Experts estimate that the global agriculture market will grow from $9.6 trillion in 2020 to $10.1 trillion in 2021 at a growth rate of 6%, says a report by Business Research Company. In 2025, the agriculture market is expected to reach $13.1 trillion at a growth rate of 7%. From the short-term perspective, the main reason for the growth is that major companies are starting to recover from the impact of the COVID-19 pandemic. From the long-term perspective, demand for food will be boosted by an increase in the world’s population. According to “The Agricultural Outlook” by OECD, the world population will continue to grow and will reach 10 billion by 2050. As a result, the global production of cereals is expected to rise by 13% by 2027.
Analysts predict that agricultural companies will carry out acquisitions more frequently to expand their activities and meet the growing demand from farmers and consumers. Also, large companies start integrating vertically with the purpose to optimize their value chain and get a competitive advantage. With the ongoing automation of industrial practices, value chains are becoming increasingly virtualized. As of 2020, 63% of global agricultural technology investments went into rerouting value chains, while biochemicals and crop efficiency technology accounted for a much smaller portion of that investments.
Other trends that will have a great influence on the industry include droughts and floods caused by climate change, biotechnology development, and increasing urbanization. By 2050, the number of people living in urban areas will grow from 50% to 70%, something that will affect the agricultural labor supply.
Geographically, the market is dominated by the Asia Pacific region that accounted for 57% last year. South America came second with 12% of the global agriculture market, while the Middle East was the smallest region.
Global Agricultural Production Outlook
In June 2021, the UN’s Food and Agriculture Organization released the Report on Global Food Markets that forecast rising food prices, surging trade, and record import bills in 2021-2022. Specifically, there will be moderate growth of world cereal production this year. The growth will be largely attributable to a surge in maize output, which is expected to rise 3.7% from 2020. World cereal trade will expand by 6.3%, with most of this growth reflecting the rise in China’s imports, which will increase by 123% from the previous season.
Global wheat supplies will continue to rise at the backdrop of strong demand. Wheat production will see a 1.4-percent growth, reaching a new all-time high. Larger outputs are expected in the EU, Morocco, and the UK, while production in Australia, Canada, Russia, and some Asian countries is anticipated to decline. While the greatest rise in stocks will happen in China, the EU, India, Australia, Ukraine, and Morocco are also expected to build up their wheat inventories. In 2021-2022, the world trade in wheat will see a small increase, mainly driven by larger imports by some Asian countries. As for exports, Russia will continue to be the world's leading exporter, whereas, exports from Australia, Canada, and the USA will diminish.
Despite a record global production in 2021, coarse grains stocks will fall while demand will remain robust. The growth will be driven to a great extent by the expansion in maize production in the USA, in addition to greater outputs in the EU, Ukraine, and China. Global consumption of coarse grains will rise by 1.4% in 2021-2022 due to an increase in industrial use. In particular, maize will be increasingly used to produce ethanol in the USA and Brazil. At the same time, coarse grains stocks will fall by 1.7% next year as China’s maize inventories diminish. In the forecast period, larger maize exports are expected from Argentina and Ukraine. An increase in sorghum exports is largely due to greater exports from the USA.
Global rice production will grow by 1% and reach new peaks, especially in Western African countries and Australia. The world rice trade will expand by 5.6% this year. Higher imports will be supported by strong demand from Africa and a rebound in Asian purchases. The resumed growth of oilseed production will be insufficient to satisfy world demand. This year, global oil crop output will recover from last year’s reduced level. The rebound in rapeseed and soybean production is expected to offset a decline in global sunflower seed output. As global oils production falls short of consumption, global oils inventories will fall to an 11-year low.
World meat output will expand by 2.2% despite the fact that the global meat trade is heading towards stagnation. Higher trade of bovine and poultry meat will offset a contraction in the trade of pig and ovine meat. Meat prices have increased driven by solid import demand from East Asia and the Middle East. Meat production will be on the rise in China, Brazil, Vietnam, the USA, and the EU, however, Argentina, Australia, and the Philippines are likely to experience a decline. In China, the growth occurs across all meat types, particularly pig meat, because of significant investments in the improvement of meat value chains. However, this will not eliminate the existing pig meat deficit in the country. The overall meat trade will be driven by China, whose total meat purchases will exceed 11 million tonnes.
