Consumers, farmers squeezed as grain giants tighten grip
LONDON - A global race for grain trading power is putting more of the world's vital cereals in the hands of fewer companies, with a string of recent acquisitions raising fears that consumers will pay even more for their food, while farmers are squeezed.
Archer Daniels Midland last week bid for Australia's last independent grain handler GrainCorp, the latest in a series of moves by grain trading heavyweights to grab a larger slice of a booming market as developing economies seek food security.
The four "ABCD" firms - ADM, Bunge, Cargill and Louis Dreyfus - dominate global grain trading along with top global commodities trader Glencore and Japan's Marubeni, both of which have made major acquisitions in the last few months.
With food price volatility increasingly coming to the fore, most recently in the wake of drought in the U.S. and other key producing regions, concern is growing among importers about extra upward pressure on prices.
"The increasing concentration of power in the global grain market is not healthy. This will lead to grain prices being controlled by top trading companies," said Rusman Heriawan, deputy agriculture minister of Indonesia, Asia's top wheat importer.
The United Nations sounded alarm bells on market volatility this summer as corn alone surged around 40 percent in less than a month. Soybeans hit record highs, while wheat also shot up dramatically, reviving memories of the 2007/08 food crisis.
"So-called grain majors account for about 75 percent of the global grain market. If they keep on merging with other grain companies, there is the possibility of a monopolistic situation," said Han Sukho of the grains division at the Korea Rural Economic Institute.
"This will make things difficult for importing countries like South Korea. We might have to pay more than what things actually cost," the assistant director of the state-run think-tank added.
South Korea is a major importer of both wheat and maize.
After a doubling in quarterly profits helped by the impact of drought on the grain trade, Bunge Chairman and Chief Executive Officer Alberto Weisser said on Thursday that he expected industry consolidation to continue.
"I do believe that we will have more consolidation because the market has shown that it is necessary to have large companies" with geographically diverse assets and strong balance sheets "to operate and serve the market in these volatile times," he said. "We are part of it."
Lee Gaus, vice president of International Futures Group, said there were some benefits from the consolidation for the grain trading companies, who will have more flexibility from expanded networks.