Gregory R. Page | We are looking at more acquisitions in India5 min read . Updated: 20 Nov 2010, 12:06 AM IST
Gregory R. Page | We are looking at more acquisitions in India
Gregory R. Page | We are looking at more acquisitions in India
New Delhi:Gregory R. Page, chairman and chief executive of farm products multinational Cargill Inc., said in an interview that free trade makes a lot of sense in order to feed the world. Page also spoke about food security and his company’s long-term plans in India. Edited excerpts:
How do you see the global food scenario?
It is the beginning of a crop season in the southern hemisphere and I think there a lot of attention is being paid to the weather. We are quite optimistic as the farmers in the world certainly have price incentives to produce a larger crop in the coming years. So, we see the application of fertilizer getting higher in most parts of the world. If we get the cooperation of the weather first in the southern hemisphere and around March-April in the northern hemisphere, I think the world’s capacity to feed itself continues to be encouraging.
How do you see the scenario in India?
I understand this time the monsoon was successful. The size of the sugar crop has grown significantly and production in oil seeds is growing and it is going to be nearly 220 million tonnes this year. If you ask me about India specifically, I think most of trends are in the positive direction.
Though India has achieved self-sufficiency in food, more than 60% of our population is still dependent on agriculture and it contributes just about 17% to India’s GDP. How do you think this can be improved?
I think it is the circular evolution, where people have more upfront job opportunities, more opportunities in industries at higher ratios than they can earn in agriculture. We see in most countries a transition in migration of rural labour into urban job opportunities such as construction, active work and with them come the mechanization in agriculture. As India’s non-farm economy evolves, the opportunity to apply and improve mechanization (in agriculture) makes it a very easy transition. So, I think the opportunity for the portion of labour involved in agriculture pursuits have declined. So, these are signs of prosperity rather than a problem.
The world saw a serious food crisis in 2008 with rising prices and supply under pressure. Are we heading towards another food crisis?
I think there are always going to be issues of weather disruptions but in the absence of that, I do not see us heading for a global food crisis. I do think one of the concerns is that there are relatively few places where strategic reserves of grains are being held from year to year. The global food system is quite dependent on production in that crop cycle. So, with that we have more volatility.
So, this year there have been disruptions in Russia in terms of a drought led to a dramatic impact on prices… In many countries, prices of wheat have grown more than 50% in a relatively short period of time. So we are in an environment where modest changes in supply led to an outsized impact on price. So, from a customer standpoint that is a challenge. From the agriculture point of view, those price rises stimulated farmers to be more productive... to invest in his farm, to invest in better seeds, better fertilizers. So, there is a balance between price and the capacities of the world to feed itself.
India has had high food inflation in recent times. How can we bring it down?
I think it is difficult for the government to do (this) all by itself. It takes the cooperation of the weather, it takes the decisions of the farmers about what crops they plant and how intensively to produce those crops. I think from an outsider’s view, I see the government’s stands on the duties on the importation of vegetable has been very pro-consumer and I think it helped in taking the edge off food prices. I think the decisions they have taken around pulses to make sure that people have access to those products from the worldwide market have been very practical action that the government has taken.
You recently acquired the Rath vanaspati brand from Agro Tech Foods.
Yes. We continue to grow our vegetable oil business in search of new customers. The brand we purchased from ConAgra has a reasonably well-earned name in the US. Within India, we will probably acquire another brand to build our vegetable oil business. We look forward to acquiring other brands that are strong in certain regions, to reach a new set of customers.
Are you also looking at any other acquisition at this point of time?
I will hope so. I believe we are.
Can you elaborate a bit?
We would like to build a food ingredient business. We would like to build an animal nutrition business. We continue to be very interested in food ingredients as well consumer packaged goods. If you look at the footprint of Cargill globally, as the Indian economy grows and evolves and the middle class expands, you may expect to see Cargill in India as big as anywhere else. At present, we are looking at food ingredients, consumer basics and animal nutrition and certainly commodity trading.
How do you see your growth in India?
I think we should speak more broadly on this. Cargill is a family business. The family enjoys an overwhelming majority over the cash flow in the business. So, they have high expectation of growth. With the company’s size and scope historically doubled every 7-8 years, the family will expect us continue to do that.
Today, if you take Asia, broadly, Cargill is under-represented in this region because these regions have grown so quickly. So as we look forward to the next five years, which is the planning horizon that we have in the company, the proportion of Cargill’s investments need to take place in faster growing economies in South-East Asia. In India, it is significant. It simply reflects that our business should reflect in the growth in GDP and these are the fastest growing areas.
Cargill has more than 65 business units, at least 15 have very good opportunities in India. The growth of the cotton industry has been good. Over time, it will become more sophisticated in its growing practices.
World demand for fibre continues to grow and certainly at today’s prices, farmers are incentivized to expand their crops and we would like to be a part of that.
How do you see free trade helping the world meet its food security challenges?
I think the capacity for the world to take advantage of comparative advantages, which are mostly shaped by weather and soil, relies on free trade. So at a level of agricultural common sense, free trade makes a lot of sense in order to feed the world. Otherwise, there is no choice left.