Four major international companies control most of the world’s grain trade and these are collectively referred to as the ABCD of international trade. The A is ADM (Archer Daniels Midlands), B is Bunge, C is Cargill and D is (Louis) Dreyfus. Between them, these four companies handle between 75% and 90% of the global grain trade.

During the ITLUS tour last June, we took the opportunity to meet Jason Klootwyk from Bunge in Burlington on the banks of the Mississippi. Jason told us that most of the company’s grain assets are along the river because it has a strong emphasis on exports and water is the cheapest form of bulk transport.

Bunge is the biggest oilseed processor in the world and it is also involved in grains, sugar and sugar cane, animal feed, cooking oils, ethanol, food ingredients, etc. The company does business in most parts of the world, with least in Africa, and it has about 35,000 employees globally. Over half of the company income comes from agribusiness (64%), another 18% from food and ingredients and 13% from sugar and bioenergy.

A map of its US locations showed the predominance of facilities along the navigable rivers. Jason said the company is again looking at locations along the west coast, given the amount of trade that now moves west to Asia. This has already begun following its involvement in the construction of a new export grain terminal in Longview, Washington.

Jason said that Bunge owns the greatest amount of storage on the river and much of this is in 60,000t bins, the capacity of a Panamax ship. He told us that barge transport down the Mississippi to the Gulf dropped as low as $15/US ton but it is again costing around $20/t for this 1,300-mile journey to New Orleans.

Truck transport costs about $2.50 per loaded mile for a 30 US ton load – that’s 9.2c per metric tonne per mile. Only about 12% of grain is now moved by rail freight because transport of energy and general merchandise is more profitable.

Optimistic tone

While our conversation took place in late June, Jason was largely optimistic about the grain trade. He saw an increasing demand for sustainably produced food and he said this issue is likely to have an increasing influence in the market. He also indicated that governments in different parts of the world were again buying and storing grain because it represented good value to build essential stocks.

Markets in the US continue to show signs of shifting consumer demand. Attitudes are hardening against GM, but possibly more in terms of the demand for more information on food ingredients. However, there is concern about a hardening attitude to biotechnology in general as new crop options may well originate from that same toolbox. While there is a definite oversupply and global surplus in grains, Jason commented that supply dislocations have become more frequent. This means that the demand point can often be quite distant from the supply and this often gives rise to local and unexpected rises in physical prices.

While international grain stocks are high, not all of this grain is available to international markets in the event of a poor production year. For this reason, he said, the stocks-to-use ratio is not that comfortable into the future. Demand continues to grow at a substantial pace and it remains to be seen if this will slow or decrease if and when grain prices rise.

Non-GMO market

Non-GMO foods are becoming an increasing segment of the US market, Jason said. And this segregation is generating growth in the food business and a new market segment.

He told us that a recent survey suggested that up to 40% of consumers wish to avoid or decrease their consumption of GMO foods. GMO is increasingly a fear of the unknown for consumers and non-GMO is increasingly carrying a price premium.

Jason said that this non-GMO market is currently paying a premium but this is easier when prices are low. What will happen market size when prices increase remains to be seen.

However, he went on to say that the actual current market share is still less than 10%. So the change in attitude and purchasing habits hasn’t really happened yet but Jason believes that it could happen very quickly.

Jason said that big businesses are now looking towards Africa and the Middle East for future developments. He said there is now a considerable focus on the technologies needed to enable production in places like Africa. Bunge is of the opinion that there is considerable production potential in parts of that continent and there is certainly local demand also.

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