edible oils conference
Major crushers
Indian potential
Financial dout
Bulk is beautiful
What'sNewS Issue 9 September 1998
As James Fry pointed out,
the raw materials for
edible oilscomefrom
numerous
sources all over
the world.
However, the
crushing industry is dominated
by six players - the US (21.2%),
the EU (13.5%), China (13.1%),
India (9.2%), Brazil (8.8%),
Argentina (7.5%).
The big six together account for 73% of all oilseeds crushed globally. They can
be subdivided into three groups: mature - US and EU; maturing - Brazil and
Argentina; and immature - China and India.
In the U5, which has the world's largest crushing industry, domination by
huge multinationals has Consolidated in recent years. Today, only five
companies control 80% of total capacity: ADM, Cargill, Bunge, Ag Processing,
and Central Soya (EBS).
is crucial to such expansion.
Closer ties to growers is
crucial to secure that access,
and more competitive
processing of raw materials.
Increasing competition will
make production cost
efficiency a critical element in
strategy. A key element in cost
is logistics and transportation.'
To reduce crushing costs,
capacity utilization - i.e. the
ever bigger crushing plants - is
being increased and operations
are being up-scaled; as already
noted, a few large,
Ikiultinational players are
)eginning to dominate the
market through expansion into
potential growth markets.
Secure access to raw materials
Marketing RI's Yvonne Dom (left) and Celia Yoshihara of Sao Paulo
providing support
but also requires sound
infrastructure. One of these
potential growth markets is
India. Said consultant John
Lou of Singapore-based
Tropical Oil Products,
'everyone is talking about
China, and India somehow
gets lost along the way.' Until
only four years ago, edible oils
trading and handling was a
government monopoly.
However, now it has been
opened up to private
enterprise, Lou believes it will
become an increasingly
significant player. 'Logistics are
still a major problem there,' he
said. 'Lack of good
infrastructure means India is
penalized to the tune of some
USD 100 million a year on oil
meals alone. Everyone realizes
the need for new infrastructure.
The question is: who will pay.'
The ensuing discussion focused
on the price tag for expansion
and development of the
industry, and specifically of
necessary infrastructure, in
various locations around the
world. It picked up on earlier
comments on multinational
financial clout. Massive
investment would be needed to
establish, for example, an
efficiënt rail network in
countries like Brazil and
Argentina. The average cost of
one mile of rail is around USD
1 million today. 'No one can
expect the private sector to
take on the massive investment
needed,' said Steven Sonka of
the University of Illinois'
National Soybean Research
Laboratory, 'it will have to
come from public funding.'
The discussion went back and
forth as the feasibility of
public spending, particularly in
Latin American and Asian
countries, was explored. The
bottom line, it appears, is that
ideally this investment should
come from both. The reality,
most believed, would be
private enterprise - and would
require funding.
These and many more issues
were on the table at Rio as this
industry consolidates and
begins its transformation into
a decommoditized sector, lf
any single conclusion could be
drawn from the conference, it
was that the study created by
FAR is right on target and
even ahead of the industry
pack in its perceptions of
ongoing and new trends. There
is still some resistance against
the notion of specialty
products, and in some -
especially maturing -
countries, bulk is still
beautiful and will likely
remain so for some time to
come. However, the wheels of
this global sector are well
oiled for change as all five
drivers defined by our research
team come together in the late
1990s and impact the whole
industry.
The study is now available
from marketing RI
(tel +31 30 216 28 04).
