Feeding Frenzy by Paul McMahon

Author:Paul McMahon
Language: eng
Format: epub
Publisher: Profile Books
Published: 2013-04-08T04:00:00+00:00

The race to the gate

We may have witnessed the high point of ABCD dominance over the global food system. This is because new challengers are rising in the East. Traditionally, Asian countries (with the possible exception of Japan) were happy to turn to the established American and European trading firms to arrange their food imports. But Asian firms now see an opportunity to take over this function. On the face of it, this should be just the sort of competition that the industry needs to keep its more exploitative tendencies in check. However, the new Asian pretenders are pursuing different business models and are subject to greater influence by governments worried about food security. What effect will this have on the functioning of food markets?

Three of the biggest challengers to emerge from Asia over the last two decades are Noble, Olam and Wilmar. Thanks to their initials, they have gained their own nickname in the financial press – the ‘NOW’ group.

Noble, founded in 1987 and headquartered in Hong Kong, has revenues of $56 billion and 10,000 employees. China’s sovereign wealth fund, the China Investment Corporation, is the second largest shareholder, holding 15 per cent. The company is active along the entire food supply chain, from production to delivery. It sources from low cost producers such as Brazil, Australia and Indonesia and supplies high growth markets like China, India and the Middle East. It is the largest importer of grains into Saudi Arabia and handles 10 per cent of South American soybeans. Noble models itself closely on the ABCDs, trades many of the same commodities and is staffed by many former ABCD employees – its chief executive used to work at Louis Dreyfus. It has even established itself in Switzerland, from where it trades cocoa, coffee and precious metals. It is often compared to Glencore because of its diversification across agriculture, energy and metals.

Olam and Wilmar are somewhat different, in that they focus less on temperate crops such as wheat or maize and more on tropical commodities. For example, Wilmar is the world’s largest trader of palm oil and owns many plantations in Indonesia and Malaysia.

Olam began as a tiny venture in 1989 exporting cashews from Nigeria. It was founded by Sunny Verghese, a bespectacled Indian businessman who learnt his trade the hard way, having been appointed as boss of a Nigerian cotton plantation at the age of twenty-six. In 1995 the company moved its headquarters to Singapore to take advantage of Asian markets. Olam has built a leadership position in niche commodities such as cocoa, coffee, cashews, sesame, cotton and timber. It prides itself on embedding staff in production regions and sourcing commodities directly from more than a million small farmers. As a rite of passage, up-and-coming executives are sent to work in remote corners of the world – what Sunny Verghese calls a posting in the ‘bush’ – so they can learn about the risks of commodity trading first-hand.

The NOW companies have shown a willingness to roll up their

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