them or they are reputable and are shipping their commitments.  

IFT: Aren’t these high prices good for the industry?

Paul Lambert: The prefect scenario is not these drastic price swings, but rather an orderly shipment of a crop at a fair price to end user customers that package, can and import at a price that allows everyone to make a little money and increases consumption. The really high prices we have today are dangerous because they can actually end up decreasing consumption.

People that understand this business don’t want to see these prices. They don’t mind firm prices, but today’s prices are ridiculously firm. Who wants to pay US$ 2500 for an alubia-type bean from Egypt? Nobody can stay in business with their consumers and retailers buying at that price. A firm price for alubias should be US$ 1200 to US$ 1300 a ton. Dark red kidneys are at US$ 100 a bag … ridiculous! It sounds good, but it should worry sellers, too. What’s going to happen in the future? People aren’t going to accept these prices as a generality. So a lot of sellers don’t like these very high prices; you’d think they’d be happy making a fortune, but they are worried about the future. It should run smoothly – buying, selling, shipping to people that consume beans almost constantly. Not way down one year and way up another. That’s what used to happen in this business. Prices would go way up and growers would plant wall to wall. So prices would fall way down, and they wouldn’t plant as much next year, and the prices would go way up. Well, now, because of Argentina and China, everything is up and most of the time you can’t find what you are looking for.

So in these volatile times, I continue to try and stay ahead of the game. And my clients appreciate that.