COMMODITY MARKETS UPDATE

Issue 1 2017

From the Ground Up: Building

Brooklyn Roasting Company
A Conversation with Co-Founders
Jim Munson and Michael Pollack
Issue 1 2017

COMMODITY MARKETS UPDATE

Executive Editors
Alice Birnbaum
Lewis Hart

Editors
Kaitlin Barbour
Jake Turner

Contributors
Lewis Hart
Alexandra Toskovich
Max Schlubach
Carlos de Mello

Design
Creative Services
 inside
3 A Letter to Our Readers
From Lewis Hart,
Executive Editor

4 From the Ground Up: Building

Brooklyn Roasting Company
by Lewis Hart and Alexandra
Toskovich

8 Shapeshifters: Yearning for

Backwardation
by Max Schlubach

12 The Food Safety Modernization

Acts Impact on Imports
by Carlos de Mello

16 Understanding Special Liens:

Q&A with John Keough of
Clyde & Co
by Lewis Hart

20 Summary Snapshots
Commodity Price Charts

Issue 1 2017 1
 First, whether we look at year-to-date
performance for crude oil, coffee or copper,
most of the markets we follow are rangebound.
This seesaw in prices is being primarily driven
by changes in short-term fundamentals on the
supply side, as temporary price increases bring
more supply online and reciprocal decreases
gradually draw supply out of the market.

2 Brown Brothers Harriman|C O M M O D I T Y M A R K E T S U P D A T E

A Letter to Our Readers
Dear clients and friends,
As we approach the midpoint of the second quarter of 2017,
several key themes seem to be at the forefront of our clients
minds across the commodities and logistics sectors.
First, whether we look at year-to-date performance for crude
oil, coffee or copper, most of the markets we follow are
rangebound. This seesaw in prices is being primarily driven
by changes in short-term fundamentals on the supply side,
as temporary price increases bring more supply online and
reciprocal decreases gradually draw supply out of the market.
Major changes in demand, on the other hand, have been muted.
This state of affairs has been especially pronounced in energy,
and absent a strong recovery in demand from China, cost
deflation and increasing U.S. production have made it difficult
for crude oil to escape the $50 per barrel vicinity. In his article,
Max Schlubach delves into how changes in the futures curve are
affecting hedging behavior and prices among physical market
players. Turning to the metal and agricultural sectors, while
we have recovered from recent lows, most commodities are
also still trading narrowly due to tepid demand growth and the
supply sides ability to fill gaps quickly. Over the longer term,
we continue to believe that demand growth must accelerate
before these markets can exit this rangebound state of affairs.
So while the past 18 months have been a particularly
rangebound period, this may be emblematic of a broader trend in
commodities markets: They tend to be mean reverting. Human
ingenuity leads to new discovery and cheaper ways of producing
commodities. Looking at the performance of the Bloomberg
Commodity Index since inception 25 years of pricing data
the total return of the index has significantly underperformed
inflation, despite upward bursts in 1995 and 1998, 2003 and
2008, and 2010 and 2012.
An even more pronounced characteristic of commodities
markets has been the hangover of counterparty risk. Even as
market conditions have generally improved, many industry
participants, particularly on the production side, are still
struggling to cover their cost of capital. This has led to a flurry
of questions from clients over how to manage counterparty risk,
so we sat down with John Keough, a Partner at Clyde & Co, to
review how special liens can work to the benefit of certain trade
participants and detriment of others.
Last but not least, 2017 has also seen a rise in uncertainty as
markets become increasingly concerned about potential barriers
to trade and changes in the regulatory environment. While we
continue to monitor the trade story to see how it plays out,
regulatory compliance is becoming even more important in
the food and beverage industry. Highlighting one example,
Carlos de Mello helps us understand how the Food Safety
Modernization Act is creating winners and losers. In addition,
Alexandra Toskovich and I go downstream to the retail coffee
market, speaking with the founders of New Yorks own Brooklyn
Roasting Company, Jim Munson and Michael Pollack, about how
they have taken their business from a Williamsburg bedroom to a
rapidly growing global brand. In this interview, we see firsthand
the challenges and opportunities facing private businesses in the
food and beverage sector.
As always, we thank you for your continued business and
readership and wish you continued prosperity in 2017.
Sincerely,
Lewis Hart
Senior Vice President
Issue 1 2017 3
From the Ground Up:
Building Brooklyn Roasting Company
By Lewis Hart and Alexandra Toskovich

In 2010, Jim Munson and Michael Pollack bonded over their love of coffee. Fast-forward seven years, and the
Brooklyn Roasting Company co-founders enthusiasm for the beverage has led them to grow what was originally
a wholesale coffee business with a small space for roasting, packaging and distribution into a company with retail
locations throughout Brooklyn as well as in Manhattan and Japan. Brown Brothers Harriman recently spent an
afternoon in Brooklyn with Munson and Pollack, where we experienced first-hand their passion for sustainably
sourced coffee and their genuine appreciation for the farming families behind the scenes. After visiting several of
the companys cafes, including its new Brooklyn Navy Yard location where Brooklyn Roasting can finally roast,
package and distribute its coffee out of one central location we sat down with the two founders to discuss the
early days of Brooklyn Roasting Company, its expansion from wholesale to retail, how the company incorporates
social goals into its mission, how it identifies opportunities in an increasingly competitive market and more.

