Despite the sharp drop in earnings, one third of their businesses exceeded the prior year's results. The Food Ingredients business, comprising 26 business units, produced record earnings in 2012. Among other 2012 record-setting businesses:
- Brazil--grains, oil seeds, cocoa and foods
- North America--corn milling
- Trade finance
- Specialty canola oils and industrial oils.
"If we have the demand for 40 percent of our food production as completely inflexible (because of government mandates) then movements in supply..are going to have an outsized impact on price. Today, 2 and 3 percent changes in supply are causing 40 percent changes in price, and much of that volatility is caused by the inelasticity in some portions of the mandated demand."A second factor is a global transportation, distribution and storage infrastructure which contributes to delays, higher costs, and significant crop spoilage. In the U.S., our inland waterways, including canals and river locks, have been neglected for decades and slow the movement of goods along major arteries like the Mississippi River.
Even in poster child success stories like Brazil, the picture isn't rosy for realizing its agricultural potential. As a recent Bloomberg story points out,
"However, some problems may take years to sort out. The growth of the past decade has left Brazil's infrastructure straining to keep up, and cash crops often rot while trucks wait in lines to get into overcrowded ports. Companies struggle to find qualified workers due to poor quality schools."So despite Cargill's 2012 success in moving certain Brazilian commodities, Brazil itself lost potential export or consumption volumes to infrastructure inefficiencies that cannot be cured in the short term due to the inability to finance significant investments. Today, paradoxically, the US imports corn from Brazil because of our own ill-conceived ethanol mandates.
According to Robert Zoellick, the President of the World Bank,
"First, we need to increase food productivity and production in developing countries, especially in sub-Saharan Africa and with smallholder farmers. To do so, we need to fix problems all along the value chain, including property rights, research and development for seeds and inputs, irrigation, fertilizer, agricultural extension, credit, rural infrastructure, storage and connection to markets."Writing on the issue of food security, Roz Naylor, of Stanford's Center on Food Security and the Environment, notes,
"The third and much more difficult issue is the lack of political stability that would enable markets to work efficiently so food producers could sell their commodities and consumers could buy them at a reasonable price."In fact, global companies like Cargill and Bunge step into this breach by providing training, agricultural extension services, and financing to small farmers in Asia and Africa. People in the developing world need their own governments to step up and take responsibility for their own food security.
To put the somewhat abstract discussion of global distribution of calories into perspective, here's a story about the experience of one village in India.
There's no doubt that we've made progress, but there is so much more to do.