Cargill\u2019s corporate growth in times of crises: how agro-commodity traders are increasing profits in the midst of volatility

Tania Salerno

doi:10.1007/s10460-016-9681-8

Abstract

This paper proposes two interrelated arguments: first, it is argued that agro-commodity traders are uniquely placed at the crossroads of agricultural trade to benefit from agricultural commodity speculation; and second, that the networks constituting their operations are central to their hedging activities. The case of Cargill—the largest privately owned company in the United States and one of the largest agricultural traders in the world—is used to support this argument by unpacking its operations, structure, and hedging strategies. In order to connect the operations of Cargill to its speculating strategies, this paper first traces how agriculture and finance have become increasingly intertwined leading to heightened agricultural commodity speculation. Second, Cargill will be positioned within this process by analyzing how it has financialized its own strategies and its Corporate Platform. Third, Black River Asset Management, Cargill’s private equity arm, will be analyzed to show how it uses the information moving through Cargill’s Platform to engage in hedging and/or speculation.

Highlights

Between the years 2006 and 2008 commodity prices were characterized by volatility and unpredictability
This paper has argued that Cargill is able to both benefit from, and engage in, speculation through the company’s corporate structure and privileged access to information regarding supply
Cargill’s operations were presented to analyze how they have financialized their strategies by opening up various financial braches and how their connections on the ground feed information to the financial arms to inform hedging strategies

Summary

Introduction

Between the years 2006 and 2008 commodity prices were characterized by volatility and unpredictability. Three of the most important financial subsidiaries include Black River Asset Management, Cargill Risk Management, and Carval Investors—each uses the company’s first-hand knowledge of commodity markets and the Platform’s networks to inform decisions on a range of financial instruments including arbitrage, speculative trading, and equity positions.4 Black River Asset Management is an equity management firm working in company equity and index products in food, agriculture, clean energy, and metals/ mining.5 Carval Investors works with distressed and credit

Results

Conclusion