Miller Magazine Issue 109 / January 2019

49 NEWS MILLER / JANUARY 2019 will outlast the war. And China will want to diver- sify away from America, says Heather Jones of Ver- tical Group, an investment firm. Disintermediation is likely to resume once the market settles. Digital mar- ket-places such as FarmLead, which covers 12% of North America’s grain market, mean farmers can shop around for the best price. “There’s no more loyalty in this business,” buyers tell Alain Goubau, the startup’s operations chief. And the established players face another problem: new competition for supply. Glencore Agriculture, a trader backed by Glencore, a metals and mining firm, and by two Canadian pension funds, has been quicker to move into the Black Sea region, which now exports more wheat than America and Canada combined. Olam, a 30-year-old firm owned by Singapore’s state fund, has carved out a lucrative niche in Asia and Afri- ca, in spices and nuts. CHINA EFFECT IN LATIN AMERICA Meanwhile China is advancing in Latin America. Since 2014 it has spent billions building up COFCO, a state-owned food processor, into an internatio- nal trading platform. Though marred by integration problems, its acquisitions of parts of Noble Group and Nidera, two traders with South American presence, have made it a top-five exporter of Brazilian produ- ce. It has invested in elevators, ports and processing plants, including a 60,000-tonne silo complex in Mato Grosso, Brazil’s top soya-growing state. Valmor Sc- haffer, COFCO I n t e r n a t i o n a l ’ s Brazil chief, says China buys 70% of the produce the company exports from Brazil, up from some 30% three years ago. Tariffs are a boon to Latin American farmers, he ar- gues. China can test the quality of Brazil’s late-year shipments, and li- kes what it gets. COFCO is not interested in sharing the spoils. Mr Schaffer says it would not like joint ventures with other traders unless it holds a majority stake. The ABCDs remain the only truly global firms. But regional competition is adding to their main prob- lem: too many companies are doing the same thing, says Sönke Lorenz of BCG, a consultancy. Tariffs or not, there are only two ways they can restore stable profits. They can diversify into food-manufacturing: Cargill, the most successful, derives two-thirds of earnings from its animal feed and protein business. Or they can consolidate, though their distinct cul- tures and ownership structures have till now made this hard. Could the shake-up at Bunge create an opening? Saddled with bad investments in sugar production, it started a “strategy review” in October. Yet there have been two failed takeover approaches in the past year, suggesting it remains too pricey for rivals to swallow whole. Antitrust issues also loom large. “This company should already have been acquired five times. But no one is doing it,” says a former employee. Rivals may be wai- ting for Bunge to become a better bargain before slicing it up. ECONOMIST