@sdelsad/commodity-desk-daily 1.0.2 → 1.0.4
This diff represents the content of publicly available package versions that have been released to one of the supported registries. The information contained in this diff is provided for informational purposes only and reflects changes between package versions as they appear in their respective public registries.
- package/README.md +4 -2
- package/ep01.md +103 -28
- package/ep01.mp3 +0 -0
- package/feed.xml +8 -8
- package/package.json +3 -2
package/README.md
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# Commodity Desk Daily
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Daily 10-minute podcast on physical commodity trading.
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RSS feed: `https://cdn.jsdelivr.net/npm/@sdelsad/commodity-desk-daily@latest/feed.xml`
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package/ep01.md
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# Commodity Desk Daily —
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- **ABCD
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# Commodity Desk Daily — Episode 1: What a Merchant Does
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*Monday, August 10, 2026 · ~10 min listen*
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## Key takeaways
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- A merchant is **not** paid to predict prices. The job is transforming commodities across three dimensions: **space** (move it to where it's worth more), **time** (store it from surplus to scarcity), and **form** (crush, blend, refine it into what customers actually buy).
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- The merchant is a **risk absorber with a balance sheet**: the farmer doesn't want to carry price risk for six months, the crusher needs exact tonnage on exact dates — the margin pays for absorbing everything they don't want (logistics, timing, quality, price risk).
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- The old guard of global agri-trading is the **ABCD**: ADM, Bunge, Cargill, and (Louis) Dreyfus — joined today by COFCO (China's state trader) and Viterra, which merged with Bunge in 2025.
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- **Physical vs paper**: physical means real cargoes with quality certificates and vessels; paper means futures and options. Merchants trade huge volumes of paper — but to *hedge* physical positions, not to speculate.
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- Because the flat price is hedged from day one, a merchant's profit lives entirely in the **differentials**: local premiums, freight, execution costs. In the worked example, 95¢/bu gross margin − 70¢ freight − 10¢ execution = 15¢/bu kept ≈ **$5.50/tonne × 66,000 t ≈ $360k on one cargo** — with zero opinion on price direction.
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- LDC has been doing the space transformation since **1851**, when 17-year-old Léopold Louis-Dreyfus carted Alsace wheat to Basel. Same trade, bigger boats.
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- **Asset-heavy beats asset-light** in two ways: assets are *options* (your port terminal prints money when export demand surges) and *information machines* (your elevators and vessels see the flows before the screens do).
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## Vocabulary
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| Term | Desk meaning |
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| Merchant / trading house | Firm that buys, moves, stores, transforms and sells physical commodities |
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| ABCD | ADM, Bunge, Cargill, Louis Dreyfus — the historic big four of grain trading |
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| Physical | The real commodity: cargoes, silos, quality specs, vessels |
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| Paper | Futures & options — standardized exchange contracts |
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| Hedging | Using paper to cancel the price risk of a physical position |
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| Flat price | The outright price level (e.g. the CBOT futures price) |
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| Differential / premium | The amount over or under futures paid for real goods in a real place |
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| Carry | Being paid by the market structure to store a commodity over time |
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| Crush | Processing soybeans into meal + oil (form transformation) |
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| Asset-light / asset-heavy | Renting the supply chain vs owning elevators, ports, plants, vessels |
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| Elevation | Moving grain through a port elevator into a vessel (a fee-earning bottleneck) |
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## Market pulse (as of Friday Aug 7 close)
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Wheat led the complex: KC September HRW +14¼¢ to $7.14, Chicago September SRW near $6.40, on Black Sea tension and firmer oil. Corn was pinned — Sep $4.39, Dec $4.62 — with the market waiting for **Wednesday's August WASDE**, where analysts expect a corn yield near 182.4 bpa and production just under 16 billion bushels. Soybeans drifted to ~$11.59 (Sep); China bought ~8.7M bu of beans and Mexico ~11.3M bu of corn. In softs, arabica sits near $3.15/lb with ICE-certified stocks at 2½-year lows despite talk of a record 70M+ bag Brazil crop; raw sugar trades around 16.5¢/lb.
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---
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## QUIZ — Episode 1 (today). No N-1 / N-3 blocks yet: this is Episode 1.
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**Q1 — The nervous junior.** Your desk bought 20,000 tonnes of soybeans from Brazilian farmers last week and immediately sold CBOT futures against the full quantity. Today the board drops 40¢/bu on good US weather. A junior on the desk says: "Ouch — our inventory just lost $300k." What do you tell him? What actually determines whether this position makes or loses money?
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**Q2 — The freight collapse.** Overnight, ocean freight on the Brazil→China route halves. Nothing else moves: CBOT is flat, Brazilian premiums and Chinese delivered prices are unchanged *for now*. Your book holds (a) beans bought FOB Santos not yet sold on, and (b) cargoes already sold CFR China with freight *not yet fixed*. What happens to the value of each leg, what trade suddenly looks attractive to everyone — and therefore what would you expect to happen to Brazilian premiums and Chinese delivered premiums next?
