William W. Wilson is a University Distinguished Professor and CHS Endowed Chair in Risk and Trading at North Dakota State University in the Department of Agribusiness and Applied Economics. His focus is risk and strategy as applied to agriculture and agribusiness, with a particular focus on procurement, transportation, logistics, international marketing, and competition. He teaches classes in commodity trading, risk, and agribusiness strategy. Bill recently published a paper, ‘Dynamic Changes in the Structure and Concentration of the International Grain and Oilseed Trading Industry.[1]
Good morning, Bill, and welcome to Commodity Conversations. My first question: What’s your assessment as to the level of concentration among commodity trading companies? Is the business environment competitive?
Our results suggest that the industry is highly competitive. In fact, in academic terms, we’d define the sector as competitively fierce.
Generally, the market share of the four largest firms (CR4) is around 30per cent, though this varies by commodity and country. The aggregate figures for FOB and CNF shipments are 32 per cent and 27 per cent, respectively. The statistics for C&F shipments averaged 33 per cent during the first three years of our study, but fell to 27 per cent in 2023. In all cases except for US exports, FOB shipments are less concentrated than CNF shipments.
The four firms with the largest market share for FOB shipments are Cargill, COFCO, ADM, and LDC, while the leaders for CNF shipments are COFCO, Bunge, ADM, and Cargill. There is a distinction in market leaders between FOB and CNF shipments.
In your paper, you refer to cluster analysis. What is it?
Cluster analysis is a statistical tool we use in big data analytics. We use it to identify which firms are most closely associated with each other. In our case, we attempted to cluster the trading firms based on the number of shipments they make, the number of origins and destinations they serve, and the commodities they trade. We identified three clusters.
The first consists of seven firms. In addition to the ABCD group, it includes COFCO, Viterra, and CHS (ABCCCDV). These firms account for 45per cent of global FOB shipments, which is significantly lower than the percentages reported in earlier studies. These results are fundamental to understanding the structure of the international grain trading industry. Rather than suggesting one segment called ABCD, there is a cluster comprising seven firms with similar characteristics.
Our second cluster is a large group of smaller firms with similar structural characteristics but typically have few origins or destinations. We refer to these firms as ‘the competitive fringe’.
Our third cluster comprises many small firms that handle commodities other than wheat, corn, or soybeans.
Your analysis reveals that seven firms, comprising the ABCD+ group of seven trading companies (ABCD + COFCO, Viterra, and CHS), account for 45 per cent of global FOBS shipments. In 2024, EY and others prepared a discussion paper for the EU’s Agriculture Committee that concluded the four ABCD companies “handle around 50–60 per cent of the worldwide trade in essential COPSs (Cereals, Oilseeds, Protein crops and Sugar), and 70–80 per cent if you include CIL (COFCO International) and Viterra.” Why do your figures differ from theirs?
EY published their study when we were finishing ours.
The first thing to say is that the ABCD companies are not the four largest firms in the sector. COFCO is one of the largest. EY focused specifically on ABCD.
There are a few other distinctions. One is that they used all cereals, oils, proteins, and sugar. We omitted sugar and several of the others, including barley, sorghum, durum, other softs, including cotton pulses, cocoa, tapioca.
The second is that they use the expression ‘relevant information’ to describe their data sources, but don’t define it. They do say they look at how much grain was handled by each firm, but don’t define ‘handled’. ‘Handled’ does not necessarily mean ‘exported’.
In our data, we utilise what we call Seaborn Commodity Shipments, which track shipments from specific origins to specific destinations. We separate FOB from C&F.
I point that out because it’s likely that there’s a large amount of non-seaborn shipments of grain that result in exports. For example, there’s a significant movement between Canada, the US, and Mexico, as well as Ukraine to Poland and Romania, as well as intra-EU trade, which is all conducted by train or barge.
For example, ADM may originate 100 metric tons of soybeans from a farmer, process 50 metric tons, and sell 50 metric tons in the export market. They then rail the soybean meal into the domestic market. Taken together, it would mean they handled 240 metric tons, when the original volume was 100 metric tons. I suspect there’s some double counting in EY’s data when they use the word ‘handled’.
In my book, The New Merchants of Grain, published in 2019, I wrote that the top seven companies accounted for ‘about 50 per cent’ of the world trade in grains and oilseeds. Is the sector becoming more competitive?
Yes, it is – and significantly so.
I have traced every published study on this topic from the 1970s, starting with one by Richard Caves from Harvard in 1974, which suggested concentration ratios of 80 to 90 per cent. Over the years, it moderated back to 70 to 50 per cent.
In our study, we covered the period from 2020 to 2023. In the first year, the concentration ratio was 33per cent. By the last year, it had fallen to 27 per cent.
In an interview for my recent book, Commodity Conversations, Ivo Sarjanovic estimated the combined market capitalisation of the top eight ABCD+ agricommodity companies to be around $150 billion. To put that into perspective, Chevron has a market cap of roughly $250 billion, Nestlé around $230 billion, and PepsiCo approximately $200 billion. In my book, The New Merchants of Grain, I described the seven biggest agricultural traders as ‘Seven Dwarfs.’ Why do they come in for so much media attention and public criticism even though they are relatively small?