World production of milk will grow at a steady pace, up 1.6% from 2020. Asia accounts for the highest volume, followed by the USA, Canada, Europe, South America. and Oceania. Asia’s milk output growth is mainly attributable to an increased number of dairy cattle in Pakistan and India as well as the expansion of China’s large-scale farms. In the Americas, the growth in milk output is supported by improvements in farming technologies. This year, world trade in dairy products will rise 2.6% from 2020, with a higher import concentration in Asian countries, particularly China. Exports will essentially increase from the EU, the USA, New Zealand, and Australia.
Global fish production is forecast to resume its positive growth, however, supply will continue to be tight for a number of essential species, such as salmon and cephalopods. Aquaculture businesses and fisheries are facing both challenges and opportunities. On the one hand, there are operational difficulties that have been affecting financing, labor, and logistics since lockdowns began. On the other hand, despite the heavy financial losses incurred by the pandemic, new market opportunities have emerged. In particular, new distribution channels have been developed and the number of fish products intended for home consumption has significantly increased. Total trade in fish products will grow only minimally this year because of the pandemic's impact and some challenges associated with the trade. As for the latter, this includes tariffs on fish products traded between the US and China and administrative obstacles that traders in the UK are facing due to the country’s exit from the EU.
Global sugar production will decline and will not be sufficient to meet demand, with a global shortfall amounting to 1.7 million tonnes. As a result, world trade in sugar will diminish a little bit because key exporters will experience supply shortages. The EU, Russia, Brazil, and Thailand experience lower output due to unfavorable weather conditions, whereas in the USA, China, and India, there is an expansion in sugar production. As for the world sugar trade, the United States and India are importing less while China is increasing its sugar imports. International prices of sugar were on the rise in 2020 and reached their highest since 2017. This hike in prices was caused by tighter global supplies and sustained demand from Asia.
Major Players in the Agricultural Industry
Privately-held U.S. company Cargill is the world’s largest agribusiness by sales, with $114 billion turnovers in 2020. Established in 1865, it is also among the oldest agricultural companies. The company’s share in U.S. grain exports makes up approximately 25%. Cargill supplies more than 20% of the United States meat market and is the biggest poultry producer in Thailand. The company supplies American McDonald’s restaurants with more than two billion eggs every year for two decades.
Chicago-based Archer-Daniels-Midland Company (NYSE: ADM) is the second-largest agribusiness in the world that reported 64.3 billion in revenue last year. Cargill, ADM, and two other agricultural companies — Bunge Ltd (NYSE: BG) and Louis Dreyfus Co — are known as the ABCD quartet of grain trading giants. They buy crops from farmers to process and export them.
The OXFAM Research Report notes that these huge companies will not disappear any time soon. They are adapting and continue to grow, taking advantage of new areas of demand. For example, the growth of global meat consumption has stimulated the demand for feed, which consists of crops such as wheat, maize, and soy. The development of the biofuels sector depends on the crops in which these companies specialize, particularly sugar and maize for ethanol, and soy and palm oil for biodiesel. “The ABCD companies are not only traders of physical agricultural commodities: they operate all along the agri-food supply chain as input suppliers, landowners, cattle and poultry producers, food processors, financiers, transportation providers, and grain elevator operators, and they provide much of the physical infrastructure involved in agri-food production and marketing,” the document says.
What distinguishes the ABCD companies from their competitors is the sheer scale and a significant presence in a wide range of basic commodities, such as wheat, corn, maize, palm oil. All these four companies were founded more than 100 years ago. Except for Louis Dreyfus Co, which is a privately held Dutch company, the other three are American companies. Apart from being the world’s leading international agricultural commodity trader, Cargill is also the only one directly involved in meat production and marketing. The company also holds 25% of the global trade in palm oil. ADM is the most industrial profile of the Quartet and is a leader in ethanol trading. Bunge is the leader in South American soybean exports while Louis Dreyfus Co is the world leader in rice, cotton, and dairy products trading.
“In many ways, the world’s major grain trading firms now operate more like cross-sectoral “value chain managers” on a truly global scale compared to their grain trade origins. High degrees of concentration combined with control over a vast array of activities give these firms enormous power to shape key aspects of the global food landscape,” says Jennifer Clapp from the University of Waterloo. In particular, these companies motivate producers to grow certain goods by giving them an incentive in the form of grants or access to their chemicals.
