German ETF Innovation (Exchange Traded Faeces) – Frankfurt Prepares New Post-Brexit Products

German ETF Innovation (Exchange Traded Faeces) – Frankfurt Prepares New Post-Brexit Products : Management of Change is reaching fever pitch in the EU financial markets following the Brexit vote. As well as trying to encourage London bankers to relocate the Germans are developing innovative environmentally friendly trading products to encourage Start-ups.

The Key to Successfull Trading In Poo is Finding Ways To Manage the Smell — The Key to Successful Trading In Poo is Finding Ways To Manage the Smell

In these times of post Brexit and US Election hangovers I am keenly looking out for good examples of Management of Change opportunities. Here is one that is, in my view, very ‘green’. In addition to this article I have also prepared a briefing in relation to ‘Trump’ issues – if you are interested in that the link is here (‘How to Prevent Smelly Trumps – Scientific Breakthrough…‘)

I was interested to read in last week’s Frankfurter Allgemeine Zeitung about the German Güllebörsen which can be roughly translated as their ‘Shit Exchange‘. Buying and selling ‘exchanges‘, like those used to trade commodities, are a useful way of improving economic efficiency. They put those who ‘have‘ in touch with those who ‘want‘. Futures and Options exchanges are an extension of this idea providing people with an opportunity to make the trade at a future date or by merely giving them the ‘option’ of buying or selling a commodity.

Inviting City Traders To Frankfurt — State of the art facilities and innovative products to encourage London City Traders To move to Frankfurt

But what about when the commodity is poo? Or to be more precise animal poo? For my masters dissertation about 25 years ago I researched setting up a new ‘exchange’ for the chemicals industry. The idea was to help producers and consumers of nasty smelling chemicals buy and sell more efficiently.

Well our German friends have gone one further and on their ‘shit exchange’ you can buy and sell some very nasty smelling products. To investigate this business in more detail I decided to take a look at the Nordrhein-Westfalen Region’s Nährstoffbörse. The word ‘Nährstoffbörse’ translates as ‘Nutrient Exchange‘ which I think uses a bit of artistic licence because it deals with buying and selling excretia from farm animals. I suppose the more descriptive name ‘Animal Shit Trading Website‘ struggled to get through the marketing department’s vetting process.

Frankfurt's Latest Exchange Traded Commodity — Frankfurt’s Latest Exchange Traded Commodity

The necessity to be able to trade in animal poo is underscored in German Law by the ‘Düngeverordnung‘ (Transl: ‘Dung Regulations’) which stipulates that the number of, for example cows or pigs, that a farmer can keep is limited by the availability of land needed to dispose of their poo. The idea behind this law is to control the amount of environmentally unfriendly contaminants like nitrates that get into the soil and then can enter the water table.

This means that a farmer may find he has more poo from his animals than he can use on his own land. This is where he needs the Shit Exchange – a managed way of trading in unwanted animal faeces. There are also other farmers who do not have enough fertiliser for their crops and would really appreciate someone dropping by with a truck load of poo. This demand often peaks in the spring time – precisely the period when animal farmer’s poo tanks are almost overflowing because they can’t ‘spread muck‘ during the winter snow.

Distributing Exchange Traded Commodities

The Nordrhein-Westfalen Regional Shit Exchange website provides details of how to take animal poo samples and where to send them. The relevant regional agricultural authority can then arrange sample testing (for a fee) – you need to specify what kind of poo it is – beef or dairy cattle, pig, horse, veal, chicken etc. You take 10 samples from your ‘vat’, mix them in a bucket and then send 0.75L in a bottle by post (specific details here). The sample is then analysed for various chemicals (e.g. Nitrogen, Ammonia, Phosphates, Potassium, Magnesium, Calcium, Solids etc.).

The analysis of the poo is important because as we say up-North: ‘All shit is not the same‘. The chemical characteristics of the poo help to determine its value to a potential customer and whether there is a risk of over-contaminating the local ground water with the wrong substances.

Making Liquid Commodities For Germany's Newest Exchange — Making Liquid Commodities For Germany’s Newest Exchange

Also ensuring customer and supplier are geographically close is an important job for the exchange. In addition to reducing transport costs this also helps to minimise the number of faeces tankers moving around the German road system. Despite every effort on the part of the suppliers these vehicles can sometimes be a bit smelly. Distance minimization is also important because the vehicles generally have to return empty (it is rather difficult to find other products that you could sensibly transport in a poo tanker – even if you wash it first).

Adequate Good Quality Storage Is Important In Commodity Trading

So there you have it – a German environmentally friendly innovation in the area of risk management. In time I am sure they will introduce shit futures and options to further help manage farmers risks. I know that following Brexit there is a big movement to encourage the financial industry to move from the City of London to Frankfurt. Watch out you Brits you may have already missed the boat on the Frankfurt Shit Exchange!