Alpha Three Minutes With Third Street Ag Investment's Chad Burlet

Third Street Ag Investments Joins Hehmeyer's Multi-Strategy Fund

by Jessica Darmoni

Hehmeyer Capital Management, LLC offers a multi-manager managed account with their Multi-Strategy Program .  The program includes five managers covering energy, equity indexes, interest rates, meats and now, grains.  The newest entrant to the program is Third Street Ag Investments, which joined on June 1st and specializes in grains.  Hehmeyer Trading + Investments sat down with Chad Burlet, and his co-Founder Bob Otter, of Third Street Ag to learn more about the new manager, his extensive experience in the grains market and how he played a role in the launch of the related over-the-counter markets.

A Swimming Pool Big Enough

“Grains impact everyone,” said Chad Burlet, who started his career in the grain markets at Cargill.  “Everyone needs to eat. “

Burlet grew up in a rural area of Minnesota and always liked the outdoors.  He was a senior at St Olaf College with a double major in Economics and Religion when he interviewed for a position at Cargill, a company close to home.

“Grains involve business and international trade, which I liked,” said Burlet.  “I had recently read Merchants of Grain by Dan Morgan and it had piqued my interest.  It talked about the international grain houses of the world and touched upon the risk management side of the industry as well as the entrepreneurial spirit.”

In September of 1980, Burlet joined Cargill’s Commodity Marketing Division.  He completed training and orientation at Cargill’s headquarters in Wayzata, a town outside of Minneapolis, before moving to Chattanooga to work with the grain elevators, as well as the poultry and feed operators. Before too long, he was promoted to trade grain for two of Cargill’s biggest export elevators in Louisiana. 

“Cargill was a great company, they would throw you in the water and if you could swim, they would build you a bigger pool,” said Burlet.

After Louisiana, Burlet and his family moved to Chicago where he moved up to a merchandising manager for the Central United States.  He made decisions about making and taking delivery on the futures markets and traded vessels in the Great Lakes.

In 1988, he returned to Wayzata, where he managed global oilseed transactions.  It was in this position that Chad reconnected with an old friend, Bob Otter, who would later become his co-Founder at Third Street Ag Investments. 

Bob was a trader and broker in the soybean pit at the Chicago Board of Trade (CBOT) and became Chad’s “soybean guy”.

The Ferruzzi Scandal, the Launch of OTC Grain Markets and VSR

“I left Cargill and went to J. Aron, a division of Goldman Sachs in 1996,” said Burlet. “Goldman had been trying to get into grains and hired a team of experts to jumpstart their business.”

During Burlet’s time at Goldman Sachs, he had the opportunity to serve on the Board of Directors at the CBOT.

“In 1989, the grain markets were recovering from the Ferruzzi scandal,” said Burlet. “The US arm of Gruppo Ferruzzi S.p.A of Italy, took delivery against the May contract, held the soybeans and bought the July contract attempting to corner , or control, the market.” 

While this happened a year before Burlet joined the CBOT, he remembers dealing with the fall out.  Other issues he reminisced about included changing the grains storage rates, acquiring the MidAmerican Exchange and also, managing the relationship with the Board of Trade Clearing Corporation and the CBOT. 

Burlet also had the opportunity to testify in front of the Commodity Futures Trading Commission (CFTC) and played a role in the creation of the over-the-counter grains markets. 

“I was able to speak with the CFTC to get a no-action letter when Goldman Sachs was working to launch an over the counter market for grains,” said Burlet.  “The second time I went to Washington was with staff from the CBOT to talk about Variable Storage Rates (VSR).”

VSR is a market-based determinant of maximum allowable storage charges for outstanding wheat shipping certificates.  It triggers higher maximum allowable storage charges that allow wider spreads when spreads are near financial full carry and lower maximum allowable storage charges when spreads are narrowed or inverted.

Burlet explained that in 2006, Index Funds had first come into the grains market and overwhelmed the wheat contract.

“This drove the price of the futures contract up against the price of the cash market,” said Burlet.  “We testified in favor of VSR.”

Third Street Ag Investments

Burlet left Goldman Sachs in 1996 to trade for himself.  About 12 years later, he began managing money for a few friends, including long-time friend Bob Otter. 

“A few years later, the trading floor business was starting to wind down,” said Otter. “Chad had the idea to formalize what he was doing and start a business.”

In 2012, Burlet and Otter joined forces to launch Third Street Ag Investors LLC, named after the street they had both lived on in Hinsdale, Illinois.  Third Street offers a Fundamental Discretionary Ag managed futures program based in the understanding of the economics of worldwide grain production, transportation, processing as well as consumption and the trade flows and market aberrations that occur naturally within these markets. 

Third Street Ag Investors joined the Hehmeyer Capital Management, LLC Multi-Strategy Program on June 1 and is excited to be a part of the multi-manager program. 

“I’ve known Chris Hehmeyer for 30 years and remember him walking around the trading floor managing his traders,” said Bob Otter.  “I remember thinking that was the way to treat your traders.”

If you are interested in learning more about the Multi-Strategy Program or seeing program performance, please register for access to the Hehmeyer Investment Platform.

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