Cargill expects grain glut to last long time

(Dave Bedard photo)

Seoul | Reuters –– Commodity firm Cargill expects international grain markets to remain oversupplied for a long time due to bountiful harvests and a rise in storage, the head of the global commodity trader said on Friday.

Bumper crops have flooded many markets, dragging on prices for grains and hitting profits at agribusiness giants including Cargill, Bunge, Archer Daniels Midland and Louis Dreyfus.

“There’s been several strong seasons of growth and almost near perfect weather conditions both in North America and South America,” Cargill CEO David MacLennan told a media briefing in Seoul.

“There are a plenty of supplies in storage, and Brazilian farmers are holding on to their products in the hopes of better prices … but I don’t see the clearing of excess supply or much volatility to up commodity and grain prices in the near future.”

Global corn, wheat and soybean inventories have risen for four straight years in the longest stretch of increases since the late 1990s, according to the U.S. government data.

Word grain and oilseed stocks are up 48 per cent since 2012-13, compared with production growth of 18 per cent and consumption growth of 17 per cent over the same period.

Minneapolis-based Cargill has been simplifying its operations to shift its focus to higher margin-businesses such as food ingredients. In late April, it said it would exit its U.S. cattle business.

When asked about the possibility of making company acquisitions, MacLennan said Cargill was always looking for growth opportunities.

He added that the firm had no intention of going public in the near future.

MacLennan also said that growing international worries over trade protectionism after Donald Trump became U.S. president had not affected Cargill’s business.

“It is the early days of the new U.S. administration, so far we have not seen any impact on trade flows and I’m optimistic that would continue to be the case,” he said.

He was also optimistic on trade between South Korea and the U.S., saying the two governments would continue to support trade with each other.

His comments come as Trump said in a recent interview with Reuters that his administration would renegotiate or scrap a “horrible” deal with South Korea to protect U.S. trade.

Cargill also plans to keep boosting business in South Korea, he said.

Cargill Agri Purina, a South Korean unit of the company, plans to increase its feed production to 2.7 million tonnes per year by 2025.

Reporting for Reuters by Jane Chung in Seoul; additional reporting for Reuters by Naveen Thukral.


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