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December 05, 2005

Agribusiness being reshaped by three revolutions, Archer Daniels Midland VP tells Fletcher students

Around the world agribusiness is being reshaped by several simultaneous revolutions, Margo Loebl, Group Vice President for Finance at agribusiness giant Archer Daniels Midland (ADM) told students at the Fletcher School on November 14. With the increasing influence of global trends on agribusiness, she said that Fletcher’s students’ international perspective is very valuable.

The first major revolution taking place is the rise of Latin America as one of the world’s breadbaskets, Loebl said. In the past, North America’s huge agricultural capacity made it the primary food exporter for much of the world.

“But as the world has continued to evolve, countries have tried to diversify their sources of food, including investing in Latin America as an alternative,” she said. For example, Brazil is now one of the top producers of agricultural products like soybeans. “This shift has required us to rebalance our assets,” Loebl said.

The second revolution is shift of the majority of the world’s population to Asia, creating new dynamics in international food demand. “This is combined with rising incomes that allow people in Asia to consume protein at middle class levels,” Loebl observed.

ADM and other agribusiness companies can supply Asia with soybeans for products like tofu, and also feed grains to raise chicken and livestock. “Chicken is the first thing people in developing countries are able to afford, since it uses less feed and is mature sooner,” she explained.

“The third revolution is in rising energy demand and limited oil capacity, so renewable fuels will play an important role in the future,” she said. ADM and other companies will be able to play an important role in expanding production of fuels developed from agricultural products like ethanol and bio-diesel.

To meet these new demands, Loebl explained that ADM’s operations in 60 countries extend from “From the farm gate to the dinner plate.” “We are not farmers – we process, transport, and store food,” she said. “The difference in the agribusiness sector is how far up the value chain firms go - we don’t go up to the brand level. Instead, we focus primarily on agricultural processing,” she stressed.

As these revolutions reshape agribusiness, “The leaders of the company have to be very astute in working with other issues like economics, global supply and demand, and trade policy,” Loebl said.

“World Trade Organization negotiations are largely driven by farm subsidies, and we expect a global reduction in subsidies. This is another big issue,” she added.

With these global issues becoming increasingly important to ADM, Loebl said Fletcher students can play a valuable role in the company. “We need intellectual capital from folks like you at Fletcher for this dynamic environment which changes every day,” Loebl said. “With Fletcher people there is a role in leadership once you have learned the business,” she added.

Article by Charles De Simone, MALD '07

Posted by jessica at December 5, 2005 08:11 AM