4 Brown Brothers Harriman|C O M M O D I T Y M A R K E T S U P D A T E

Brown Brothers Harriman: Jim, you started your career at
Brooklyn Brewery. What inspired you to move from the beer to
the coffee business?
Jim Munson: I helped start Brooklyn Brewery, where I learned
about distribution in New York and how powerful Brooklyn can
be as a brand. There was really no other brand with Brooklyn in
the name. When the brewery started, I learned about Brooklyns
rich history and what the borough was all about.
At some point, I wanted a change. I joke that I went to sleep with
a beer in my hand and woke up to the smell of coffee. I liked the
idea of switching to coffee and thought New York City deserved
its own great coffee brand. There are many similarities between
the two beverages. Both are brewed, and theres a gritty, brown,
industrial nature to both. Theres also a quintessentially American
character to both beverages.
centralized facilities where quality is controlled. With coffee, the
brewing equipment is decentralized, so one of the challenges of
being in the wholesale coffee business is that we have to service
equipment all around the city.
Having to buy equipment for each cafe can be costly, so a loca-
tion may have just one brewer, which means its likely serving
one type of coffee. Thats why its often referred to as regular
not Sumatra or another name; in comparison, with beer there are
long lists at bars and stores with different varieties. When you
only brew one type, it is easy to get rid of everything that makes
it special and call it regular, so we go out of our way to talk to
customers about what makes our coffees interesting, delicious
and distinct.
BBH: Michael, how did you get involved in Brooklyn Roasting
Company?

I started Brooklyn Roasting Company in 2009 after working at
another coffee business, where I became knowledgeable about
the beverage. At the time, there was much conversation in
the coffee industry around direct trade, fair trade and third-party
certification. The idea behind Brooklyn Roasting was to focus on
third-party certified, sustainably sourced coffee. I approached
Columbia University, who I had sold coffee to previously, and
said I was starting a coffee company and wanted to be its
provider. The school wanted $40,000 worth of equipment, but I
had no money. Luckily, I had industry contacts, and one of those
contacts had a small, unused roaster in his basement. He agreed
to let me roast my coffee there, and I would package the bags and
deliver them to Columbia. Thats how
Brooklyn Roasting Company started.
Michael Pollack: I have always loved coffee, and in the early
2000s I signed up to get coffee bean samples from a program.
When the first package arrived, I realized the samples werent
roasted. I knew how to brew coffee about 1,000 different ways,
but I didnt know anything about roasting coffee. Eventually, I
purchased a roaster and, after several failed attempts, became
proficient at roasting.
In 2010, I saw something about Brooklyn Roasting Company
online and called to see if the company needed any help. Jim told
me he was about to place an ad for an unpaid summer intern, and
I said I wanted to apply. I went to interview, and after we talked

BBH: You talked about the similarities

between coffee and beer. How are When you only brew one type, it is easy to
they different?
get rid of everything that makes it special and
JM: Coffee and beer are both what call it regular, so we go out of our way to talk
I will call psychoactive beverages.
If you drink either, it has an effect to customers about what makes our coffees
on you but a very different effect.
Theyre also different in terms of how
interesting, delicious and distinct.
they are brewed. Beer breweries are

Issue 1 2017 5
about my past and my love of coffee, Jim said that I should be
his partner. In November 2010, we had a new machine hooked
up, and I started to roast.
In our first year, we roasted 140,000 pounds of coffee. With our
expansion into Brooklyn Navy Yard, we will have the capacity to
roast 4 million pounds of coffee annually; 2017 will be our first
million pound year.
BBH: Coffee is a notoriously volatile commodity. How do you
manage the price risk associated with the coffees you buy?
JM: During 2011, our first full year of business, the price of
coffee was at its highest. We modeled with that as a starting
point, so that has helped us succeed when coffee prices fluc-
tuate. You must ensure that you are buying coffee at the right
price and mitigate the risk knowing that you need to be able to
source the same coffee over a period of time. However, while
coffee is the important part, everything else that goes into the
retail customer experience is what adds costs cups, milk,
sugar, employees, and so forth.
BBH: How do you think about single origin vs. blends, and how
do you help consumers understand the mix of products?
6 Brown Brothers Harriman|C O M M O D I T Y M A R K E T S U P D A T E
MP: I love single origin, and I would be sourcing from every
country that grows it if left to my own devices. My underly-
ing goal is to introduce as many people to as many different
coffees as possible. However, our biggest selling product is a
blend and what I consider a tribute to coffees history Mocha
Java, or a combination of Ethiopian and Sumatra beans, which
was the worlds first blend.
People can get overwhelmed with our large selection, and our
descriptions and tasting notes can add more confusion. We like
to talk about coffees characteristics, profiles and tastes, but one
of my favorite phrases is What goes on in your mouth is your
own business. Everybody tastes personally and privately, so
the idea of me telling somebody what they should be tasting is
not accurate. I always tell people to travel the world, try coffee
and keep a little of what they tasted side by side so that they can
understand the differences among origins, processes and roast-
ing techniques. Thats how I like to educate people about coffee.
BBH: You started out strictly in the wholesale roasting business,
but you now operate in the retail cafe business as well. How did
you get into retail?
MP: A friend was working on the East River Ferry project, and
we were chosen as the coffee company for the ferries. We found
out that when the ferries launched, they were going to give away
free rides, and they asked if we would give away free coffee.
In the first two months post-launch, the ferries had a ridership
of 150,000 people, and about 100,000 of those riders had our
coffee in hand. We couldnt have asked for a better place to
launch a product because we were reaching commuters who
were coming from the Brooklyn neighborhoods we called home.
It was through seeing the popularity of our coffee among riders
that our staff realized we could sell it. We put in a cash register
at our roasting facility, and thats how retail started.
BBH: What are the challenges to finding new retail locations and
making them successful?
JM: We get invited to look at many locations, so its difficult to
decide what opportunities to pursue. Its often based on whether
it feels right. In those cases, we go to the location and get a feel
for the area and what traffic looks like throughout the day. We
have been fortunate to have opened at a time where a borough is
being reimagined, and our name is part of that experience. Were
a central gathering place, and we create community.
BBH: Are there social goals behind Brooklyn Roastings mission?
What about educational goals for the consumer?
MP: We talk about coffee from two sides. I describe what we do as
green to ground our coffee comes to us green, we roast it, and it
gets ground and served. But what we like to talk about and what
we celebrate is ground to green. That same seed, instead of being
processed, dried and given to us, is planted back into the ground.
Ninety percent of our coffee is third-party certified, with fair trade
always as a lead certification because when you visit farming fami-
lies, you realize that its hard work. We have tremendous respect for
the families ability to make a living and unending support and admi-
ration for them. Were focused on ensuring that theres enough
quality of life so people can continue to take that seed and plant it
back in the ground. Whats great is that our growth and success
has meant profound success for the farming families too.
Given the opportunity, we would talk all day about sourcing
sustainable certified coffee. In terms of educating the consumer,
we showcase where our coffee comes from on our labels and
how we source on our website, but its not something that we
get in someones face about.
Social awareness is definitely part of our brand. We have the
worlds most fuel-efficient roaster. We chose a tin (steel) can for
our packaging because it is the most recyclable material, and it
also gives us an opportunity to give back to our customers who
buy cans they can get a discount if they refill them.
BBH: What challenges still exist for you in terms of social awareness?
JM: We would love to find a solution for our coffee grinds. We were
supplying them to a rooftop garden for their compost, but eventually
it was too much for them. We do take the chaff from roasting and
supply bedding for everyone who has a chicken in the area.
Finding a cup that is recyclable is another challenge. Weve tried
to figure out how to start a reusable cup program several times.
Right now, cups for hot coffee have a plastic lining. Luckily,
research is being done on how to replace the plastic so that cof-
fee cups can be recycled.
BBH: As youve grown, how do you decide which opportunities
to pursue?
MP: Were willing to try almost anything. I jump on opportunities
because you never know which one will be the next big thing.
Weve been able to prove that we can successfully do wholesale
and retail. Looking at other formats for example, coffee service
were open to trying new things because its not that complex
to figure out how to make something coffee-based, whatever
the format.
BBH: As more and more players enter the specialty coffee space,
how does Brooklyn Roasting Company differentiate itself in the
marketplace?
MP: Beyond having a great name and product, our differentiators
include the customer experience we provide, our roast profiles
and how we source our coffee. From the serve side, Im pretty
basic. My approach to coffee is just add water how you
choose to do this is where the magic happens.
BBH: Jim and Michael, thank you for your time and insights.
Issue 1 2017 7
Shapeshifters: Yearning for Backwardation
By Max Schlubach