Grain trading companies suffer a disproportionate share of negativity compared to other major commodity companies. I hadn’t thought about it before, but I suppose it’s because it involves food and agriculture. Every country must deal with food and agriculture in some way or another. It’s an important topic that covers food price inflation, shortages, and food security, and most countries intervene in some way, more so than in other sectors.
Agricultural commodity trading companies must operate within these government guardrails while maintaining their social licence to operate.
Will the competitive fringe of companies continue to take market share from the ABCD+ group?
Yes. In general, there’s a tendency for all industries to evolve towards a few large firms and a large competitive fringe. Our study found that the competitive fringe is big in agricommodity trading. We identified 38 firms in the competitive fringe. They are niche players that have emerged in various ways, focusing on specific commodities, origins, or destinations.
They are not part of the ABCD+ group, but they are viable and significant companies that compete in the ABCD world.
Soren Schroder, a former CEO of Bunge, once told me that ‘There are too many companies trying to do the same thing with a small margin.’ Do you agree?
It is a challenge. This is an industry with substantial economies of scale, easy entry, and subject to volatile demand; consequently, there are many firms. The answer to your question is, yes, we probably have too many operating on small margins, but given the importance of volatility, which affects margins, that’s just a fact of life.
I wrote a separate paper, focusing on Egypt, where I attempted to document all the countries in the world that use an auction-type mechanism – tenders- to select suppliers. Before Russia invaded Ukraine, Egypt had more than 20 firms offering tonnage every time they had a tender. Now, that’s highly competitive, but it’s the reality of a commodity-type business.
How will Bunge’s acquisition of Viterra affect competition, and how was it received among US, Canadian and Australian farmers?
There was minor criticism, if any, of the proposed merger. I don’t recall any in the US. There was a bit of controversy in Europe, which was ultimately settled. Ditto for Canada and China. All relevant countries have now approved the merger.
I recently reran our data to examine that question. Before the merger, the CR4 – the four-firm concentration ratio – was 27 per cent with the top firms in the C&F market being COFCO, Bunge, ADM, Cargill, Viterra, and Dreyfus, in that order. Post-merger, the CR4 goes to 33 per cent, which, by definition, is more concentrated. The top firms now are Bunge, COFCO, ADM, and Cargill. If two firms merge, you can expect a higher four-firm concentration ratio, but it’s still not excessive.
This calculation presumes that buyers will not change their behaviour. However, some buyers will diversify to the competitive fringe and conduct less business than they did with Bunge and Viterra separately. It’s a natural transition in many industries that observe a merger.
Security has replaced sustainability as the buzzword in the agricultural trade and prompted state actors, such as COFCO, to enter the sector. SALIC (Saudi Agricultural and Livestock Investment Company) has bought Olam Agri, and ADQ (Abu Dhabi Development Holding Company) has an indirect 45 per cent stake in LDC. Will these investments make the countries more food secure?
There’s no doubt that food security is essential nowadays, and rightly so. As to your question whether these amalgamations between private and public entities result in greater food security, it all depends on how they organise and structure their business.
Having a venture between two entities will result in the importing country having more information, which will likely make them more assertive in trading and more strategic in their operations. That’s a good thing, but it doesn’t necessarily solve the food security problem.
Food insecurity has various causes, including climate change, weather-induced production shortfalls, and logistical bottlenecks. Having a public-private partnership doesn’t solve these issues.
My response to this, and the advice I offer to importers and major processors I consult with, is stock holding. You may not like it, because everyone grew up with a JIT (just-in-time) attitude, which is to not carry stocks. However, stocks play an essential role and are the cleanest way to mitigate the risks related to food security.
The quantitative analysis I have conducted suggests that an importer should likely maintain around 20per cent of their expected annual demand in stock. In the US domestic market, participants should hold stocks of approximately 15per cent. Both of those numbers are higher than conventionally taught.
My point is that these private-public relationships can mitigate the risk of food insecurity, but only if they adopt a more overt strategy of stockholding.
What about owning farmland? I recall that the Chinese were purchasing farmland and other agricultural assets in exporting countries, but it didn’t make them more food secure. You can still have localised poor weather or export bans.
Or wars. Owning a farm in Ukraine doesn’t mean that you can export your crops – and that’s if you can even harvest them. Owning assets doesn’t necessarily mitigate problems of food security. I think the only solution is a stockholding strategy.
Holding stocks in the destination country reduces political risk and makes those stocks more easily financeable.
Will this trend continue? Will more state companies get involved in agricultural commodity trading?
It is not a clear trend just because we have three or four entities evolving in this way.
Before 1996, we had extensive state trading enterprises worldwide, but they have largely disappeared. Now there’s pressure to put some back together. I suspect many countries are evaluating this and trying to figure out what to do.
