Miller Magazine Issue: 116 August 2019

98 MARKET ANALYSIS MILLER / AUGUST 2019 International grain trading is no longer profitable Over the past few years the ABCDs have hit a patch of high turbulence leading to a significant deterioration in their operating margins, Unigrains says in its study entitled: “International grain trading: what’s next for the ABCDs?”. On June 11th, Unigrains organised a break- fast meeting to discuss changes in the business model of the historical international grain trad- ing companies - the ABCDs (ADM, Bunge, Car- gill, Louis Dreyfus Commodities). This new study by Unigrains’ economic and strategic research team was presented by Céline Ansart and Anne Couderc. Despite solid fundamentals, over the past few years the ABCDs have hit a patch of high turbulence leading to a significant deterioration in their operating margins. The study examines the main reasons for the weakening of these global food trading giants. In a bid to restore competitiveness, stability and profitability, the ABCDs have undertaken a major transformation of their business model. The study details the strategic options that are emerging for each of them. As a conclusion, the analysis seeks to assess the impact of these changes on the physiognomy and purpose of international trading in agricultural commodities. It also examines the resulting threats and opportunities for the entire agri-food value chain, with a particular focus on French companies. Traditionally, international trading companies generate profits from two activities: commercial, by providing services, and speculative, through good - or sometimes bad - market timing in arbitrage operations. According to study several factors are now contributing to a deterioration in profitability: