Commodity giants on our shores
Business Day (Nigeria) | Monday, 23 February 2009
By SIAKA MOMOH
Louis Dreyfus Commodities, a global name in commodity business partners with Finatrade, a Swiss big time commodity concern, to do business in Nigeria.
Louis Dreyfus Commodities (LDCommodities) is a global name in commodity business. It is one company that has merchandised and traded bulk agricultural commodities in international markets for over 150 years.
LDCommodities is present in over 53 countries, with major offices in Beijing, Buenos Aires, Delhi, Geneva, London, Paris, São Paulo, Singapore, Wilton (Connecticut) and Memphis (Tennessee). Its aggregate average annual gross sales in recent years have exceeded $40 billion.
LDCommoditities has moved into Nigeria under a partnership arrangement with Finatrade Holding SA with headquarters in Place du Midi Switzerland and a West African Regional Office in Accra, Ghana.
Business Day had a brainstorming session with Guy de Montule Louis Dreyfus’ chief executive officer for Middle East Africa and general manager rice division, Nicolas Bernadi, the company’s West Africa general manager and Fidaa Halawi, Finatrade’s managing partner in Lagos recently. The session revealed that the strategic partnership is here to do big business. Excerpts:
Guy de Montule: Guy de Montule opened up the conversation. Said he in his preamble “We have been operating in Africa since 1997. We started in Ghana; our head office is in Ghana. Our core business is commodity distribution. We are into the importation of rice and sugar. I am in charge of Middle East and Africa. Louis Dreyfus has been operating for more than 150 years now. It is a family business which is doing about $40 billion all over the world. We are present in the entire continent. We have more than 100 offices all over the world. In Africa, we have offices in Accra, Dakar, Johannesburg. We trade in coffee, citrus, grains, oilseeds, cotton, sugar… We are number one in rice. We are trading more than two million tonnes of rice worldwide out of which Africa accounts for 1.8 million tonnes.
“We are number two in oranges with big industries in Brazil and Florida, number two in sugar with about nine sugar mills in Brazil -- number two in Brazil and number two worldwide. We have different kinds of other interests all related to commodities. We have land fund in South America -- mainly Argentina and Brazil. We own land, we farm land, we lease land and we trade land. In Ukraine we do the same thing. We are now thinking of a land fund for Africa. Our main interest after commodity trade is farming.”
Relationship with Finatrade: Louis Dreyfus has been associated with Finatrade for 15 years. Historically, for the past 20 years, this commodity giant has been developing exclusive partners all over Africa. “And Finatrade is our exclusive partner in eight different countries in West Africa where we trade in rice, sugar, milk, corn. We started with the group Finatrade six months ago. We are looking at other projects such as farming and industrial projects,” he said.
But his company has little experience in Africa and wants to consolidate in other places like Nigeria which is quite a large place “where you do not enter Nigeria if you are not strong”.
Food as core business: Why in food business he was asked? “This is because historically we have always been in commodities. It is our core business. This is our expertise. This is where we know how to develop to take care of a company and shareholders’ interest. We know how to leverage money within the food industry. This is one business where we have a vision; where we can solve problems and develop agriculture. You cannot be good everywhere, you have to focus.”
The partnership already has a Soya mill in Ibadan which will be launched in March this year. It a $20 million (N291.8 million) investment. It has taken two years to build. The plant will produce Soya milk from Soya beans “but would import granules for a start.”
Commodity trade/agric processing: One wondered if Nigeria should continue to hang on to importation of a popular staple like rice or should continue exporting our primary commodities like cotton, coffee and grains. This we have been doing for ages -- a strong legacy of colonialism. Montule was confronted with this problem. His response: “In Nigeria we have a three-prong approach. We are starting off with trading. We are going into manufacturing, starting with Soya mills and we are looking at farming and exporting at some point. We have not put any timing into farming.”
“We have been in Africa for 20 years. We have not come into Nigeria all this time because we wanted to understand Nigeria little more; we wanted to have the right partner. We wanted to be stronger outside so that we can leverage on expertise and experience. We are being careful. African is not the easiest market, it has a local feature. It is an environment that is quite different from South America or Europe.”
The smallholder farming challenge: Nigeria’s agriculture is smallholder farming in character. What plans does the Louis Dreyfus/Finatrade partnership have for this challenge? “We are already looking at local farming, including rice, in other countries. Definitely we have plans for Nigeria but it is too early to say when we will start; but at some point in view of the number of tonnes Nigeria is importing we will be looking at local farming -- we will be interested in rice and other commodities. It is too early to understand how we can play in local farming. There are two schools for extensive farming. Some countries are good for extensive farming some are good for cooperative farming. We do not know what the right thing is yet for Nigeria. But definitely we are already looking at it. You cannot want to do business in Africa and leave out Nigeria. The food crisis has to be addressed and Nigeria is one place where this can be done.”
“We have a land fund in South America, we have in Ukraine . Now we are developing one in Afric. We need to acquire land for farming.”