When crude oil traders speak of the forward curve or term structure of the futures market, they reference
the line chart that depicts the current cash (spot) price of crude oil alongside the prices for delivery of crude
at future points in time. If the line is sloping upward, it means spot prices are trading at a discount to future
prices; this term structure is called contango or more colloquially the market is in carry.1 Conversely, if
the futures curve line is sloping downward, it means the current price is trading at a premium to future pricing;
this term structure is called backwardation. The shape of the forward curve in a deep, liquid futures market
like crude oil can be interpreted many ways. The most active commercial participants in the crude oil futures
market are exploration and production (E&P) companies, trading companies and refiners that employ futures
to hedge their natural exposure to price risk. Their collective expectations and behavior drives the crude oil
term structure that we explore in this article.

8 Brown Brothers Harriman|C O M M O D I T Y M A R K E T S U P D A T E

What does the forward curve tell us about
supply/demand fundamentals?
The slope and trend of a futures market structure means differ- is currently oversupplied reduces prices at the front end of the
ent things depending on whether the market is oversupplied, curve. In addition, since the market tends to expect that E&Ps will
in equilibrium or undersupplied. While the market remains in respond to the inventory glut by cutting production, price expec-
an oversupplied state,2 the current term structure suggests the tations over the long term tend to creep up. This is first reflected
market is betting that OPEC will likely extend its targeted supply in increasing prices at the far end of the futures curve.
cuts, given that the price for future delivery of crude is cur-
rently trading near parity to the cash/spot price for crude. During When a contango market structure persists in an oversupplied
the first half of April, futures contracts trading for 2018 deliv- market, it signals the market is likely struggling to deplete stock
ery backwardated, indicating a collective view that supply will levels. This has been the case since January 2015 and is depicted
exceed demand growth and stocks will build next year. in the nearby chart, which maps the Brent term structure against
Contracts for 2017 delivery remain in contango, reflecting both the prompt month pricing.
the oversupplied cash market and the bet that OPEC will extend
its supply cut through year-end.

At its most basic level, any single price shown on a forward curve A prolonged, backwardated
reflects the markets view about the balance between supply and
demand at a future point in time. The slope of the graph formed market structure is what
by plotting those prices reflects anticipations about what will
happen over the course of time parts of the forward curve can OPEC needs to reach its
show contango, while other parts exhibit backwardation. The
objective of reducing global
causal relationship between supply expectations and the forward
curve slope is foggy, though. There is reflexivity between par- stocks because carrying
ticipants behavior and the shape of the term structure: Market
actors must be careful not to mistake a dog wagging its tail for inventory becomes financially
the opposite.
burdensome in a market that
Shapeshifted Contango to Backwardation
lacks contango.
Backwardation

$160 -$15
OPEC Cut
$140 -$10

$120 -$5
In an oversupplied market, when market perceptions begin to
$100 $0 shift to the view that oversupply will dissipate (and that near-
||

term supplies will tighten), crude oil consumers, or refiners who

Contango

$80 $5

$60 $10 are naturally short crude oil in that their earnings benefit from
$40 $15 falling crude prices and suffer from rising crude prices tend to
$20 $20
increase purchasing and hedging activity. This, in turn, drives up
5
4
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15
9

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11
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7

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7
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nearby prices and tends to flatten the futures curve. Producers

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Brent Prompt Month (LHS) Brent Term Structure (RHS) react to the higher prices by increasing production volumes and
Source: Bloomberg and BBH Analysis.
Data as of May 8, 2017. adding supply to the market, which pushes down longer-term

In the oversupplied crude market that we have faced for the 1

F or more information about crude oil contango economics, read our October 2015 Commodity Markets
Update article, The Contango Trade: A Cost of Capital Competition.
past several years, forward prices have generally traded at a pre-
2
For more information about the global crude oil supply and inventory glut, read our May 2016
mium to spot prices that is, contango. The view that the market Commodity Markets Update article, Crude Oil and the Four Laws of Gravity.

