Homepage

Search on site

To write the letter

Site map

We are on:

Ukrainian Grain & Oilseed Market

Ukrainian Grain&Oilseed Market

Home > News

Cargill seeks out fertile ground in Asia frontier markets

28.11.2016 10:40 "Agro Perspectiva" (Kyiv) — Alan Willits, Cargill’s Asia-Pacific chairman, said the world’s largest agricultural trading house planned to raise the share of its total gross investment in the region from 16 per cent, although he did not specify a target.

The investment push is intended to take advantage of rising demand for protein — particularly chicken and fish — among Asia’s growing middle class, and increasing urbanisation that means fewer people can grow their own food.

«Our intent will be to grow faster in Asia than anywhere else in the world,» he said, through both acquisitions and partnerships.

The US company is in the midst of a revamp aimed at simplifying and refocusing as the broader commodities slump has dragged down profits. Seeking to grow in areas in which it is already dominant and quit those where it lacks a competitive edge, it is moving away from the cyclical nature of commodities trading by seeking to become a supply chain manager for more sustained profit growth.

Mr Willits said: «There are some geographies where we’re really not present, or very small. Myanmar would be an example. We’ve been selling products there for a number of years — grains and soyabean meal — but don’t really have a physical presence there. That would be an opportunity for us.»

Cargill is also seeking opportunities to expand in Pakistan, where it is among the largest importers of palm oil and largest exporters of raw cotton. The south Asian country is the world’s fourth-largest cotton producer.

«The emerging middle classes of Asia are the prime target for commodity trading houses … the change of diet of the newly urbanised middle classes towards protein will provide the bulk of the growth in the industry for many years,» said Jean-Francois Lambert, founding partner of Lambert Commodities and former head of commodity trade finance at HSBC. «In that sense, Cargill’s strategy is the right one.»

Cargill, one of the world’s biggest privately held companies, already has sizeable operations in Asia including a $250m chicken farm and processing plant in China, opened in 2013.

It has agreed a series of partnerships to supply poultry in Indonesia and the Philippines, and is looking to strike further poultry-related deals in the region. Last year, it acquired Norwegian fish-feed maker EWOS, which has a manufacturing facility in Vietnam, for $1.5bn including debt.

«Aqua is an area that we would like to continue to invest in, in the region,» Mr Willits said.

With an eye to the infant formula milk sector — booming in Asia as the share of women in the workforce increases — Cargill is also adding production capacity to its starch and sweetener business in Indonesia, particularly to make maltodextrin, a thickening agent used in infant formula.

In Asia, the company faces a shifting competitive landscape as customers are sourcing directly from producers elsewhere in the world. The strategy of forming alliances with big consumers in emerging markets is helping to counter this threat.

Mr Willits said that, in addition, there are «areas where we think we’re under-serving. An example of that would be North China, where we’ve never had a soyabean crushing facility.

»We’ve built a crushing refinery outside of Tianjin," he said. «Our large customers in China are national players. They want us to be everywhere.»

In India, which Mr Willits describes as an important but «highly fragmented» market, Cargill also plans further investment. Last year, the company established its first starch and sweeteners production facility in India, in the southern state of Karnataka.

Referring to Cargill’s footprint in the Asia-Pacific region, where it has 40,000 employees across 250 locations, Mr Willits said: «We’re under-indexed for sure in a place like India.»

https://www.ft.com

Agro Perspectiva

< Presidential couple honored memory of the victims of Holodomor of 1932-33 in Ukraine

All news for
28.11.2016

Bayer-Monsanto deal is a bet on GM crop expansion >

11.04.2024