ABCD agribusinesses have extensive logistical systems allowing them to transport not only their own but also others’ products. Their logistical reach is so large that governments use ABCD companies to deliver food to disaster-struck areas. Louis Dreyfus is headquartered in the Netherlands and takes advantage of the country's extensive shipping lanes and harbors. ADM and Cargill operate barge transportation and ship products along major rivers. All this helps the ABCDs keep their costs down.
Although ABCD companies are rivals, they often speak with one voice. In October 2018, for instance, ADM, Bunge Ltd, Cargill Inc, and Louis Dreyfus Co announced that they were working together to digitize international grain trades with the use of such technologies as AI and blockchain. The big four companies want to replace a system relying on paper contracts and invoices with an automated electronic system, something that will make commodities trade more transparent and efficient while reducing costs.
In the early 2000s, ABCD companies controlled about 70% of the global grain market. However, they have been facing growing competition from new Asian companies, such as Singapore-listed Wilmar and Olam, China’s state-owned Cofco, as well as from Switzerland-based Glencore (GLNCY). Although Glencore is known primarily as a mining company, it has an agriсulture business operating in the international grain market. Five years ago, Cofco replaced ABCD as the main buyer of Brazilian soy and maize, reducing the cumulative share of the four big companies in Brazil’s grain exports from 46% in 2014 to 37% in 2015.
Wilmar International Limited (WLMIF), which operates in Singapore and worldwide, controls 45% of the palm oil global trade. It is also one of Asia’s leading agribusiness companies. In the first quarter of 2021, Wilmar reported higher-than-expected net profit that was due to increased palm oil and sugar prices as well as reviving demand from China. Its net profit was $450.22 million, up 100.9% as compared to the same period last year.
Another Singaporean company, Olam International Limited (OLMIY), is one of Asia’s biggest agricultural commodity suppliers and one of the world’s largest food businesses. It offers cocoa powder, cocoa butter substitutes, confectionery, soybean, sunflower oils, and more. The company sources cocoa beans, coffee, and nuts from more than 2.5 million farmers all over the world and operates in more than 60 countries. Last year, Olam reported $9 billion in revenues and $600 million of pre-tax profit. In August, Olam announced that it would list its food ingredients business on the London Stock Exchange in the first half of 2022. Earlier, the Singaporian company unveiled its plans to buy Olde Thompson, a U.S. spice company, for $950 million. Singapore’s state-backed Temasek Holdings holds a 53% stake in Olam, while Japan’s Mitsubishi Corp. owns 15% of shares.
One of the major challenges that ABCD companies face is the growing share for Russian wheat exporters. Russia’s Trading House RIF LLC (private company) has been the leader in this sector since 2017, accounting for 31% of global wheat exports in 2019. Two other Russian private companies — Aston and Zerno-Trade — held the second and fourth spots, respectively. Glencore was third with a market share amounting to 10%. In 2019, Aston, Glencore Agro IGC LLC, United Grain Company Yug LLC, and Trading House RIF LLC signed a memorandum on the creation of the Union of Grain Exporters. The Union was set up to promote Russian grain and legumes on international markets.
Meat & Poultry Market
According to the 2021 Report by Research&Markets, the global meat, poultry, and seafood market will grow this year at a rate of 3.8% and will reach $1442.42 billion. Major companies in the industry include Brazil’s JBS S.A. (JBSAY); U.S. company Tyson Foods Inc (TSN); Hong-Kong-based WH Group Limited (WHGRF); Japan’s NH Foods Ltd. (NIPMY), Danish Crown A/S, and Cargill. The world’s largest meat producer is Brazil-based JBS SA, while Tyson Foods is the second-largest processor of chicken, beef, and pork in the world after JBS S.A. Headquartered in Arkansas, the company exports the largest percentage of beef out of the USA.
In 2020, Asia Pacific accounted for 45% of the global meat, poultry, and seafood market, while Western Europe was the second largest region with a 22% share of the global market. The report notes that poultry processing companies more often use 3D imaging systems that help them optimize yields. These systems employ near-infrared sensors to determine how much bone and meat each particular bird has.
