Trade protectionism is detrimental for global economy in the long term: Peter Van Deursen of Cargill

In November 2017, US-based food and agriculture major Cargill pledged to invest $240 million in India to promote agriculture and food processing industries and create 1,300 additional jobs. In just six months, the company has already made some headway in this direction, says Peter Van Deursen, the Chief Executive Officer of Cargill Asia Pacific. In a chat with Business Today, Deursen and Cargill's India chairman Siraj Chaudhry, give a detailed account of the company's India plans, and how the $109.7 billion transnational corporation sees the increasing protectionist trends in global trade.
Here are the excerpts.

BT: You had signed a memorandum of understanding with the food processing ministry to make investments in India. Any progress?

Deursen: We are taking steps to invest $240 million in three to five years. We have already spent $15 million for a fish feed mill in Vijayawada,  invested $18.3 million in a bio-industrial manufacturing plant (which produces Envirotemp FR3 fluid, a renewable, bio-based natural ester dielectric coolant for use in distribution and power class transformers) in Maharashtra. A Corn silos plant is coming up in Davangere in Karnataka. This bulk storage facility with a capacity of 60,000 metric tonnes will need an investment of approximately $10 million.

Chaudhry: We are creating jobs outside this $240 million investment plan also. The employee strength of our business service centres in Gurgaon (near Delhi) and Bangalore have, in the last four years, gone up from 600 to 2300. It will be 3000 soon. These centres handle the backend services for Cargill's operations around the globe.

BT: Given your global size, isn't your India operations and investment plans too small? What are your growth plans for the country?

Deursen: Let me begin with what Cargill wants to be in the world. We have a strategic intent to be a global leader, nourishing the world in a sustainable manner. It's very aspirational. Since 60 per cent of the world population is in the Asian region, you need to be successful in India (and other Asian countries) to live up to this strategic intent. We have been in India for quite some time, but we were relatively small, so we are building up our business in India through investments.

Chaudhry: We are actually a portfolio company, dealing with agriculture, food, animal nutrition, services, trading..., it's a whole range. So for us, it's finding the right mix. We had an interaction with Prime Minister Narendra Modi as part of World Food India, we have been party to discussions with the government, whether it is food processing industry, finance ministry or agricultural ministry. We are working with state governments on improving their power situation, and many of them are adopting our model industrial products. So somewhere or the other, we bring technology enhancement.

BT: What has been your growth, in terms of revenues?

Chaudhry: We don't typically focus on top line as we are a collection of businesses and our top line is impacted by the commodity prices. But I would say we have been in the range of anywhere between Rs 7500 crore to Rs 10,000 crore.

Deursen: India is an emerging country for our businesses and we are building our market share here. We want to be a leader in every sector that we are operating in.

Chaudhry: We are a top three player in most of the segments we are operating. There is domestic competition. Edible oils for instance. But that is to be expected. Across the region, local players are getting stronger. It adds to our challenge, but the advantage we bring in is the global knowledge, understanding, technology.

BT: How do you see the agri-policies and promises of the Central Government?

Chaudhry: The policy changes proposed by the government talk about increasing farmer income, educating farmer to understand the market better and opening up the markets to the farmer. These are all areas where we can contribute to make a difference. We are present in animal nutrition, aquaculture, dairy farming, poultry not just as suppliers, but also as providers of best practices. Because, it is not only about feeding the animals or the birds, it is also how you keep them. And a lot of that has to do with farmer education. While we are selling products, we are going to the farmers to help them do things.

BT: Can you double farmers' income through higher minimum support price (MSP) for all crops?

Chaudhry: It's a fine balance that needs to be maintained. We need the farmers' income to increase, but increasing the price is not the only solution for it. It is about bringing the risk in agriculture down, and increasing the productivity. It can be done through a combination of factors, which is efficient agriculture practices, technology in agriculture, and ensuring free market access to the farmers. All these should combine to achieve the objectives of doubling farmers' income.

BT: As a global commodity player how do you see US President Trump's protectionist posture?

Deursen: Statistics prove that free trade benefits the growth of the company, the growth of the country also. It can address the question of how to feed the growing global population. We are a champion and proponent of free trade. If you look at the dispute between US and China, for a US company, China is the second largest food market in the world. If they cannot sell their produce in China it will impact them. As a commodity trader, these kinds of developments create lot of volatility options in the short term, but in the long term, it is detrimental for global economy.

BT: What could be the impact of a China US trade war?

Deursen: If you see Trump announcing tariffs on steel and preparing for more, and China's reaction of already making a pre-emptive list, not implemented yet, it is detrimental for the global trade. Because if you look at the soyabean exports, China is the second biggest market for US farmers and any disruption here will have a big impact on US farmers and eventually, there will be retaliation. We do have substantial soyabean supplies to China, but we do it from US and South America. So you will see the trade flow changing. It is not disastrous for us in the short term because we can manage the volatility of the trade by sourcing it from Brazil and Argentina. But then the prices in US will go down and prices in China will go up and it will impact growth. So our statement is that any trade war loses. Global trade can only benefit global companies as wherever there are excesses and shortages, you can trade freely and you bring efficiencies in the global trade flow.