Issue 1 2017 9
price expectations and thus flattens the longer-dated end of the
curve. Given that changes in demand and speculative position-
ing have been minimal, this pattern of increasing supply leading
to lower prices and a steeper curve, followed by periods of inven-
tory drawdown and flatter to backwardated curves, is essentially
what has taken place in crude markets since OPEC announced
its targeted production cut last year.

On November 30, 2016, OPEC announced a member agreement

to restrict production for the first six months of 2017. Its objective
is to reduce global crude oil stockpiles that had built to record-
breaking levels over the preceding five years, swamping the world
in a well-documented supply glut. A prolonged, backwardated Lewis Hart and Max Schlubach of the BBH Commodities & Logistics
market structure is what OPEC needs to reach its objective of team visit a crude oil storage facility in West Texas.

reducing global stocks because carrying inventory becomes

financially burdensome in a market that lacks contango. Stock daily crude oil requirements and produced around 33.2 million bar-
drawdowns typically follow backwardation because owners of rels per day during the fourth quarter of 2016. The group intends
oil inventory are financially punished for storing oil in a backward- to cut output by roughly 1.2 million barrels daily, with a targeted
ated market when they roll hedges that is, when they close, production cap of 32.5 million barrels each day. Furthermore, cer-
or buy back, a close-to-expiry short futures contract at a price tain non-OPEC members agreed to reduce output by an additional
higher than what they can sell a new or replacement short futures 600,000 barrels per day, with Russia making up 300,000 of that
contract for. This market structure provides incentive for inventory amount. This announcement marked a shift in the psychologi-
owners to sell. For producers, backwardated markets typically cal tide of the crude market, despite the announced volume cut
augur production restraint because a downward-sloping futures amounting to around merely 2% of daily global crude oil supply.
curve indicates that wellhead rates of return will drop due to the
market signaling lower future prices. The crude oil futures mar- When a term structure flips, it blasts a foghorn that market expec-
ket must show backwardation in order for OPEC to meet its tations of future supply have shifted. The nearby chart indicates
collective objective of a global stock drawdown. that the shape of the curve (the green line) is now effectively flat
to backwardated. The Brent futures contract lost virtually all of its
Brent Crude Futures Term Structure Changes contango structure the day following OPECs announcement the
$65
blue line was Brents term structure the day before the cut, while
the purple line was its term structure the day following. As of this
Brent Crude Price ($/bbl)

$60
writing, we are four months into the production cut, and OPECs
$55
compliance with it has been higher than expected nearly 95%.
$50 Given high compliance levels, the market has now turned to focus
$45 on the question of whether the cut will be extended beyond the
$40
June 30, 2017, expiry. We think it will.
Apr-17

Apr-18

Apr-19

Apr-20

Apr-21

Apr-22

Apr-23
Jan-17

Jul-17
Oct-17
Jan-18

Jul-18
Oct-18
Jan-19

Jul-19
Oct-19
Jan-20

Jul-20
Oct-20
Jan-21

Jul-21
Oct-21
Jan-22

Jul-22
Oct-22
Jan-23

Jul-23
Oct-23
Jan-24

Crude Oil, Brent (ICE) Crude Oil, Brent (ICE) Crude Oil, Brent (ICE) The current term structure of the Brent oil futures contract seems
11/29/2016 12/15/2016 5/8/2017
Source: Bloomberg and BBH Analysis.
to suggest that the market believes that OPEC will extend its
Data as of May 8, 2017.
supply cuts beyond that initial end date. A flip in the crude oil
The long-telegraphed but much-delayed announcement marked market structure has preceded a price rally during the past two
the cartels first coordinated output reduction since the 2008 crude oil market cycles. Market participants will watch closely to
financial crisis. OPEC supplies roughly one-third of the worlds see if this one does, too.

10 Brown Brothers Harriman|C O M M O D I T Y M A R K E T S U P D A T E

A flip in the crude oil market structure has
preceded a price rally during the past two crude
oil market cycles. Market participants will watch
closely to see if this one does, too.

Issue 1 2017 11
The Food Safety Modernization Acts
Impact on Imports
By Carlos de Mello

On January 4, 2011, the Food Safety Modernization Act (FSMA) was signed into law. The bill was the first
major overhaul of food safety laws in the United States since 1938, when Congress gave the Food and
Drug Administration (FDA) the power to oversee the safety of most foods. While foodborne diseases are
viewed as being largely preventable, the Centers for Disease Control and Prevention estimates that each
year, about 46 million Americans get sick, 128,000 are hospitalized and 3,000 die from them. The FSMA
gives the FDA broad new powers to better protect public health by strengthening the food safety system,
with a particular emphasis on preventative practices for those who grow, process, transport and store food.
This article focuses on how the FSMA impacts the importation of food products into the United States.

12 Brown Brothers Harriman|C O M M O D I T Y M A R K E T S U P D A T E

According to data from the United States Department of
Agriculture, 19% of food consumed in the United States is
imported. This figure is expected to grow as the nations popu-
lation continues to expand in size and ethnic diversity. Importing
food provides U.S. consumers access to a greater variety of
[T]he FSMA tasks importers
climate conditions, crop seasons and cost jurisdictions. with verifying that their
As food products imports rise, relying solely on port-of-entry foreign suppliers are being
food inspections has become increasingly burdensome. With
that in mind, the FSMA tasks importers with verifying that
held to the same food safety
their foreign suppliers are being held to the same food safety
standards as producers in
standards as producers in the United States. One of the key
components of the act is the Foreign Supplier Verification the United States.
Program (FSVP), which requires importers to establish and
follow specific written procedures to ensure that imported foods
are only sourced from preapproved foreign suppliers. As food
safety and verification for imports move closer to origin, the
FSMA also directs the FDA to physically inspect at least 1,200 With the FSVP, importers inherit the novel burden of identifying
foreign facilities per year. Foreign facilities and countries that and evaluating myriad potential food products hazards. They
deny entry will be refused access to the U.S. market. are now responsible for considering biological hazards such
as parasites and other bacteria, chemical hazards such as
Value of U.S. Food Imports allergens and food decomposition and physical hazards such
($B and Share of Total)
as glass. In addition to evaluating the hazards to the under-
Other edible products
Dairy $1.8 (1.5%)
$9.4 (7.9%)
lying foods, importers need to factor in their customers
Nuts $2.8 (2.4%)
Sugar and candy $4.5 (3.8%) potential hazards in order to protect themselves. For example,
Cocoa and chocolate $4.7 (4.0%)
Vegetable oils $7.6 (6.4%) an agricultural importer is less likely to be concerned about
Coffee and tea $8.3 (7.0%)
Cereals and bakery $10.4 (8.7%) listeria, which is more prevalent in animal products, than a dairy
Vegetables $10.9 (9.2%)
Beverages (non-alcoholic) $11.8 (9.9%) company. But if the agricultural importer wished to sell to
Live meat animals and meat $11.9 (10.0%)
Fruits
Fish and shellfish
$14.8 (12.5%)
$20.0 (16.8%)
a dairy company in the United States, it must verify that
$0.0 $5.0 $10.0 $15.0 $20.0 $25.0 its product is not contaminated with listeria, in addition to
Source: United States Department of Agriculture Economic Research Service. evaluating the usual biological hazards inherent in agricultural
Data as of December 31, 2014.