In the United States, four companies slaughtered more than 80% of U.S. cattle that are made into beef roasts and steaks for consumers in 2018, according to the U.S. Department of Agriculture’s most recent data. The big four processors in the beef sector of the United States include Cargill, JBS SA, Tyson Foods Inc, and National Beef Packing Co. The latter company is a beef processor headquartered in Kansas City and controlled by Brazilian beef producer Marfrig Global Foods SA.
The U.S. company Smithfield Foods, Inc., which is owned by China’s WH Group, is considered to be the world’s largest pig and pork producer. However, last year, China’s top pig producer, Muyuan Foods Co., Ltd. (002714.SZ), said it would build the world’s largest pig farm that could accommodate 84,000 sows and their offspring. As of 2020, the company had as many as 2.6 million pigs.
World’s Largest Publicly Traded Agricultural Companies
Archer-Daniels-Midland Company (NYSE: ADM)
The Archer-Daniels-Midland Company or simply ADM is a U.S. commodities trading and food processing corporation established in 1902. The company is headquartered in Chicago and operates in more than 160 countries, running hundreds of plants and crop procurement facilities all over the world. Its facilities process oilseeds and cereal grains into products used in beverage, food, animal feed, and industrial applications. ADM procures, stores, and transports a broad range of agricultural raw materials, including wheat, corn, oilseeds, oats, barley as well as partially refined oils used in biodiesel production, and other industrial products. The company imports and exports agricultural commodities.
ADM has a market capitalization of $33 billion and ranks No. 51 in the Fortune 500 list of the biggest companies in the USA. Its stock has been going up for the last twelve months, except for June when it dropped from $68 to $57. The company's largest shareholder is The Vanguard Group, Inc. that owns 9.4% of the shares outstanding. State Farm Mutual Automobile Insurance Company is the second-largest shareholder with 9.2% of common stock, while BlackRock, Inc. and State Street Corporation have 6.7-percent and 5.7-percent stakes in ADM, respectively.
Juan Luciano (58 years old) has been ADM’s CEO, President, and Chairman since 2016. He is also on the board of the pharmaceutical company Eli Lilly and Co, The Commercial Club of Chicago, The Business Council, The U.S.-China Business Council, and some other associations. Under Luciano’s leadership, ADM has increased the use of innovative technologies and expanded its global footprint. In particular, the company invested in port facilities in South America and Europe, feed plants in China and the United States, and expanded the capacity of sweetener production in Eastern Europe. Additionally, Luciano has led the company’s expansion into the ingredients business.
ADM operates in three segments. The first one, agricultural services and oilseeds, accounts for 77% of the company’s sales. The second segment, carbohydrate solutions, accounts for about 13% of sales, while the nutrition segment makes up 9% of the company’s sales. Whereas the first and third segments saw a 2-percent increase in sales last year, the segment of carbohydrate solutions saw a decline last year. The highest revenue-generating products are soybeans, soybean meal, and corn that accounted for 18%, 14%, and 12% of total revenues, respectively. In 2020, ADM’s revenues amounted to $64.3 billion, a slight decrease from $64.6 billion in 2019.
In geographical terms, more than 40% of ADM sales went to the United States, 21% — to Switzerland, 6% — to the Cayman Islands, 3.7% — to Brazil, 3.5% — to Mexico, 3.1% — to Germany, and some 22% go to other foreign countries.
In April, ADM reported a surge in first-quarter profit that jumped 76% year-on-year. This impressive growth was largely due to robust demand from China and strong margins from its oilseed crushing business. The thing is that following the recent U.S.-China trade agreement, China is buying more grain and meat from the USA, something that benefited heavily ADM and other ABCD companies. It is noteworthy, though, that Chinese farmers have increased corn planting, taking advantage of higher prices, which is likely to cool imports, analysts say.
ADM’s first quarter’s net earnings increased to $1.22 per share from 69 cents per share a year ago. Quarterly revenue rose 26% to $18.8 billion, surpassing Wall Street's expectations. “We are seeing clear, favorable demand trends for many of our products, and we expect that pattern to continue as vaccine rollouts accelerate and restrictions ease,” said ADM's CEO Juan Luciano. He added that this year, all of the company’s business segments are expected to show stronger results as compared to the previous year. “That will drive the company to earnings that we never had before certainly,” Luciano pointed out.
