Meet the Behemoths of Modern Grain Trading
These are the companies that farmers are most likely selling their grain to. It’s important and interesting for farmers and smaller agriculture companies to know who these major players are and what they are doing in their industry. For example, ADM purchases commodities from the producers and then processes and transports it almost entirely in house- but not through ADM- through its subsidiaries. On top of that ADM can motivate producers to grow certain goods by providing an incentive; these incentives can range anywhere from grants to access to private chemicals developed in house at ADM Industrial Chemicals. Cargill offers the same services, as do Bunge and Louis Dreyfus.
For the average farmer and for anyone in the food chain of this industry, this means that if you are dealing with ADM, Cargill, Bunge or Louis Dreyfus, then you must understand that they have an enormous amount of power over what the price of grain is and what you can/should grow. These 4 companies, the ABCD companies, controlled 73% of the grain trade in 2003 (1)and because they are often so private, it is hard to determine exactly how much they control in each commodity. That doesn’t mean that you can’t take control of your commodities or that you have to do be totally dependent on what these companies tell you the market is doing-local farmers and smaller grain companies still have a say. You can use these companies programs to yield bigger crops which can lead to more profits, especially if you sell to the right grain elevator.
The 4 big players tend to execute the same strategies, because historically they work. All 4 companies have extensive logistical systems that lets them transport their own goods as well as others’ goods. Louis Dreyfus is located in Amsterdam which means they have access to some of the largest ports in the world, as the Netherlands has extensive shipping lanes and harbors. Cargill and ADM both operate barge transportation where they are able to ship goods along major rivers wherever there is good access. Cargill tends to stick to North America but ADM doesn’t- they operate in Brazil as well; shipping their cocoa from the producer to their processing facilities. Operating this way allows for the companies to keep their costs down because they don’t have to deal with many competitors trying to also make a profit on shipping. The ABCD companies can operate these transportation systems and write it off as a business expense, something that they need to do to stay competitive; but they don’t have to make huge returns off of it because they will make big profits off of the end product either way. If many independent shipping companies were used to ship ADM’s goods, then ADM would have a lower profit margin in the end because those independent shipping companies would hurt ADM’s bottom line.
The logistical reach of the ABCD’s are so large that governments use them when attempting to provide aid to disaster struck areas. These companies are also uniquely positioned to help get food to those suffering from these disasters. Not only do they handle a lot of food themselves but they have the systems in place to deliver that food in a timely and safe manner in emergencies.
For the farmer, this matters because it goes to show how large these companies are; they don’t play in the same league as other grain companies. In fact, they aren’t even playing the same sport. It’s like other catch-up companies playing dodge ball and the ABCD’s are playing full contact ice hockey. These behemoths have been around for so many years and have such a long reach that they are able to influence entire market prices and have changed the grain trade in modern history. There is a reason there are conspiracy theorists who love talking about these massive private companies.
Despite 2 of these companies being public, they have managed to stay widely private to the general consumer, largely because the vast majority of people don’t interact with these companies. We don’t buy their products, we buy their subsidiary products or different companies products entirely. The ABCD companies operate on a B2B (Business to Business) profit plan where they don’t deal with the end consumer. They deal with the companies that deal with us. That is how these companies have managed to stay behind the scenes for so long because a lot of people don’t even know that these companies exist. Despite the fact that they consistently bring in tens of billions of dollars, Cargill is the largest privately held company in the United States of America and the king of grain trading.
When trying to understand how food prices shift and how to anticipate cost, you should have a look at the ABCD companies and use their corporate policies as a guide to your own decision making. They have such large information networks as well as large sway themselves, that what they are doing is usually what the industry will adapt to eventually. If you have to transport massive amount of foodstuffs, then you should look at the ABCD companies as a potential method for that transportation.
The grain industry is very much in the hands of these 4 companies; each one of these 4 has their unique outlook and way of functioning, yet they all operate in a similar manner. The ABCD companies operate on such a large scale that it can be difficult to understand and truly grasp their reach.
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1- Murphy, Sophia, Ms, David Burch, Dr, and Jennifer Clapp, Dr. “Cereal Secrets.” Oxfam. Oxfam Research Reports, Aug. 2012. Web. Jan. 2016.