products such as salmonella and E. coli. This provides the

Source of U.S. Food Imports by Country
($B and Share of Total) importer with an added layer of protection in the event of a
product contamination or recall from its dairy customer.

Canada
$22.0 (18.5%) Food products importers and foreign suppliers are now
Other
$45.3 (38.0%) subject to a growing number of compliance costs, such as
Mexico
$19.2 (16.1%) onsite auditing, sampling and testing, and validation stud-
ies for multiple biological hazards in each individual product.
Indonesia China
Larger importers are hiring qualified individuals who under-
$3.3 (2.8%) $5.8 (4.8%)
stand food safety risks based on product, geography, supply
Australia
$3.5 (2.9%)
India
$4.2 (3.5%)
chain and the specific foreign suppliers they are doing busi-
Brazil Italy Chile France ness with. FSVP-compliant importers will also likely see
$3.7 (3.1%) $4.0 (3.3%) $4.1 (3.4%) $4.1 (3.4%)

Source: United States Department of Agriculture Economic Research Service.

Data as of December 31, 2014.

Issue 1 2017 13
insurance premiums rise as they are held to ever more
rules and regulations. The North American food safety test-
ing industry has undoubtedly benefited from this, with
projections of becoming a $6.4 billion market by 2020.1

One of the many ways that U.S. food products importers

can respond to the growing requirements of the FSMA is by
investing in the expansion of their physical presence at origin.
In addition to food safety requirements, there is a growing
desire to know that imported foods are grown in environmen-
tally responsible ways and do not utilize unfair labor practices.
Having source operations and controlling the majority of the
supply chain has now become a significant competitive advan-
tage in complying with the FSMA, as it ensures U.S. buyers
that hazards are being controlled and that adequate food safety
procedures are being followed.

Food products importers will likely continue to face higher costs

in the near term as the FSMAs expanded level of foreign supplier
scrutiny is implemented. Whether or not the FSMA will reduce
health concerns related to food safety remains to be seen,
but we expect to see continued investments in the hiring of
qualified food safety professionals and in operations at origin.

1
S ource: MarketsandMarkets, North American Food Safety Market by Contaminant (Pathogen,
GMO, Toxin, Pesticides), Technology (Traditional & Rapid), Food Tested (Meat & Poultry, Dairy, Fruit &
Vegetable, Processed Food), & by Country - Trend & Forecast to 2020, November 2015.

14 Brown Brothers Harriman|C O M M O D I T Y M A R K E T S U P D A T E

Having source operations and controlling the
majority of the supply chain has now become a
significant competitive advantage in complying with
the FSMA ... .

Issue 1 2017 15
Understanding Special Liens:
Q&A with John Keough of Clyde & Co
By Lewis Hart

As many Commodity Markets Update readers know, Brown Brothers Harriman (BBH) is a financier of energy,
metal and agricultural commodities. Our clients help balance global supply and demand in these markets by
purchasing commodities in areas where there is surplus production and transporting them to areas where
they are consumed. They also provide storage, financing, insurance and price hedging services for producers
and consumers of physical commodities. In the course of their businesses, these commodity merchants are
increasingly filling the role of bankers to their suppliers and customers either providing advanced payments
to suppliers to help with working capital needs or extending payment terms to their customers.

16 Brown Brothers Harriman|C O M M O D I T Y M A R K E T S U P D A T E

As commodity merchants take on the role of capital provider to the
supply chain, the lines between financing and commercial activity
become blurred. Many clients have sought advice on structuring
financial transactions, trying to minimize the risks of nonpayment
and nondelivery that can create significant economic loss. One
key aspect of managing these risks involves understanding where
commodity merchants who are typically unsecured trade cred-
itors rank in the capital structure. Special statutory liens often
come into play and must be understood by merchants prior to
structuring transactions that involve credit risk with a commercial
counterparty. Given the increasing importance of these matters
to our clients, BBH sat down with John Keough, a Partner at the
New York office of Clyde & Co, an international law firm headquar-
tered in London and specializing in shipping and commodities. Mr.
Keough co-heads the firms maritime, trade and commodities prac-
tice in North America.
Brown Brothers Harriman: You have represented banks, ship-
ping operators, insurance companies and commodity traders in
various financial transactions. What are the key legal risks com-
modity merchants face when extending credit to their customers?
John Keough: The key legal risks facing commodity merchants
often arise from a merchants failure to conduct basic due
diligence to know its customers and to consider details of exe-
cuting the transaction. These risks generally include:
Solvency-related problems of the counterparty, such as cargo
shipment delays caused by bankruptcy or financial nonper-
formance of the counterparty, a supplier or purchaser in the
supply chain, a parent company guarantor or an intermediate
charterer of an ocean vessel
Arrests or attachments of vessel or cargo, particularly in
foreign ports, and the exercise of statutory maritime liens that
may be unknown to the merchant or creditor
Fraudulent or unauthorized ocean bills of lading
C ybersecurity breaches in the supply chain, including
brokers, causing the wrongful diversion of ocean freight or cargo
sales payments
Governmental regulatory, or other interference, in transaction
performance, such as those resulting from foreign regulations
or orders controlling exports and U.S. trade sanctions
The risks can cause problems in any number of scenarios. For
example, if a vessel arrest or cargo attachment occurs based on a
maritime lien that is not recorded anywhere and can be unknown
to the merchant or the vessel owner, a merchants shipment
can be delayed or require additional legal costs to discharge,
transship or replace a shipment.
BBH: What important strategies can merchants use to protect
themselves against the risk of nonpayment?
JK: Key strategies to protect against the risk of nonpayment, in
our experience, include the following:
Know your customers business and the transaction coun-
terparties. Exercise due diligence, with legal guidance
if appropriate, to best protect your interests in defining the
structure of the transaction.
Require letters of credit issued by reputable banks.
If you are a U.S. merchant, require a contractual choice of New
York law and New York federal or state court or arbitral forum
for dispute resolution or alternatively, the law and forum
of another U.S. state, as appropriate, on the advice of legal
counsel instead of the law and forum of a foreign jurisdiction.
Confirm commercial and marine insurance coverages, includ-
ing trade credit risk coverage if appropriate. In addition, confirm
that the coverage scope extends to delay of shipments or
specifies when a delay becomes an insurable loss as well
as additional named assureds on policies and any waiver of
subrogation provisions.
If chartering an ocean vessel, obtain legal guidance on the
charter structure and terms, identifying the charterparty chain
to the extent possible.
Request a contractual counterparty to assign any lien rights.
Require charterers and sub-charterers to identify the vessel
owner before contracting for shipment so that proper risk
analysis may be considered by the merchant.
If the merchant is servicing the vessel itself, direct contractual
privity with the vessel is the best way to ensure the mer-
chants rights are protected.
Consider requiring a parent company guarantor of perfor-
mance and payment by the counterparty.
Provide vessel and vessel interests with a notice of lien in favor
of bunker suppliers to vessel prior to delivery.
Issue 1 2017 17

Vessels may be encumbered by entities extending
beyond the owners control, so the owner is not
always aware of liens on its vessels.
Require the shipper to provide a copy of the relevant charter-
party to allow the merchant to assess what countrys law may
govern any disputes arising under the charter.
Identify the flag state of the vessel. The law of the flag state
is often an important factor that courts weigh in determining
the governing law to a charter dispute if the parties do not
otherwise agree on a choice of law.
BBH: Describe the main categories of special or secret liens, or
similar tools, that can protect commercial traders in the event of
a credit problem with one of their customers.
JK: Commercial traders may have a wide range of such protec-
tions, depending on the trade. In ocean shipments where the
merchant is entering a charterparty for a vessel, the merchant
may have a maritime lien for claims relating to the charter. The
lien is against the vessel itself for breach of the charter by the
counterparty. The merchant may also have a right to attach the
vessel or other assets of the shipowner or the disponent owner
or chartered owner vis--vis the merchant charterer for breach
of the charter under U.S. law, which can allow the prejudgment
seizure of bank accounts, debts owed by third parties to the
18 Brown Brothers Harriman|C O M M O D I T Y M A R K E T S U P D A T E
merchants counterparty, real property and
other assets. In addition, the merchant may
have a maritime lien on the cargo in question
in the transaction under U.S. maritime law.
If a shipment is detained, the merchant may
have a right to arrest the vessel or to seek an
attachment under U.S. maritime law where
a shipment is detained or delayed in transit.
Such issues could arise, for example, where
goods are stopped during or after loading at
a foreign port due to unforeseen export con-
trols by the foreign government or by insolvency issues. Similar
rights to secure a claim for breach of a contract of carriage may
exist against forwarding agents and non-vessel operating com-
mon carriers, or NVOCCs, that issue bills of lading for shipments.
Depending on the connection to the U.S., other methods of secu-
rity may be considered under applicable state law, such as the
Uniform Commercial Codes Article 9.
BBH: How do banks get comfortable that they are secured in
instances where they may be trumped by a creditor they thought
would be unsecured in bankruptcy?
JK: Banks can find that comfort level by obtaining sound legal
advice at the pre-deal stage on the transaction structure and by
ensuring diligent reporting on the intermediaries and any mari-
time aspects on the deal. Some creditors, usually considered
unsecured, can on occasion receive protection under the federal
statutes authorizing maritime liens under U.S. law. Indeed, federal
district courts can withdraw a maritime claim from a bankruptcy
court proceeding in the U.S. under limited circumstances.
BBH: You have been active in several recent bankruptcy situa-
tions involving banks and trade creditors. What have you learned
in this process? What lessons can commodity merchants take
away from recent legal decisions?
JK: We often see that the mistakes clients make in structuring a
transaction without legal advice can be costly. Early advice on key
legal issues can typically help to avoid some traps for the unwary.
Insolvency and government-related issues often can introduce
unexpected risks in a transaction and lead to costly legal disputes,
particularly in foreign courts. Lessons learned include the value of
taking steps to ensure the security a merchant believes it holds is
in fact effective, as well as that foreign law issues and contracts
containing foreign choice of law and forum selection provisions
can disrupt a merchants commercial risk expectation and profit-
maximizing plan.
BBH: Why are maritime liens called secret liens?
JK: Maritime liens are considered secret since there is
no filing requirement to obtain, perfect or enforce a valid lien,
such as under Article 9 of the UCC. The maritime lien is in
effect an inchoate lien, attaching immediately upon a provision of
necessar-ies (such as bunkers) to a vessel, for example, or
upon a breach of a charterparty or contract of affreightment, or
commission of a maritime-related tort. It is generally not
recorded before enforcement. Vessels may be encumbered
by entities extending beyond the owners control, so the
owner is not always aware of liens on its vessels.
BBH: In a nutshell, what is the risk of maritime liens to commodi-
ties traders and charterers? Why are they a trap for the unwary?
JK: Maritime liens often exist below the radar until they are
enforced by an arrest or attachment; however, when enforced,
they may substantially disrupt commodities traders and charterers
who face extensive delays due to the debts of a key counterparty
or vessel operator in a transaction.
BBH: Do the liens arise only on trade to or from the United States?
JK: Not necessarily. The maritime liens arise under U.S. law.
Some contracts for trade to and from foreign ports, however,
expressly incorporate U.S. maritime law with the intent to invoke
maritime liens created by U.S. statute. This issue has been under
recent review by courts in a number of jurisdictions. Some
maritime liens exist under foreign law, but generally to a lesser
extent than U.S. law.
BBH: What is the current state of the U.S. law facing marine fuel
traders? What does it take to have a maritime lien for marine fuel
delivered to a ship?
JK: U.S. law on this issue confounding marine fuel traders is
under active review by a number of appeals courts across the
country, with conflicting decisions issued by the district courts
so far. Given the state of judicial play, no simple answer exists to
the question of what it takes to have a maritime lien these days
for fuel delivered to a ship. Distilling the decisions so far in a con-
servative manner, the rule may be summarized as this, at least
for courts in New York: A maritime lien for marine fuels delivered
to a vessel arguably arises under the applicable federal statute
where a bunker supplier (1) provides necessaries (fuel), (2) to a
vessel, (3) on the order of the owner or someone authorized by
the owner, with a direct contractual relationship between the
supplier and the vessels owner. The law remains subject to appel-
late review, and it is unsettled whether a contractual relationship
between the owner and the physical supplier is required.
The courts are wrestling with the plain meaning of the statutory
language on the order of the owner. Does it mean a contract
with the owner is required? Or is it sufficient that the fuel was
delivered on an order of the owner, though the owner com-
municated the order through intermediaries and not directly to
the physical supplier? Although a maritime lien may arise from
a contract with a charterer of the vessel, some risk also exists
if the supplier is provided notice of a no lien clause in the
charter or knows that the owner or charterer of the vessel does
not authorize the supply to the ship.
At any rate, we suggest taking legal advice on the issue
when drafting supply contracts, charterparties and bunker fuel
delivery receipts.
BBH: John, thank you for sitting down with us to share your
expertise on this important topic.
Disclaimer of Attorney-Client Relationship and Legal Advice
The responses to the above questions are for general information purposes
only, and the content of this interview: (1) is not provided in the course of,
and does not create or constitute, an attorney-client relationship; (2) is not
intended as a solicitation; (3) is not intended to convey or constitute legal
advice; and (4) is not a substitute for obtaining legal advice from a quali-
fied attorney. You should not act upon any such information without first
seeking qualified professional counsel on your specific matter. The hiring of
an attorney is an important decision that should not be based solely upon
advertisements or general information for public consumption.
Issue 1 2017 19
 Agricultural Prices
Arabica Coffee Cocoa Beans
$1.80 $3,100

