Years of excess in agriculture is squeezing traders dry, making it tougher for the world’s biggest agriculture companies to make money buying and selling major crops like wheat, corn and soybeans. Now, firms including U.S. processor Archer-Daniels-Midlands Co. and Chinese food giant Cofco Corp. are restructuring or scaling back their ambitions.
During the commodity boom years, the industry thrived on price swings and expanded in a bet that profit would increase as population growth drove food demand. But after record-breaking production by top exporters like the U.S., Russia and Argentina, many markets are mired in surplus. Companies that operate vast global supply networks that deliver crops from farms to food makers now find themselves in a buyer’s market.
“When commodity prices are high, you generally have a high level of volatility and traders thrive,” said Philippe Chalmin, a professor of economic history at University Paris-Dauphine. “When markets are like they are today — very flat, very dull, without much volatility — there are far fewer opportunities for traders to earn a living.”
Read more: Bloomberg