However, it’s essential not to overlook that the pressures on food security are primarily driven by climate change, weather, and logistical bottlenecks. In the 2023/24 crop season alone, we experienced reduced flows through the Mississippi and Danube Rivers due to drought. And we had problems in the Red Sea – all in one year.
Additionally, we face geopolitical pressures that result in tariffs or other forms of trade intervention. The issue of food security is paramount, and governments are under pressure to do something.
The recent unofficial Chinese embargo on U.S. soybean purchases has demonstrated that China wields significant influence over private importers. Does China need COFCO to achieve its objectives?
COFCO is technically a State Trading Enterprise (STE). It is similar in structure to the AWB (Australian Wheat Board) or the CWB (Canadian Wheat Board) of the old days, which had government-backed credit guarantees. These bodies could direct trades that might not otherwise necessarily have been the optimal trades based on the market at that time.
The Chinese government could achieve its goals by collaborating with the private sector. However, to do that, they would need an intensive regulatory regimen to monitor all the different traders. It’s easier to do that via a single entity.
Russia now controls grain exports in the same way as it controls fossil fuel exports. Why have they done this, and will it be beneficial/efficient to the sector?
The Russian government is attempting to establish and replicate a model similar to its oil industry, where operations are concentrated in a single entity, Rosneft. That is, exploration, drilling, distribution within the country, and exporting. They have had considerable success with that model. They’re trying to accomplish the same with grains and oilseeds.
Following the 2014 takeover of Crimea and the first round of U.S. sanctions, we initially had 20 to 30 Russian trading companies; we have since evolved to just a few, which are heavily concentrated on domestic handling and exporting. The Russian government has also taken over management of private farms, although – and I may be wrong – they’ve not taken over ownership of those farms.
Will it be beneficial? I’m not sure I can answer that for certain. Agriculture is a complex field, and there are numerous risks to manage and control.
Will traditional agriculture commodity trading companies face financial stress due to an environment of low volatility, high stocks, reduced global flows, increased government intervention, and new local/regional players in different parts of the world?
I think you hit all the buzzwords there, and the answer to your question is ‘yes’.
Traders are heavily dependent on volatility. They make good, attractive returns when markets are volatile. There are several reasons for that, but when markets become less volatile, their earnings tend to decrease. And we’re already beginning to see this, at least in the Americas, with companies announcing reduced profits and layoffs.
How should the ABCD+ ag trading companies react – what strategies should they employ?
First, they must exploit economies of scale. Their costs decrease as they grow larger, which gives them an advantage relative to smaller players.
Second, supply chain management has become increasingly important. You must be efficient in managing the supply chain.
The third one is data analytics, and I use the word ‘analytics’ because I don’t want to say data. Early studies by Richard Cave showed that larger firms had an advantage because they had access to information that other firms didn’t have. Information is now universally and simultaneously available at low cost. Everyone has data; the challenge is to analyse it better than your competitors.
The fourth one is optionality. Successful firms must be masters of optionality. In grains and oilseeds, it means the ability to shift origins and destinations – a global book.
And lastly, managing risk and financial management will become increasingly important.
To varying degrees, governments are now active in a) trading, b) tariff policy, and c) biofuels policies, and an increasing percentage of trading company results now depend on government policies. Do you agree?
I agree that governments are increasingly intervening in the trade of agricommodities.
Biofuels are particularly important now in the Americas, Brazil, Europe and India. Agricultural commodity firms must be involved with biofuels in some capacity. They are a reality of life, and it’s just something that companies must live with.
How will technology, data and AI shape the profile of trading companies?
AI doesn’t change what you do; it enables you to make better decisions faster and quickly. In that context, it could be interpreted as a game-changer. We already see AI used in railcar loading and export terminal operations.
There are tremendous opportunities to utilise AI in supply chain management, particularly in managing inventories and maintaining a certain level of inventory at every point in the supply chain.
Every company is looking to utilise AI to make more accurate predictions about future prices or freight rates.
What should readers take away from this wide-ranging interview?
There are a few main takeaways, but the most significant one is that the agricultural commodity trading sector is highly competitive, or, in academic terms, ‘competitively fierce.’ We have a substantial and viable competitive fringe in addition to the traditional large commodity companies.
I don’t want to say it’s easy to enter the industry, because it’s not easy to enter any business. However, we’ve seen companies enter and be successful. It doesn’t mean it’s easy, but it means it is possible, and that’s a vital fabric of this industry. Companies have been able to enter and find a way to be successful and persist.
Taken together, the bottom line is that the grain trading industry is far more dynamic and competitive than other studies have previously represented.
Thank you, Bill, for your time and input.
© Commodity Conversations® 2025
[1] Wilson, William W., David W. Bullock, and Isaac Dubovoy. 2025. “Dynamic Changes in the Structure and Concentration of the International Grain and Oilseed Trading Industry.” Applied Economic Perspectives and Policy 1–22. https://doi.org/10.1002/aepp.13524