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**Q3 — Steel vs screens.** LDC owns a port elevator at a Brazilian export terminal; a competitor runs the same beans business asset-light, renting elevation capacity. This season export demand doubles. Next season it collapses. Sketch who wins and who bleeds in each season, and name the two things (from today's episode) the elevator gives LDC that the asset-light rival can never fully rent.
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---
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## ▼ SOLUTIONS (spoilers) ▼
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**S1.** The junior is looking at the flat price, but the desk has no flat-price exposure: the short futures gained roughly what the inventory lost (≈ 40¢ × 20,000 t × 36.74 bu/t ≈ $294k each way). The position's P&L is driven by the **basis** — the difference between the local physical price and futures. If Brazilian premiums *strengthen* relative to the board (e.g. because a lower flat price stops farmer selling), the hedged position *makes* money even as the screen bleeds. The trap: confusing flat-price risk (hedged away) with basis risk (the risk you actually chose to hold). Tomorrow's episode is exactly this.
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**S2.** Leg (a): unsold FOB beans are now cheaper to deliver anywhere — their forward value rises. Leg (b): sold CFR with freight unfixed means your all-in cost of performing just dropped by half the freight — instant mark-to-market gain (you were short freight, freight fell). The attractive trade is the space arbitrage: buy Brazil, ship to China, since the margin (CFR price − FOB cost − freight) just widened. But everyone sees it: the rush to buy Brazil lifts FOB premiums and the rush to sell China pressures CFR premiums until the arb closes back to roughly freight + costs. Lesson: differentials, not flat price, absorb the shock — and arbs are self-extinguishing.
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Corn ~$4.64 (Dec), soybeans ~$11.79 (Nov), SRW wheat ~$6.35 (Sep). Grains heavy on good US Midwest weather; beans eyeing a 2nd weekly loss; wheat supported by Black Sea disruptions but capped by weak US exports. Watch: Chinese soybean flash sales, and **WASDE Wednesday Aug 12**.
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**S3.** Boom season: LDC elevates its own cargoes at cost and rents spare capacity to desperate rivals at boom prices — the asset-light trader queues, pays up, and hands its margin to the terminal owners. Bust season: LDC still carries the fixed costs (staff, maintenance, capital) of a quiet terminal, while the asset-light rival simply walks away — that's the real cost of owning steel. The two un-rentable advantages: **optionality** (guaranteed capacity, at cost, exactly when it's scarcest) and **information** (the terminal sees real flows — farmer selling, lineups, congestion — before they hit any screen). Owning assets is buying a permanent option plus a data feed; the rent is paid in bad-year fixed costs.
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##
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## The episode, in writing
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### What a merchant actually does
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Picture a commodity trader and you probably imagine someone glued to screens, betting that wheat goes up. That image is wrong in an important way, and understanding *why* it is wrong is the foundation for everything else in this series.
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A merchant does not get paid for predicting prices. A merchant gets paid for **transforming commodities** — in space, in time, and in form.
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The founding story of your future employer is the cleanest illustration there is. In 1851, a seventeen-year-old named Léopold Louis-Dreyfus began buying wheat from farmers in Alsace and carting it across the border to Basel, where it was worth more. Buy where it's cheap, move it to where it's dear, capture the difference. That is transformation in **space**, and 175 years later it is still the core of what LDC does — with 66,000-tonne vessels instead of carts.
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The second dimension is **time**. At harvest, corn floods the market and prices sag; by spring the flood is over but the world still eats every day. A merchant buys at harvest, stores, and sells forward months later — not as a bet that prices will rise, but because the market's forward structure usually *pays a known spread* for storage. That spread is called carry, and it gets its own episode later this week.
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The third is **form**. Nobody eats a raw soybean: crush it and you get meal for animal feed plus oil for cooking — products with actual customers. Blend cheap low-protein wheat with expensive high-protein wheat and you hit exactly the specification an Algerian miller will pay for. Same atoms, new form, new value.
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Who pays for all this? Think of the farmer in Mato Grosso: he grows soybeans brilliantly but has no vessel, no buyer in China, and no desire to carry price risk for six months. Think of the crusher in Shandong: she needs 66,000 tonnes, on spec, arriving the second week of October — not "whenever". The merchant sits between them and absorbs everything they don't want: the logistics, the timing, the quality risk, the price risk. That service is what the margin pays for. A merchant is, at bottom, a risk absorber with a balance sheet.
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### The players
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The historic big four go by four letters — **ABCD**: ADM, Bunge, Cargill, and Dreyfus. Add the newer giants: COFCO, China's state trading house, and Viterra, which merged with Bunge in 2025. Between them, these firms handle most of the grain that crosses an ocean.
