SAO PAULO (Reuters) - The world’s top grain trading houses Archer Daniels Midland, Bunge Ltd Cargill [CARG.UL] and Louis Dreyfus, have lost their century-old dominance of Brazil’s grains export market to their Asian rivals, data shows.
An analysis of shipping data by Reuters found that Asian trading houses, including China’s state-owned COFCO [CNCOF.UL], bought 45 percent of the country’s soybean, corn and soybean meal exports last year. By comparison, the share purchased by the traders known collectively by the acronym “ABCD” was 37 percent.
That marked an abrupt turnaround from 2014 when purchases by the U.S. and European-based ABCD companies accounted for 46 percent of Brazil’s grain exports, compared with 36 percent for Asian firms.
With populations growing in China’s cities and other parts of the region, Asia has been scooping up more of the world’s grains, and established Asia-based merchants like Wilmar International Ltd are growing their global footprint.
The data illustrates how Asian players have tightened their grip on supplies from Brazil, the world’s top exporting country, challenging the trading titans who have traditionally acted as middlemen between farmers and consumers.
“The Chinese always wanted to buy directly from our farmers, but they wanted the grains delivered,” said André Pessôa, head of the leading local consultant Agroconsult. “Now they finally realized they need to come and get them.”
China’s footprint is growing, in part, through acquisition. Government-owned COFCO bought 51 percent each of Dutch grains trader Nidera and of Hong Kong-based Noble Group’s Noble Agri in 2014. Late last year, COFCO said it would buy the remaining 49 percent of Noble Agri.
Reuters analyzed more than a decade of shipping data from Williams Shipping Agency, a Brazil-based firm that acts as an agent for ships loading or discharging cargoes of anything from wheat to crude oil to passengers.
It shows the structure of the Brazilian market has changed dramatically in recent years. In 2003, ABCD companies bought roughly 57 percent all grain cargos sold by Brazil, while direct purchases by Asian companies were 9 percent.
Total exports have jumped as crops have swelled and a slump in the value of Brazil’s currency has spurred foreign buying.
But the trend toward Asian wholesalers has accelerated as merchants in that region aim to tighten their grip on securing supplies for themselves. Among top buyers during the first two months of 2016, ABCD had relatively little volume growth, the data shows.
Expanding much faster were Japan’s Itochu, Agrex/Mitsubishi and Mitsui; China’s China Agri, Noble Agri and Nidera — all controlled by giant state-owned COFCO; South Korea’s CJ, and Singapore’s Wilmar.
The ABCDs still play a key role in supplying China’s burgeoning appetite for grains. Even after buying stakes in Noble Agri and Nideria in 2014, COFCO still relies on the historically dominant traders to pick up the slack.
Brazil, the world’s largest soybean exporter, is in midst a record harvest, with the first cargoes hitting the ports in recent weeks. That follows a record corn export season.
“A good part of those (Asian) companies changed attitude, moving from clients to competitors,” said Bunge, the No. 1 single biggest buyer of Brazil grains last year, in a statement emailed on March 11.
A stalwart of the Brazilian market, the U.S. merchant has reduced its soybean export business, focusing on corn exports and soybean crushing last year because of “the unfavorable market situation”, the company said.
ADM and Cargill declined to comment on the data. Louis Dreyfus did not respond to Reuters’ inquiries.
The shift follows the efforts of Asian traders to buy infrastructure, such as port terminals, to make their shipping more efficient and give them an edge in a business where margins are typically tight.
Brazil’s corn, soybean and soybean meal exports skyrocketed in the past 10 years, from a little more than 40 million tonnes to about 98 million tonnes last year, according to Trade Ministry data.
Asian buyers have capitalized on that growing supply, in many cases by increasing their port operations and their local infrastructure, increasing their trading skill.
A large chunk of purchases by Japan’s Marubeni, the second-largest buyer of Brazil’s grains behind Bunge, were made through a maritime terminal in São Francisco do Sul, southern Brazil, which the company bought in 2011.
Similarly, Itochu grew its grain acquisitions ten-fold last year after it sealed a joint venture with local grain company Naturalle in 2014. A company spokesman said it was expanding its presence in Brazil to source soybeans and corn for the Southeast and East Asian markets.
In the short term, Asian companies may be prepared to buy grains with zero margins in order secure a foothold, posing tough competition to long-established companies,
But Murilo Braz Sant’Anna, the head of local trader Algar Agro and former senior grain executive at Bunge in Brazil said he didn’t expect the no-profit strategy to last more than two or three years.
Additional reporting by Niu Shuping in Beijing; Editing by Daniel Flynn and Josephine Mason and Lisa Girion