By Choo Rui Qi Rachel, Ouyang Huixian, Phua Fabian and Teo Pai Loong

IF rice and sugar sound like ingredients for a recipe, then this particular one wouldn't be complete without a dash of business savvy and the latest trading platforms. All combine to explain why Singapore-based trading firm Wee Tiong laughed its way to the bank last year as sugar prices jumped and its profits hit record highs.

It wasn't too long back when the firm faced an uphill climb as the Singapore market opened up to free imports and quickly became saturated. In the late 1990s, Tan Siong Kern, founder of Wee Tiong Pte Ltd, felt that he must venture overseas to remain competitive. The firm (named after his son) would grow quicker than anyone expected and is now a leading commodities trading company in the region.

Average annual turnover has been clocking past $200 million for the last few years. And for five consecutive years, the company has clinched the prestigious Enterprise 50 (E50) Award, given to the top small and medium-sized enterprises in Singapore. Wee Tiong has also been recognised by IE Singapore and put under the Global Trader Programme for six straight years. Its success story would be the dream of every budding entrepreneur.

Incorporated in 1993, Wee Tiong Pte Ltd is an established regional rice and sugar importer and wholesaler. It sources rice supplies mainly from Thailand and Vietnam, and has successfully built up household brands such as Golden Royal Jewel in Singapore. Its products can be found in most major supermarkets and provision shops. While local sales make up 7 per cent of Wee Tiong's total sales, the majority of its revenues are generated from overseas sales in Indonesia, The Philippines, and Malaysia, among others. Wee Tiong's customer base spans not only the South-east Asian region but also the Middle East.

The company operates with a small workforce of less than 30 employees. Tan Wee Tiong and Tan Wee Beng, both directors of the firm and sons of Mr Tan Siong Kern, handle the finance department and the trading arm of the firm, respectively. Mr Tan Wee Beng explained that by keeping the workforce lean, he is able to streamline efforts and manage human capital effectively.

Graduating from Nanyang Technological University with a degree in engineering, Mr Tan Wee Beng was roped into the family business by his father and brother. Despite having no prior knowledge of the world of commodities trading, he made a swift impact on the business by redesigning Wee Tiong's business model and bringing fresh ideas to the company. Understanding that technology is crucial for Wee Tiong to remain competitive, Mr Tan took the initiative to refine business and administrative procedures as well as upgrade his staff in terms of the latest trading knowledge and technology trends.

Within a few months, Mr Tan organised a team of traders to supply high value-added information to customers and suppliers to assist them in their decision making. To equip and enhance its staff with the necessary skills, Wee Tiong sends every trader to attend courses at MFGlobal, a leading US commodities trading brokerage, regularly. Armed with the latest financial instruments and trading platforms, the trading team is able to convey timely, critical information on the global demand and supply situation to clients. This service is highly valuable because many of Wee Tiong's customers overseas do not have access to such information.

The influx of speculative money into the commodities market in recent years had created an extremely volatile market where prices spiral and plunge frequently. Price fluctuations cause suppliers to back out when prices suddenly rise and customers get cold feet when prices drop. In order to stay the course through such unpredictable markets, the trading team recognises the need to hedge against the fluctuations by taking appropriate positions in the physical vis-a-vis futures markets.

For instance, Mr Tan explained, 'when the international futures prices of wheat flour soared in 2007, our team understood the link between wheat flour and rice, both of which are household staples in Asian countries. We recognised a potential supply shortage in rice and took a longer and bigger physical position. This move led to a substantial profit in 2008'.

Mr Tan acknowledges that providing value-added market information alone is not sufficient to sustain Wee Tiong's success in the long run because it does not add value to the goods they trade in. To strengthen its position, Wee Tiong is looking for ways to develop its expertise as well as to diversify upstream and downstream.

One of the diversification plans is to expand its business by establishing a sugar refinery. The company has already drawn up plans to open a plant in Indonesia. The sugar refinery will be able to process raw sugar into white sugar.

This would extend Wee Tiong's reach and presence and capture more buyers in Indonesia. Opening the proposed sugar refinery in Indonesia may also help Wee Tiong to gain access to a huge, lucrative market and strengthen its position to compete with other trading houses. However, because of the recent global recession, Wee Tiong has scaled back its expansion plan for now and is treading more cautiously. The proposed refinery is expected to be ready by 2011.

'In the next decade, commodities will be here to stay', says Mr Tan. He hints at plans to expand product lines by exploring other commodities that have a pervasive presence in Asia, such as rubber and wheat. With more ingredients, it is a recipe for success.

This article was first published in The Business Times.