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The shape of the business is worth internalizing early: massive volumes, razor-thin margins. A net margin of 1–2% of revenue is a good year. The game is won on repetition and reliability, not home runs.
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### Physical vs paper
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Physical is the real thing: actual soybeans in an actual silo, with quality certificates and a vessel waiting at berth. Paper is futures and options — standardized contracts traded on exchanges like the CME in Chicago.
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What surprises most newcomers is that merchants trade enormous volumes of paper, yet almost never to speculate. Paper exists to *cancel* the price risk of physical positions — hedging. Buy a real cargo of beans and sell futures against it: if the whole market drops a dollar, the cargo loses and the futures win, netting out to roughly flat. What's left is the margin you locked in for moving beans from Brazil to China.
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Connect that to Friday's pulse. Wheat jumped 14 cents — did the wheat desks cheer? Mostly, no: their books are hedged, so the flat-price rally largely washes out. What they actually watched was whether Russian export premiums moved against Chicago, whether freight twitched, whether importers pulled bids. Different screens, different game.
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The merchant's mantra: *we are not paid to be right about price; we are paid to move things to where they are worth more.*
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### The math of one cargo
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| Item | ¢/bu |
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| Buy FOB Santos | futures + 80 |
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| Sell CFR China | futures + 175 |
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| **Gross margin** | **95** |
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| Ocean freight | −70 |
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| Port & execution | −10 |
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| **Net margin** | **15** |
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Fifteen cents a bushel sounds tiny — until you scale it. A tonne of soybeans is about 36.7 bushels, so 15¢/bu ≈ **$5.50/tonne**, and on a 66,000-tonne Panamax cargo that is roughly **$360,000** — earned with *no opinion whatsoever* about whether soybeans go up or down. The flat price is hedged on the futures market from day one; the entire profit lives in the differentials.
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### Asset-light vs asset-heavy
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Some trading shops own almost nothing — a desk, screens, and credit lines — and rent the rest. Asset-light is nimble but fragile: anyone can copy your trade. LDC sits firmly on the heavy side: elevators, port terminals, crush plants, juice terminals, and around 200 chartered vessels on the water at any moment.
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Why own steel and concrete? Because **assets are options**: when export demand surges, your terminal prints money while competitors queue to rent capacity at your price. And because assets are **information machines**: your elevators see what farmers are selling, your vessels see which ports are jammed. You see the flows before they ever reach a screen.
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*
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*Tomorrow — Episode 2: Flat price vs basis, or why the number in Chicago is not the price of anything you can actually touch.*
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package/ep01.mp3
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package/feed.xml
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</itunes:owner>
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<itunes:explicit>false</itunes:explicit>
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<itunes:category text="Business"/>
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<itunes:image href="https://cdn.jsdelivr.net/npm/@sdelsad/commodity-desk-daily@1.0.
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<itunes:image href="https://cdn.jsdelivr.net/npm/@sdelsad/commodity-desk-daily@1.0.3/cover.jpg"/>
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<image>
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<url>https://cdn.jsdelivr.net/npm/@sdelsad/commodity-desk-daily@1.0.
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<url>https://cdn.jsdelivr.net/npm/@sdelsad/commodity-desk-daily@1.0.3/cover.jpg</url>
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<title>Commodity Desk Daily</title>
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<link>https://www.npmjs.com/package/@sdelsad/commodity-desk-daily</link>
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</image>
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<item>
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<title>Ep 1 — What a
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<description>
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<enclosure url="https://cdn.jsdelivr.net/npm/@sdelsad/commodity-desk-daily@1.0.
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<guid>https://cdn.jsdelivr.net/npm/@sdelsad/commodity-desk-daily@1.0.
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<pubDate>Mon, 10 Aug 2026
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<itunes:duration>
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<title>Ep 1 — What a Merchant Does</title>
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<description>Why commodity merchants get paid to transform commodities in space, time and form — not to predict prices. The ABCD houses, physical vs paper, and the math of one soybean cargo.</description>
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<enclosure url="https://cdn.jsdelivr.net/npm/@sdelsad/commodity-desk-daily@1.0.4/ep01.mp3" length="7401933" type="audio/mpeg"/>
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<guid>https://cdn.jsdelivr.net/npm/@sdelsad/commodity-desk-daily@1.0.4/ep01.mp3</guid>
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<pubDate>Mon, 10 Aug 2026 18:30:00 GMT</pubDate>
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<itunes:duration>616</itunes:duration>
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</item>
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</channel>
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</rss>
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package/package.json
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{
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"name": "@sdelsad/commodity-desk-daily",
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"version": "1.0.
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"description": "Commodity Desk Daily -
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"version": "1.0.4",
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"description": "Commodity Desk Daily - Ep 1: What a Merchant Does",
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"license": "CC-BY-4.0",
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"keywords": [
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"podcast",
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"commodities",
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"trading",
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"education"
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]
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}
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