Cargill India, part of $119-billion global agri-business behemoth Cargill Incorporated, has been part of the country’s farm story for the last 25 years. Having seen almost all the transitions in Indian agriculture, the company now plans to venture into processing farm products and the sugar and animal feed businesses. Cargill was India’s biggest buyer of wheat last year after state-run Food Corporation of India (FCI) and is also a big player in the branded edible oil market through brands like Sweekar, Nature Fresh and so on. In an exclusive interview Cargill India chairman Siraj Chaudhry tells Sanjeeb Mukherjee that UPA’s much-talked about Food Security Act could impact the availability of grain for private traders unless the equilibrium between production and distribution is maintained. dited excerpts:
The government is coming up with a Food Security Act that will entail a significant increase in the amount of grain it procures from farmers every year. How do you think this will impact the private grain trade? Will it crowd out private trade and, if yes, to what extent do you think it will impact private traders of agricultural produce in India?
It is important for the government to ensure food security for its entire people. It is a tough call in a country like ours that requires policy along with efficiency in supply chain and the right infrastructure. The intent of the Bill is appreciated but we do run the risk of needing more grain over the years since we may not have high production every year. While the Bill has addressed the “what” of ensuring food security, we need to have broader engagement to discuss the “how” aspect by involving the private sector and other stakeholders. The Bill will impact free availability of grain for demand outside the ambit of food security. Therefore, to ensure we don’t lose equilibrium, increased production and efficiency of distribution will be critical to sustain this noble but ambitious intent.
Do you think the recent ban on cotton exports was warranted at this juncture?
I believe that not only cotton, but banning export or imports of any product (farm commodities in particular) distorts the market and is not in the interests of either farmers, industry or traders. Regarding the recent ban on cotton exports, I, like many others in the industry, do not have a clue to what has been the trigger and what the government wants to achieve through this. We in Cargill also export cotton but that is a very small portion of our total exports from India. Inherently, we are of the belief that any step that distorts the market harms everyone.
Do you think our crop forecasting needs to improve vastly to help better policy making?
Well, forecasting has improved in the past three or four years and work is on to improve it further, but we are a long way from accurately doing so. Indeed, better forecasting of crop production, yield and estimates help in better planning for policy makers, export and import for traders and planting strategy for growers.
Do you think the government’s flip-flop on farm trade, mainly grain and oilseeds, impacts the farm business in India? Do you think a more stable policy regime is needed in India for the good of both farmers and industry at large?
Long-term planning and stable policy will provide serious industry players a roadmap for planning investment, which will complement the government’s efforts. It will allow the agri- and food sector to deploy capital, technology and global best practices to give India the advantage of optimally utilising its natural resources. We have in the past few years attained self-sufficiency in wheat, rice, corn, cotton and sugar — optimising distribution efficiencies and sustained improvement of productivity will allow farmers and consumers to reap the benefits of this.
Private traders are regularly blamed for the rise in food prices, whether it is for hoarding or futures trade. Do you think this is a valid complaint?
We believe that market forces are stronger than one player or players to create distortions in food prices. Greater transparency in regulations and stability in policies and their compliance would be effective in preventing any significant distortion in the market.
In what way do you think that the private trader can partner with the government to improve the lot of farmers in India?
For a country as large as India, partnership between the private sector and the public sector is necessary to meet the food requirement in the country and benefit all stakeholders — whether it is the farmer, consumer, industry or the government. We believe that the government of India has the finest minds who understand well the paradox of managing farmer and consumer interest and the need for a balance between economic prudence and political obligations. However, the private sector has demonstrated significant skills in execution and trust-based partnerships to create solutions that are well thought-out and efficiently executed.
There can be several areas of collaboration — extension services, farm services, water resources, pre- and post-harvest management and technology, supply chain, procurement and distribution system, and infrastructure. Besides, there can be collaboration for linking farmers’ produce to domestic and global markets, augmenting government’s distribution through grain banks and food banks, research and development and so on.
Cargill in India is now largely concentrated on edible oils — in fact 60 per cent of its $3.5 billion annual turnover from India comes from branded and bulk edible oils sale. How are you planning to grow your businesses in India?
The big challenge in India is to grow alongside our customers and not compete with them. This is precisely the reason that though we are into fresh foods in many parts of the world, we wouldn’t like to do that immediately in India. We plan to get into corn processing, also sugar and animal feed businesses for which we plan to use our recent global acquisition of Provimi.
How will Cargill’s global buyouts like that of Provimi and AWB benefit its India operations?
It’s only in the past three or four years that we have tried to leverage our global buyouts for Indian markets. As part of that strategy, we plan to get into the animal feed business in big way through Provimi, which we acquired last year. Also, the acquisition of AWB Commodity Management Business from Agrium in Australia will help us improve our India operations as the buyout includes AWB’s grain marketing and pool operations, international grain trading businesses, grain distribution and storage assets as well as other international operations.
Who are your biggest consumers in India and for what products? In India, our biggest customer is Parle for wheat, edible oils and flavour. We are also big suppliers to McDonald’s and Pepsi in India.