Bunge Limited (NYSE: BG)
Bunge Limited is an American agricultural company that specializes in soybean exports, food processing, grain trading, and fertilizers. The company is the world's largest oilseed processor and an international soybean exporter. It operates in the three largest soybean-producing countries – Brazil, the USA, and Argentina. Bunge operates crush plants worldwide, including soy crush and soft seed crush, with processing capacity covering the Americas, Europe, and Asia-Pacific. In Brazil alone, the company owns 9 grain mills, 8 oilseed crush plants, 6 refineries, 6 port terminals, and 4 oil packaging facilities.
Founded in 1818, Bunge Limited was incorporated in Bermuda and is headquartered in St. Louis, Missouri. The company operates through 5 segments. The Agribusiness segment is the largest one and accounted for more than 71% of the company’s sales as of 2020. This segment includes purchasing, soring, and processing agricultural commodities, such as oilseeds, wheat, corn, vegetable oils, and protein meals. The Edible Oil segment, which includes packaged and bulk oils and fats, generated 23% of total revenue. The Milling Products segment, which offers wheat flours, dry-milled and wet-milled flours, made up 4% of sales last year. The Fertilizer segment and the Sugar and Bioenergy segment accounted for 1.2% and 0.3% of sales, respectively. In 2020, the first two segments showed an upward trend, growing by approximately 4% year-on-year, whereas the other three segments were in decline.
More than 36% of Bunge’s sales went to Europe, The United States is the second-largest import destination for the company’s products, and remarkably, the share of this region is rising. In 2020, the United States accounted for 23.2% of the company’s sales, an almost 15-percent increase from a year earlier. The share of the Asia Pacific region in Bunge’s sales is also on an uptrend and amounted to 20.7% last year. The fourth-largest import destination is Brazil (over 12%), followed by Canada and Argentina (3% and 2.5%). Other countries account for 2% of the company’s total sales. Net sales were reported at $41.4 billion, a slight increase from the previous year.
Five shareholders in the company have a stake of more than 5%. The largest one is Capital Research & Management Co. that holds 9.5% of shares outstanding. It is followed by The Vanguard Group, Inc. (8.9%), T. Rowe Price Associates, Inc. (7.4%), Capital Research & Management Co. (5.1%), and Fidelity Management & Research Co. LLC (5%). Bunge’s CEO, 58 years old Gregory A. Heckman, has been occupying his position for three years. He also sits on the board of the Dutch company OCI N.V. that is engaged in the production of natural gas-based fertilizers and industrial chemicals.
In the first quarter of 2021, the company more than tripled its profit thanks to strong crop export demand and stout oilseed crushing margins. Also, Bunge raised its full-year 2021 adjusted earnings outlook to approximately $7.5 per share from its earlier forecast of at least $6 per share at the backdrop of the eased pandemic restrictions. The company had a net income of $5.52 per share and revenue of $12.9 billion in the first-quarter period. According to the second-quarter report published in July 2021, the company continued strong Agribusiness execution across the global network. Net sales have grown to $11.6 billion from $6.6 billion in the same period of the previous year. Sales volumes increased, too. Based on the strong second-quarter results, Bunge increased its full-year adjusted EPS outlook to at least $8.5.
Bunge shares have surged 31% since the beginning of 2021. The stock has increased more than twofold in the last 12 months and now is traded at around $77 per share. As of August 2021, the company’s market capitalization amounted to 10 billion.
JBS S.A. (JBSAY)
JBS SA is the world’s largest beef and poultry producer and the second-largest pork producer in the world. Its market capitalization is $15 billion as of August 2021. Headquartered in the Brazilian city of São Paulo, the company has more than 60 years of history. JBS SA operates 150 facilities worldwide and is present in 15 countries. In June, JBS SA said it would expand the capacity at two of its major beef processing plants in Nebraska, the USA, and invest more than $130 million for this purpose. This will increase the plants’ capacity by almost 300,000 head of cattle per year.
