Tufts-Fletcher-News:

Home Page || News || President of ADM, Paul Mulhollem

The Challenges and Complexities of the Global Food Business

The global food business is older than the spice trade, but somehow, when business students think of world trade, they seldom mention sugar, wheat, cocoa, corn, or poultry. In the world of international diplomacy, agricultural issues ranging from world hunger to genetically modified organisms (GMO) to tariffs and import quotas are the focus of continuous and contentious debate. In the past year alone, developing countries have protested GATT’s failure to address agricultural protectionism b Rachel Cherry

y wealthier nations, the EU has sought to place new import restrictions on grain that will disadvantage Eastern European farmers, and Russia has implemented several poultry and meat import quotas that will drastically affect U.S. and European exporters. Agribusiness is a trans-national, multi-cultural, multi-disciplinary industry with all of the complexities and challenges a Fletcher student is trained to tackle.

It’s a trillion dollar industry that consists of farmers, freight carriers, traders, processors, manufacturers, and consumers. We know the names Unilever and Kraft; and the average urbanite can guess where rice and wheat are grown, or where milk comes from. But the intermediaries in the business are lost in a gray void; the average consumer doesn’t know or realize who these firms are or how they are linked to world trade.

A handful of agricultural processing and trading intermediaries process the raw

agricultural goods that become the ingredients or feed for most of the food we eat. They produce products ranging from daily vitamin supplements to the oil in your kitchen frying pan to the biodiesel used in European cars and trucks, to the milled wheat in your bread. They have little exposure to the end consumer, yet play a central role in global trade; as processors spanning 6 continents, as futures traders on the floors of the world’s largest mercantile exchanges, as train, truck and ship operators that move nearly all of the world’s human and animal foods, and as active lobbyists in world capitals such as Washington, Brussels, Tokyo and Sao Paolo.

This is the fascinating industry I researched two years ago in Russia, that I later pursued an internship with six months ago in Hamburg, and will soon join on a permanent basis in Illinois. This past summer, while business school and finance concentration colleagues pursued opportunities in financial services, consulting and banking in New York, Boston, Hong Kong and Zurich, I headed to one of the two world trade and shipping capitals of Europe, to apply my knowledge of international business, foreign language, cultural differences and trade patterns to the global foods industry. My employer, Archer Daniels Midland Company (NYSE: ADM) is arguably the largest agricultural processor in the world, and one of the three largest agricultural trading companies in the world. It is an exciting business for an international business enthusiast. ADM is strongest in the mature U.S. and European markets, but with little room for further expansion in these regions it has been forced to look for growth opportunities in the emerging Asian, Eastern European and South American markets. This challenge to expand presents an array of opportunities for those whose interests include global trade, futures markets, international trade law, foreign business practices and languages, and management and fusion of multicultural businesses.

Like any global business, ADM faces multiple complexities to integrating all of its business units, while growing into new, riskier markets. Despite the conveniences of e-mail, internet and a host of high-tech accessories, for a business that often deals with the physical movement of goods across the world, geography still matters. This may seem like a simple concept, but the decision to establish and operate a new regional facility encompasses business, cultural, and sector specific skills.

To cite a specific example, the Russian port of Novorossisk on the Black Sea in the southern region of Kaliningrad is one of Russia’s two largest ports, and its only developed year-round deep sea port. It is accessible from the west only after passing through the crowded, Turkish controlled Bosphorus Straights; and accessible by land from the east only after passing through an already over-used tunnel. It is heavily used by Russia’s dominant oil and gas industry, which receives priority for export/import operations, refining location, etc. The region is politically powerful and economically well off, a result of its role in the Federation as an essential trade base as well as a prospering agricultural and industrial region. To receive permission to build at the port, a host of connections, lobbying, and dealing must be accomplished with a plethora of local, regional and federal officials. And if a facility is built, rail cars must be used to transport product through the tunnel and into the interior. In the U.S., ADM owns many of its own rail cars, and contracts others on the open market. However, rail is nationalized through the Russian Rail Ministry; many of its cars are no longer suitable for transporting agricultural goods. More connections, dealing and local knowledge are necessary to secure a steady supply of acceptable rail cars to the plant. And then there are the customers, only now beginning to recover from the financial crisis of 1998, with little knowledge of the uses and advantages of the products, dispersed over a vast terrain, with low-quality storage facilities that prevent large purchases even if there they had access to financing.

The challenge to educate the consumer, move and store products in a new way to encourage sales while maintaining efficiency, and keep up with government regulations, while fending off protectionist measures of the tariff and non tariff variety are only some of the challenges a company like ADM faces. Expansion is not only a technical decision, it is a politically sensitive maneuver, a geographical and logistical mega-problem, and a business decision that considers not just numbers, but first-mover advantage, future but often unpredictable regional growth expectations, and cultural awareness that for ADM includes foreign business practices as well as local consumer tastes, farming conditions, and processing methods which can often be quite different from culture to culture. Agribusiness is an exciting, dynamic industry that encompasses the multi-disciplinary, international fields in which Fletcher students thrive.

Rachel Cherry, F’03, Rachel.Cherry@tufts.edu will spend her first year at ADM working on domestic and international finance projects. To learn more about this “Fletcheresque” industry, join the President of ADM, Paul Mulhollem, during a lecture/luncheon visit to Fletcher on March 25, 2003.
Visit http://www.fletcher.tufts.edu/ibr/gss/speakerseries2003.htm for more details.

160 Packard Avenue - Tufts University - Medford, Massachusetts 02155-7082 USA - 617.627.3700
Comments to: FletcherWeb@tufts.edu

2002 The Fletcher School, Tufts University