Global meltdown challenge: Guy de Montule does not see this as a handicap. Said he, “You have got to continue to feed an increasing world population. The economic crisis does not stop one from developing long term.”
Fidaa Halawi: Fidaa Halawi is managing partner and co-founder of Finatrade Group. He is in charge of the West Africa Group that started out of Accra Ghana in 1997. Finatrade is the West African arm of LouisDreyfus.
Said Halawi “Over the last ten years, we have expanded in close cooperation and collaboration with LouisDreyfus. We are present in many countries and most recently we have expanded our business into Nigeria doing commodity business so we know the market well. Finatrade is exclusively a West African Group. We are in commodity trading. We are into procurement and export of agricultural products. We are in fast food consumer distribution. We are into manufacturing too. I have relocated to Lagos from Accra to take charge of the five companies we already have on ground here. We have three categories of companies. We have commodities, manufacturing and logistics. For the past five years I have been in Accra.”
The partnership, according to him, is on ground in Ibadan already with a $20 million (N291.8 million) Soya flavour plant.
Nicolas Bernadi: Nicolas Bernadi is the West Africa general of Louis Dreyfus and he is based in Dakar. Said Bernadi, “The company has presence in 23 countries in West Africa. Today, we work with companies like Finatrade in eight companies in West Africa. Our main focus among the countries we work in, in West Africa is Nigeria which accounts for half of the population in this sub-region. We focus also on Ghana, Senegal and Ivory Coast with Finatrade. These are the four main countries we focus on in West Africa. We are into rice imports in West Africa. We are also leader in cotton. We buy about 100,000 tonnes of cotton per annum. We are number in the buying of cotton in West Africa.”
He explained “The two other areas we focus on are wheat and vegetable oil. We are already exporting between 600,000 and one million tonnes of wheat to Nigeria. We are also selling wheat in Ghana and Ivory Coast. So we plan to increase our market share in that commodity. We are world leader in Soya oil. We do also canola red oilseeds, and we are developing palm oil programme from Asia and in West Africa.”
“We are both looking at increasing our share through Finatrade partnership and at the same time looking at assets that will develop the agro industry in West Africa. So we are looking at assets like port facilities, tanks, silos, warehouses that will permit the development of the agro-industry in West Africa. We have some interest in the biggest flour mills in Abidjan. We are the biggest Soya mill in Argentina producing one million tonnes per year.”
Freight Overview: Louis Dreyfus Commodities has been involved in all aspects of the bulk ocean freight industry for over 100 years, including the ownership of a large fleet under Louis Dreyfus Armateurs. LDCommodities is one of the largest chartering entities in the world in support of its worldwide commodities trading activities, a significant portion of which is concentrated in the area of grain transport.
LDCommodities is unique in its ability to offer a full suite of comprehensive risk management products to customers, including products to manage commodity price and volume risks.
LDCommodities has three main offices responsible for its grain chartering operations that are located in Beijing, Geneva and Wilton (USA). These activities are also supported from offices in Buenos Aires, Delhi, Paris, São Paulo and Singapore.
LDCommodities produce profile
Citrus: LDCommodities is one of the three largest producers of orange juice in the world with a 15-percent share of the global market. It operates processing facilities in Brazil and Florida that have a combined annual capacity of 83 million boxes of oranges, producing 330,000 tons of orange juice concentrate.
Coffee: LDCommodities is one of the largest and best-known dealers of green coffee in the world, trading over five million bags annually. Clients include some of the largest international food companies such as Kraft Foods, Nestle, Sara Lee and Procter & Gamble.
Cotton: LDCommodities, the world’s leading trader and merchandiser of raw cotton, handles approximately 1.5 million metric tons of cotton each year, which originate in major producing nations and are distributed to end users in major consumption markets. In the United States , it is a major supplier to domestic textile mills and operates over five million square feet of warehouse space.
Grains: LDCommodities, consistently ranked among the largest merchandisers of grains, originates and distributes products throughout the world. Offices in Buenos Aires, Geneva, São Paulo, Singapore and Wilton (USA) serve as major coordination centers for merchandising activities. It owns or operates considerable strategic assets around the world to support its global activities.
Oilseeds: LDCommodities, consistently ranked among the largest merchandisers of oilseeds, originates and distributes products throughout the world. Offices in Buenos Aires, Geneva, São Paulo, Singapore and Wilton (USA) serve as major coordination centers for merchandising activities. It owns or operates considerable strategic assets around the world to support its global activities.
Rice: Actively involved in the global rice trade, LDCommodities merchandises paddy, brown and milled rice from the United States, Europe, Asia and South America. It sources high-quality Thai, Vietnamese, Pakistani and Chinese milled rice for consumer markets within Asia and for export, and originates rice for trade within, and export from, the Mercosur.
Sugar: LDCommodities ranks as one of the top three sugar merchants and traders in the world, handling both raw and white sugar and handling more than 2.5 million tons of sugar annually. The company owns three Brazilian sugar mills that produce 450,000 tons of sugar and 150,000 cubic meters of alcohol annually.
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