“Perhaps it was the ancient nightmare of the middleman-dealer that made them all so reserved and secretive,” wrote Dan Morgan in his 1979 book. Grain merchants. “The old fear that in times of scarcity or famine the people will blame them for all misfortunes, they march to their granaries.” . . and confiscate their supplies.”
This time, it’s not hunger that’s pushing the companies that control the world’s grain flows into the spotlight, but deal-making. Combining US-listed Bunge with Glencore-backed rival Viterra, $8.2 billion in tradebrings together two of the largest traders in grains, oilseeds and other agricultural commodities, further consolidating the grip of a handful of low-profile companies on the global market.
It is the biggest reshaping of the top tier of agricultural commodities since Cargill, long the biggest of the pack, bought Continental’s grain assets in 1999. The deal catapults Bunge into second place among the four global traders that go by the acronym ABCD, including Archer-Daniels-Midland and Louis Dreyfus. And while the alphabet is outdated and the market has changed dramatically since the 1970s, concerns about the concentrated system of global food production remain.
Despite some uptake in public markets and social media, it’s still hard to get good data on companies that can’t be avoided, whether you’re in agriculture or food service. One oft-used statistic is that the quartet controls 70 to 90 percent of the world’s grain trade—a figure that is probably too high.
After food shortages and price spikes between 2008 and 2012, China pushed hard for agricultural trade through state-owned Cofco, which worked its way into the Big Four. Jonathan Kingsman, whose book 2019 the updated Morgan’s classic, counted with five plus Viterra and Singapore’s Wilmar, provide half of the international grain and oilseed trade.
Such dominance is disturbing. The classic “hourglass” model of market power in food involves a large number of producers supplying a similarly large number of consumers through a narrow group of processors and traders. Marketers emphasize their complementary strengths, but regulators rightly take a close look. Argentina and Canada have already pledged to review the overlays. Brazil, Australia, the US and China are likely to follow, with some asset sales almost inevitable.
Traders are something of a misnomer: this group does not make money by simply moving goods from point A to point B. In recent years, they have expanded into agricultural production, storage, freight transport and port infrastructure, and then into processing, ingredients and final products. , while we move to a wider range of foods.
“The big problem is that when you have this vertical integration, it creates a huge intermediary power from farmers to consumers,” says Jennifer Clapp, a professor of food security. A business with more assets means higher barriers to entry and can help shift dominance from one part of the chain to another. Bunge’s strengths in processing and downstream processing, plus Viterra’s in merchandising and handling, create a more integrated global company.
Still, the dealers are not wrong that this combination looks good. The uneasiness may reflect that regulators and governments should be asking who is monitoring the food system globally, outside the narrow prism of antitrust law. “Nobody” is the stark assessment of Abdolreza Abbassian, a former senior economist at the United Nations’ Food and Agriculture Organization.
Disruption is becoming the rule rather than the exception thanks to a changing climate. Traders keep food moving during crises and periods of price volatility, such as the pandemic and Russia’s invasion of Ukraine. But such events are also good for business, with sales soaring last year and profits hitting record highs.
The market is already on the move. The emergence of Cofco marks the highest level of ABCC, replacing the commercially motivated trader with a geopolitically focused trader. Food security nations are raising stakes: Abu Dhabi’s sovereign wealth fund bought Louis Dreyfus in 2020; The Saudi Commodity Investment Company took over a one-third stake in Olam Agri last year.
Meanwhile, efforts to introduce better surveillance after 2008, led by France at the G20, have largely failed. “It wasn’t enough,” says Abbassian of the market intelligence unit that was established at the time. “And today’s needs are much, much greater.” You need transparency at all levels, from all commodities to final products, and more influential settings to look at the market.”
Bunge’s big deal will prompt rival watchdogs to re-examine the world of agricultural trading. Everyone else should too.