Looking for higher margin
Cargill drops out in US cattle feed livestock industry
Cargill is changing course in the United States (US). The largest supplier of raw materials for the animal feed industry announces its intention to sell its animal feed components in the US. The company wants to focus on the parts where a higher margin can be achieved. Is this a harbinger for strategy in other parts of the world?
Worldwide, Cargill is an important name in the agricultural sector. The company also plays an important role in the Netherlands, especially when it comes to the distribution of agricultural raw materials for the production of animal feed. However, the company is now announcing that it is phasing out its North American livestock operations.
Parts for sale
In order to properly phase out the activities, they are put up for sale. That is what the Reuters news agency said. This sale follows the sale of the components in the North American pig farm. That ging to the Brazilian meat giant JBS.
Although the company is saying goodbye to pigs and cattle, it continues to focus on various activities in poultry farming. In addition, the focus is shifting to vegetable proteins, aquaculture and insects. This in an attempt to achieve a higher margin.
Increasing competition in grain
The plan is not entirely new, because Cargill has been investing in vegetable proteins since 2015. The choice to say goodbye to animal feed is a new one. An underlying problem affecting all major grain traders in the US is low grain prices.
The margins are being squeezed in particular by the high supply, the low margins and arable farmers who are increasingly able to regulate their own sales with financial instruments. In addition, competition is increasing from niches such as GMO-free, organic products and other novelties that respond to consumer demand.
Trend for Western Europe?
Based on the developments outlined above, the change of course is still reserved for the United States. Although the demand for GMO-free and locally grown raw materials for animal feed is also increasing in Western Europe. However, the volumes still seem too small to pose a threat to the commodities giant Cargill.
In general, trends from the United States sooner or later blow over to Europe. As a result, it could be a sign of a new trend in Western European livestock farming. Especially because the high dependence on South American soy is increasingly being pointed out as the weak spot of livestock farming.
Also check out the following:
De futures market for wheat, maize and soy.
Discover here the developments in feed prices.
Herman van den Pol
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