In his 1979 book Merchants of Grain, Dan Morgan speculated that the aloof and secretive nature of grain merchants was due to their historical fear of being blamed for scarcity or famine and having their stocks confiscated. This fear now seems to be overshadowed by the recent $8.2 billion deal between US-listed Bunge and Glencore-backed competitor Viterra, which further consolidates the control of global grain flows in the hands of a few low-profile companies.
This deal represents the biggest change in the top tier of agricultural commodities since Cargill acquired the grain assets of Continental in 1999. With this acquisition, Bunge will become the second-largest global trader, joining the ranks of Archer-Daniels-Midland and Louis Dreyfus. However, concerns persist about the concentrated system of global food production.
Gaining accurate information about these influential companies remains challenging, despite some presence in public markets and social media. It is widely claimed that the quartet of Bunge, Archer-Daniels-Midland, Louis Dreyfus, and Cofco control 70 to 90 percent of global trade in cereal grains, but this figure may be too high.
Since the food shortages and price spikes between 2008 and 2012, China’s state-owned Cofco has become a major player in agri-trading and now competes with the Big Four. Along with Viterra and Singapore’s Wilmar, these companies likely handle half of the international trade in grain and oilseeds.
This level of dominance raises concerns. The food market typically operates on an “hourglass” model, with numerous producers and consumers connected through a small group of processors and traders. The consolidation of power among these companies can lead to intermediary dominance from farmers to consumers. The integration of Bunge’s processing and downstream strengths with Viterra’s merchandising and handling capabilities creates a more centralized global company.
However, the potential benefits of this combination should not be underestimated. As the world faces disruptions due to climate change and geopolitical events, such as the pandemic and conflicts, traders play a crucial role in keeping food moving and stabilizing prices. The market is already experiencing shifts, with the emergence of Cofco and increased investments by nations focused on food security.
Regulators and governments must go beyond narrow antitrust concerns and examine the global food system more comprehensively. The establishment of a market information unit in 2008 was insufficient, and greater transparency and oversight are needed at every level of commodity production and distribution.
The impending scrutiny from competition watchdogs prompted by Bunge’s deal should serve as a reminder for everyone to pay attention to the world of agricultural trading.
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