$1.70 $2,900
$2,700
$1.60
$2,500
$1.50

$/MT
$/lb

$2,300
$1.40
$2,100
$1.30
$1,900
$1.20 $1,700
$1.10 $1,500
SOFT COMMODITIES AND PLYWOOD

Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17

Robusta Coffee Cotton

$2,400 $0.81

$2,300
$0.76
$2,200

$2,100 $0.71
$/MT

$/lb
$2,000
$0.66
$1,900
$0.61
$1,800

$1,700 $0.56
Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17

Plywood Sugar
$0.26
$420
$0.24
$410
$0.22
$400
$0.20
$/1,000 sq ft

$390
$/lb
$0.18
$380
$0.16
$370
$0.14
$360
$0.12
$350
$0.10
$340 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17
Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17

Corn Rice
$3.90 $0.11

$3.70 $0.11

$3.50 $0.10
$/bu

$/bu

$3.30 $0.10

$3.10 $0.09

$2.90 $0.09
GRAINS

$2.70 $0.08
Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17

Soy Wheat
$11.20 $4.70

$10.70 $4.50

$10.20 $4.30
$/bu
$/bu

$9.70 $4.10

$9.20 $3.90

$8.70 $3.70

$8.20 $3.50
Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17

Live Cattle Lean Hogs

$1.30 $0.80
$1.25
$0.70
LIVESTOCK

$1.20
$1.15 $0.60
$1.10
$/bu

$0.50
$/lb

$1.05
$1.00 $0.40
$0.95
$0.90 $0.30
$0.85
$0.20
$0.80
Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17
Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17

20 Brown Brothers Harriman|C O M M O D I T Y M A R K E T S U P D A T E

 Metal Prices
Gold Silver
$1,400 $21
$1,350 $20
$1,300 $19
$1,250 $18
$/oz

$/oz
$1,200 $17
$1,150 $16
$1,100 $15
PRECIOUS METALS

$1,050 $14
$1,000 $13
Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17

Palladium Platinum
$850 $1,150
$800
$1,100
$750
$700 $1,050
$650 $1,000
$/oz

$/oz
$600
$950
$550
$500 $900
$450 $850
$400
$800
Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17
Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17

Aluminum Nickel
$2,000 $12,000
$11,500
$1,900
$11,000
$1,800 $10,500
$10,000
$/MT

$1,700 $/MT
$9,500
$1,600
$9,000
$1,500 $8,500
$8,000
$1,400
Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 $7,500
Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17

Copper Tin
$6,500 $22,500
BASE METALS

$22,000
$6,000 $21,500
$21,000
$5,500
$20,500
$/MT

$/MT

$20,000
$5,000
$19,500
$4,500 $19,000
$18,500
$4,000 $18,000
Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17

Lead Zinc
$2,700 $3,200
$3,000
$2,500
$2,800
$2,300 $2,600
$2,400
$/MT
$/MT

$2,100
$2,200
$1,900 $2,000
$1,800
$1,700
$1,600
$1,500 $1,400
Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17

