Grain Giant Warns Globalization Is Over

by John Konrad (gCaptain) Yesteray – on the heels of China President Xi’s consolidation of power, nuclear warnings from Russia, and droughts spanning the globe – Greg Heckman, CEO of the grain gaint Bunge, warned investors that globalization is “done for a period of time” and admitted that geopolitical turmoil has resulted in large profits for the company.

Shares of Bunge (BG) jumped seven percent yesterday after the St. Louis-based company announced they are profiting from crop shortages and global volatility. Bunge said war in Ukraine has caused a major disruption in the supply of grain from one of the world’s top exporting regions leading to a sharp increase in the price of wheat and corn. Additionally, bad weather reduced crop stockpiles in some major agricultural countries.

Globalization Ends

“I think globalization is done for a period of time,” Bunge CEO Greg Heckman  said in a call yesterday. “When we had a supply problem or a demand surge globally, every origin port and every destination was available to solve that problem in the past. That’s no longer true.”

Book Review: The End Of Globalization Is Just Beginning For Shipping

Archer-Daniels-Midland ($ADM) also warned of uncertaintly coupled with profits that have nearly doubled this year. The company reported earnings of just over $1 Billion, up from $526 million during the same period last year.

“We have very good momentum going into 2023,” ADM Chief Executive Juan Luciano told investors. “But what we see is a very uncertain world.”

Agriculture experts say we will need two or more good crop years in North and South America to relieve the tight food supply situation. Mother Nature is not cooperating. More rain will be needed to water crops and boost low water levels on the Mississippi River, Great Lakes’ St. Lawrence Seaway and Argentina’s Paraná River so grain barges can operate but too much rain could drown crops and reduce yeilds.

Also read: Waterways And Lakes Are Evaporating Worldwide

Grain Piles Up On American Docks

Luciano warned low water levels in the Mississippi River will cut ADM’s North America soybean exports this year, and corn exports could be delayed until early 2023. Both companies are shipping more commodities from South America as America’s grains pile up on the docks.

Grain traders like ADM, Bunge and Cargill often benefit from higher commodity prices. They can also benefit from price spreads that happen during extreme weather events, shipping shortages and geopolitical turmoil. Some grain companies like Cargill – the largest privately held corporation in the United States – own massive silos that profit from charge farmers rent.

Related Book: Out of the Shadows, The New Merchants of Grain by Mr Jonathan Charles Kingsman

“Business is booming but nobody is trying to squeeze the consumer,” one Cargill operations manager told gCaptain. “We are in the business of helping the farmer solve problems and this year problems are booming.”

Silver Lining

On a bright note Bunge CEO Heckman said the company is benefiting from high demand for oilseed-based biofuels which could help customers reduce carbon emissions. Overseas Shipholding Group ($OSG) will present quarterly results on Friday Nov 4th and Sam Norton, CEO of the American tanker company, is expected discuss an increase interest in the transporation of biofuels and renewable diesel.

Also read: Emergency SOS – Are Boomers To Blame For The Shipping And Supply Chain Crisis?

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