Sales at world’s top four traders have soared, raising concerns of profiteering and speculation
Companies at the centre of the global grain trade have enjoyed a record bonanza amid soaring food prices around the world, raising concerns of profiteering and speculation in global food markets that could put staples beyond the reach of the poorest, and prompting calls for a windfall tax.
The world’s top four grain traders, which have dominated the global grain market for decades – have seen record or near-record profits or sales. They are forecasting demand to outstrip supply at least until 2024, which is likely to lead to even higher sales and profits in the next two years.
Food prices have surged more than 20% this year, according to the UN Food and Agriculture Organisation. About 345 million people are experiencing acute food insecurity, according to the World Food Programme, compared with 135 million before the Covid-19 pandemic.
Olivier De Schutter, a co-chair of IPES-Food (the International Panel of Experts on Sustainable Food Systems) and UN special rapporteur on extreme poverty and human rights, said: “The fact that global commodity giants are making record profits at a time when hunger is rising is clearly unjust, and is a terrible indictment of our food systems. What’s even worse, these companies could have done more to prevent the hunger crisis in the first place.”
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Four companies – the Archer-Daniels-Midland Company, Bunge, Cargill and Louis Dreyfus, known collectively as ABCD – control an estimated 70-90% of the global grain trade. “Global grain markets are even more concentrated than energy markets and even less transparent, so there is a huge risk of profiteering,” said De Schutter.
He said this year’s food price surge happened despite what are thought to be abundant global grain reserves, but there was insufficient transparency from the companies to show how much grain they hold and no way to force them to release stocks in a timely way.
“We need to be looking at the grain giants and asking what they could have done to avert the crisis, and what they could be doing now,” De Schutter said.
Cargill reported a 23% increase in revenues to a record $165bn (£140bn) for the year ended 31 May, while Archer-Daniels-Midland made the highest profits in its history during the second quarter of the year.
“Ultimately, we need to break up the monopolies that have a stranglehold on the food chain. A handful of companies control global seed and fertiliser markets, animal genetics, the global grain trade, and food retail. They are making huge profits at the cost of farmers, consumers and the environment.”
Sales at Bunge surged by 17% year on year in the second quarter, though its profits were affected by previously incurred charges. Louis Dreyfus reported profits for 2021 up by more than 80% on the previous year, as revenues rose by nearly a quarter to $1.62bn.
John Rogers, an analyst at the credit rating service Moody’s, said it was not surprising that supply constraints and rebounding demand had increased food prices and led to higher profits. “I don’t think they are colluding for outsize profits,” he said, adding that many more companies were also taking an increasing share of global grain markets. “I don’t think they are acting immorally – they’re not intentionally driving up prices.”
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The global food crisis: ABCD of food – how the multinationals dominate trade
Wherever you live, you can’t avoid the four global giants
View our interactive on the global food crisis
By mid-morning snack you will certainly have encountered their products several times already wherever you are in the world, whether it is the corn in your flakes, the wheat in your bread, the orange in your juice, the sugar in your jam, the chocolate on your biscuit, the coffee in your cup. By the end of the day, if you’ve eaten beef, chicken or pork, consumed anything containing salt, gums, starches, gluten, sweeteners, or fats, or bought a ready meal or a takeaway, they will have shaped your consumption even further.
And yet, the four giant transnationals that dominate the raw materials of the global food system have largely stayed below the radar of European consumers. Known as the ABCD group for the alphabetic convenience of their initials, ADM, Bunge, Cargill and (Louis) Dreyfus, account for between 75% and 90% of the global grain trade, according to estimates. Figures cannot be given with confidence, however, because two of the companies are privately owned and do not give out market shares.
This extraordinary concentration of power and money in the global food trade has been identified by Oxfam in a new report this week as one of the structural flaws of the system. At each stage a handful of players dominate, not just in primary agriculture but in food manufacturing and retailing. The result, according to Oxfam, is that “they extract much of the value along the chain, while costs and risks cascade down on to the weakest participants, generally the farmers and labourers at the bottom”.
Oxfam is the latest in a long line of critics to highlight this corporate concentration as a root cause of hunger and poverty. The ABCD group have said they welcome informed debate but that, as far as they are concerned, their operations are the vital waters that keep food and its finance flowing from those who can grow it to those who need to consume it. Scale enables them to be highly efficient. The grain trade is capital intensive; they invest heavily in storage facilities and port and transport infrastructure.
US-based Cargill with the highest revenues, is the largest private company in the world – and famous for its secrecy. Its headquarters is a mock-Tudor meets mock-French chateau in Minnetonka in the US mid-west, where the company was founded by a family of grain traders in 1865. Today, it is still majority-owned by descendents of the family. Its main commodity trading operation is run out of the tax haven of Switzerland. Its sales were $108bn in 2010, and $115bn in 2009, and its net earnings were nearly $6bn for those two years.
As well as being a leading player in the trading, processing and transporting of the most important agricultural commodities, fertiliser and meats, it is one of the world largest hedge funds. When Gordon Brown, as prime minister, called a summit in London on the 2008 food crisis, Cargill was invited. When Walker crisps had an image problem with the saturated fats in its crisps, Cargill came to the rescue, having a large acreage of land in eastern Europe planted with a new variety of “Sunseed”.
It produces about half of all McDonald’s chicken products across Europe. It sells fats to Unilever. When the US needed to appoint someone to lead the reconstruction of agriculture in Iraq, it turned to former Cargill executive Dan Amstutz. In China, where it has a joint venture with Monsanto, to whom it sold its enormous seeds interests a decade ago, it has trained over 2 million farmers in the American way of agriculture.
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