At the beginning of June, JBS SA was hit with a cyberattack that resulted in the production shutdown at its facilities in the USA, Canada, and Australia. In Australia, around 7,000 workers at 47 facilities could not work for several days. Following the cyberattack on JBS’s servers, U.S. lawmakers are pushing for more processing capacity to reduce the industry's reliance on large facilities operated by just a few main processors.
More than 75% of JBS’s sales come to the USA, while South America accounts for 25%. Other regions make up an insignificant portion of the company’s sales. More than 40% of the company’s revenue is generated by beef sales in the USA, followed by chicken (23%) and pork (12%) sold in the United States. So far, JBS SA is the largest beef importer in the USA, with 79,600 tons of shipments in 2020, according to Panjiva's data. The U.S. demand for imported beef has significantly increased during the pandemic, with imports having grown by 27.1% year over year. Analysts warn, however, that JBS SA may lose its market share in the United States as high-quality British beef returns to American stores after licensing permissions were granted to the British family-owned company Foyle Food Group, among others.
The second quarter of 2021 has turned out to be the best quarter in the company’s history, according to the official statement. In August, JBS SA reported a 30-percent increase in net income to $839 million, which was largely due to its thriving meat business in the USA. Moreover, in the second quarter, China purchased nearly a third of JBS’ meat exports.
The largest shareholders are brothers billionaires Wesley Batista and Joesley Batista who own a 37% stake in the company through J&F Investimentos. Two other notable shareholders are Bndes Participações S.A., which is the investment arm of Brazil's national development bank, and REAG Gestora de Recursos Ltda that hold 23% and 6% of stakes, respectively. Gilberto Tomazoni (61 years old) serves as the company’s CEO since 2018. He is also on the board of 10 other companies and is a member of the Brazil-Russia Chamber of Commerce.
The Fastest-Growing Agricultural Companies
American Vanguard Corporation (NYSE: AVD) is one of the fastest-growing agricultural company based on the most recent quarterly year-on-year earnings-per-share (EPS) growth. With EPS growth of 400%, the company saw higher sales across its domestic and international businesses. American Vanguard Corp reported $134.6 million in revenues for the second quarter, up 29% year over year. As a reference, EPS growth shows how fast a company could boost its bottom line on a per-share basis and anything above 20% is considered to be attractive to investors. American Vanguard benefited from the newly acquired businesses — AgNova Technologies, an Australian company that develops and distributes agricultural chemical products, and the Agrinos Group, a fully integrated biological input supplier with proprietary technology.
American Vanguard is a diversified agricultural company that specializes in crop protection and chemicals for turf and ornamental markets. The company produces insecticides, fungicides, herbicides as well as biological products for crop applications. American Vanguard Corp is headquartered in Newport Beach, California, and was incorporated in 1969.
In terms of revenue growth, the fastest-growing agriculture company is AquaBounty Technologies, Inc. (NASDAQ: AQB). Its revenues for the first quarter surged more than 1,000% from $7,000 to $74,000 from the same period last year. Although this figure is insignificant, it reflects the company’s vigorous growth. Operating expenses in the first quarter amounted to $4.2 million, as compared to $3.1 million in the same period of 2020, which means that the company heavily invests in its promising technology.
AquaBounty is a biotechnology company that focuses on improving productivity in North America’s aquaculture industry. It offers bioengineered Atlantic salmon as well as conventional Atlantic salmon and salmon eggs. Based in Maynard, Massachusetts, the company is primarily notable for the development of genetically modified fish that grow faster than conventional Atlantic salmon. Using this technology, the company will be able to produce up to 70% more fresh salmon per year as compared to conventional Atlantic salmon grown under the same conditions. Provided that there is forecast to be a limited supply of salmon in the near future — something that I mentioned at the beginning of the article — such a technology stands to gain. The fish is also raised free of antibiotics and other contaminants.
AquaBounty is determined to produce as much as 220,000 pounds of such salmon per month. Last year, the company announced its plans to construct another fish farm in Indiana with a production capacity of up to 3.5 million pounds per month. In May 2021, AquaBounty sold out its first commercial-scale harvest of genetically modified Atlantic salmon. Additionally, AquaBounty’s genetically engineered fish was approved by Brazil’s National Biosafety Technical Commission for the sale, something that allows the company to enter a new market in South America. However, note that AquaBounty uses debt in its business, which may make it risky.