Louis Dreyfus Company unveiled a drive to become “more than a merchant” amid the revolution among ag giants which has this week alone seen a shake-up at Archer Daniels Midland, and Cargill declare the end of traditional crop trading.
“We are, and will increasingly be, more than a merchant,” Louis Dreyfus said flagging, among growth areas, a strategy to exploit the “ongoing food revolution” evident in the likes of the organic market, which the group said is expected to show annual growth of close to 14% by 2021.
“We already process and merchandise a number of high-grade products such as refined oil, refined glycerine and lecithin,” beyond the bulk ag commodities historically carried.
“We are constantly exploring supply chain improvements,” Louis Dreyfus Company (LDC) said, flagging “innovative approaches” to supporting customer needs.
‘Focus on China’
The group also flagged an asset shake-up, which has seen it dispose of the likes of Australian fertilizer assets to Agrium last year, and agree the sale of its metals business to China’s NCCL Natural Resources Investment Fund.
“We are refocusing on activities where we already have core competencies,” while seeking to expand “into connected products and sectors”.
And geographically, Gonzalo Ramirez Martiarena, the LDC chief executive, flagged a “focus on China” among “a number of new avenues for growth”.
LDC was “turning greater attention to where demand is strong and is likely to increase continuously,” he said, with the group also stating that it was “ambitious about shifting the balance of our footprint” to the China area, where it was “particularly exploring strategic alliances”.
In global ag trade, “selecting the flows that will grow and that generate more value will be fundamental,” the group said.
‘Milliennials drive consumption trends’
LDC highlighted a focus on generational change too, which was indeed fuelling the food revolution.
“Current trends, especially among the growing millennial consumer group, include ‘responsible consumption’, and the attendant focus on organic, natural, ‘free from’, local, seasonal, fair and environmental friendliness credentials.”
Mr Ramirez said that the group was “fully conscious that milliennials drive consumption trends and sustainability concerns,” with LDC using its own employees in that age bracket as a guide.
“We would like to encourage the younger generations at LDC to express themselves in an open and genuine manner,” he said.
‘Traditional business model is over’
The comments come amid continuing drive among the agricultural trading houses – of which Louis Dreyfus, with ADM, Bunge and Cargill is one of the big four – to boost performance in the face of low ag price volatility and dents to margins from enhanced competition, improved market knowledge and increased farmer storage.
On Monday, ADM revealed its second divisional reshuffle in three years, announcing a revamp into four divisions called carbohydrate solutions, nutrition, oilseeds and origination,
“The new segments better reflect ADM’s operating structure,” the group said, adding that the shake-up “will enable the company to further highlight the differentiation of its product and service offerings and enhance its ability to respond to the evolving needs of customers”.
On Tuesday, Cargill’s president of agricultural supply chain division, Gert-Jan van den Akker, declared that “the traditional business model in the ag supply chain is over”, with groups no longer able to profit from, originating, storing and trading crops.
Historically, “you’d wait for markets to appreciate and then you would sell it. And that’s what created margins,” he told the FT Commodities Global Summit.
“That’s over. That doesn’t exist any more.”
‘Slow farmer selling’
Louis Dreyfus unveiled its strategy updates as it unveiled 4% growth to $317m in earnings for 2017, on revenues up 5.8% at $43.0bn.
“The continuing unpredictable environment of fluctuating market conditions and demands has created many challenges for our sector,” said Margarita Louis-Dreyfus, chair of Louis Dreyfus Holding.
“But thanks to our strategic roadmap and experienced management team, we have been able to successfully navigate the business towards an improved performance in 2017.”
Mr Ramirez, flagging tests from “very low price volatility levels overall and slow farmer selling for some platforms”, highlighted LDC’s “customer-centricity, broad origination and distribution networks, efficient logistics, and a good read of markets”.
In the group’s value chain division, LDS said that sales growth was “fuelled by significantly increased volumes in oilseeds and good levels of activity across the grains, freight and rice platforms”.
In merchandising, it highlighted that “in a context of rising prices for the cotton and coffee platforms, both marketed additional volumes, resulting in a strong contribution to sales”.
US cotton exports set a pace which far exceeded market expectations, while in coffee, LDC highlighted “good results” in East Africa and Vietnam, and in Honduras, which achieved particularly strong shipments last year.