Hot-Rolled Coil Iron Ore

STEEL & IRON ORE

$700 $105

$650 $95

$600 $85

$550 $75
$/MT

$/MT

$500 $65

$450 $55
$400 $45
$350 $35
Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17

Issue 1 2017 21
 Energy Prices
Crude Oil Brent-WTI Spread
$58 $4
$56
$54
$3
$52
CRUDE OIL

$50
$/bbl

$/bbl
$48 $2
$46
$44
$42 $1
$40
Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17
$0
Crude Oil (WTI) Crude Oil (Brent) Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17

Gasoline WTI 321 Crack Spread (Cushing)

$1.75 $21
$1.65 $19
$1.55 $17
$1.45
$15
$1.35

$/bbl
$/gal

$13
$1.25
REFINED PETROLEUM PRODUCTS AND ETHANOL

$11
$1.15
$1.05 $9

$0.95 $7
$0.85 $5
Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17

Heating Oil Ethanol

$1.75 $1.80
$1.70 $1.75
$1.70
$1.65
$1.65
$1.60
$1.60
$1.55
$/bbl
$/gal

$1.55
$1.50 $1.50
$1.45 $1.45
$1.40 $1.40
$1.35 $1.35
$1.30
$1.30
Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17
Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17

Ultra-Low Sulfur Diesel Gasoline-Ethanol Spread

$1.70 $0.25
$1.65 $0.20
$0.15
$1.60
$0.10
$1.55 $0.05
$0.00
$/gal

$/gal

$1.50
-$0.05
$1.45 -$0.10
$1.40 -$0.15
-$0.20
$1.35
-$0.25
$1.30 -$0.30
Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17

NYC Electricity (On-Peak) Natural Gas

$45 $4.50

$40 $4.00
POWER AND POWER GENERATION

$35 $3.50
$/MMBtu
$/MWhr

$30 $3.00

$25 $2.50

$20 $2.00

$15 $1.50
Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17

Coal Uranium
$120 $29

$110 $27

$25
$100
$23
$/MT

$/lb

$90
$21
$80
$19
$70 $17

$60 $15
Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17

22 Brown Brothers Harriman|C O M M O D I T Y M A R K E T S U P D A T E

 YTD % Change: Commodities YTD % Change: Currencies and Indices
Lumber 24% Nasdaq 11%

Palladium 16% Mexican Peso 11%

Aluminum 14% Russian Ruble 10%

Cotton 12% German DAX 8%

Silver 12% Mexican Bolsa 8%

Gold 11% BM&F Bovespa 7%

Platinum 8% Japanese Yen 7%

Copper 2% S&P 500 6%

Corn 2% Indian Rupee 5%

Ethanol 1% Dow Jones 5%

Wheat -1% Australian Dollar 5%

RBOB Brazilian Real 4%

-2%
British Pound 4%
Soybeans -4%
Euro 3%
Coffee Arabica -5%
Swiss Franc 2%
Crude WTI -8%
London FTSE 100 2%
Crude Brent -9%
Chinese Yuan 1%
Ultra-Low Sulfur Diesel -9%
Shanghai Composite 1%
Coffee Robusta -11%
Canadian Dollar -1%
Palm Oil -12%
Nikkei -1%
Cocoa -13%
U.S. Dollar Index -3%
Sugar No. 11 -17%
Bloomberg Commodity -4%
Natural Gas -18%
Russian MICEX -11%
Rubber -18%

Bloomberg
Bloomberg Commodity
Commodity Index2017)
Index (2001-YTD (2000-2016)
250
250

200 200
Index price (USD)

Index Price (USD)

150 150

100 100

50 50

0 0
2001 2001 2003
2002 2002 2003
2004 2004
200520052006
2006 2007
2007 2008
2008 2009
200920102010
2011 2011
2012 2013 2014
2012 201320152014
2016 2015 2016

The Bloomberg Commodity Index is a diversified index made up of 22 exchange-traded futures contracts for physical commodities.
The futures contracts are weighted to account for each commodity's economic significance and market liquidity.

Source for all charts on pp. 20-23: Bloomberg.

Issue 1 2017 23
The BBH Commodities & Logistics Team

Our goal is to be the financial partner of choice to premier, privately held businesses and their owners in the areas of
commodities, logistics, transportation and infrastructure. We provide advice and capital across an integrated suite of services:
Corporate Advisory & Banking, Private Equity and Private Wealth Management. With a nearly 200-year commitment to the
sector, we are deeply experienced across multiple subsectors including metals, energy and agricultural/soft commodities
as well as port services, shipping and transportation, and warehousing and logistics. As a privately owned partnership, our
Partners interact directly with clients, allowing BBH to forge intimate owner-to-owner relationships.

To learn more, please contact Lewis Hart at 212.493.7886/lewis.hart@bbh.com, Max Schlubach at 212.493.8864/max.
schlubach@bbh.com or Alice Birnbaum at 212.493.8920/alice.birnbaum@bbh.com.

24 Brown Brothers Harriman|C O M M O D I T Y M A R K E T S U P D A T E

This publication is provided by Brown Brothers Harriman & Co. and its subsidiaries (BBH) to recipients, who are classified as Professional Clients or Eligible
Counterparties if in the European Economic Area (EEA), solely for informational purposes. This does not constitute legal, tax or investment advice and is not intended
as an offer to sell or a solicitation to buy securities or investment products. Any reference to tax matters is not intended to be used, and may not be used, for purposes
of avoiding penalties under the U.S. Internal Revenue Code or for promotion, marketing or recommendation to third parties. This information has been obtained from
sources believed to be reliable that are available upon request. This material does not comprise an offer of services. Any opinions expressed are subject to change
without notice. Unauthorized use or distribution without the prior written permission of BBH is prohibited. This publication is approved for distribution in member states
of the EEA by Brown Brothers Harriman Investor Services Limited, authorized and regulated by the Financial Conduct Authority (FCA). BBH is a service mark of Brown
Brothers Harriman & Co., registered in the United States and other countries.

Brown Brothers Harriman & Co. 2017. All rights reserved. 2017.

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