Swiss-based agricultural commodity traders and their business model
Swiss Agricultural Commodity Traders
Public Eye defines Swiss agricultural commodity traders as trading companies with a presence in Switzerland and includes not only those headquartered in the country, but also those that have regional or branch offices here, or those who conduct selected trading operations from Switzerland. This understanding is in line with the definition in the Swiss Commodity Trading Sector Guidance developed to guide Swiss commodity traders in implementing the UN Guiding Principles on Business and Human Rights in their business operations.
The global trend towards concentration can be clearly observed among Swiss agricultural traders. Soft commodity traders rarely appear in the news in Switzerland, but when they do, mergers and acquisitions as well as joint ventures make up the majority of the headlines. For example, in 2017, COFCO International acquired Dutch agricultural commodity trader Nidera alongside the agriculture branch of Hong Kong-based Noble Group, Noble Agri. ADM has over the years progressively invested in Wilmar, Asia’s leading agriculture firm, controlling close to one quarter of the company in 2017. In the Brazilian sugar business, another powerful union was formed between Cargill and Brazil-based Copersucar, resulting in the joint venture called Alvean Sugar SL (Alvean), one of the world’s largest sugar traders. Moreover, Louis Dreyfus entered into a joint venture with Amaggi, Brazil’s largest soy producer, for which there was some controversy.
This trend can be illustrated by the most recent acquisitions and joint ventures of Bunge, as depicted below.
Swiss-based traders as global value chain managers
There is also a clear trend among many Swiss agricultural traders towards greater degrees of vertical integration, both upstream into the production of agricultural commodities, and downstream into processing and manufacturing. Cargill is a prime example of a highly vertically integrated company with activities at almost all stages of the value chain, in input provision, production, trading, processing, manufacturing, and commerce.
By acquiring land, entering into contract farming arrangements or by their simple economic power, traders are increasingly exerting control over production of agricultural commodities. Swiss-based traders are no exception as can be seen in the table below. Many traders are also involved in so-called primary processing, a first step in the processing of raw materials, which is often necessary for international transport and usually requires larger amounts of capital and infrastructure. For some companies, processing has become their main business, such as for ADM, which generates more revenue with processing than with its other activities.
A further expansion is taking place in the field of logistics and storage. Some companies have impressive transport and storage capacities and control entire port facilities but they cannot fully utilise themselves and therefore they also do business with third parties.
Some companies proudly refer to the vertical integration in their self-portraits, most notably Louis Dreyfus Company with their slogan "From Farm to Fork". These integrated companies make up the vast majority of the globally relevant traders. Exceptions to this trend exist, for example sugar trader Alvean and cotton trader Reinhart, who do not (yet) seem to have expanded along their respective supply chains.
Moving upstream into the production of agricultural commodities creates closer links between traders and farmers as well as workers. These increasingly direct relationships and the huge imbalance of bargaining power between traders and people working in production brings with it a responsibility of the trading companies for the severe human rights violations, such as forced and child labour, or the destruction of livelihoods, which occur frequently in the production of agricultural commodities.