Optimal trading and shipping of agricultural commodities
Globalization has significant benefits, both in terms of access to food that can be grown more efficiently and cheaply elsewhere, or those — especially fruit and vegetables — that may be seasonal but which we want year-round.
In a stable world, it makes sense for a country to grow the few things they are best suited to produce, export what they can at a competitive advantage, and import what they cannot grow as well. This in turn leads to efficiencies and price reduction. Through trade, therefore, our globalized system provides cheaper food for all. It also allows countries with a significant agricultural economy to export and benefit from this.
Trade, in monetary terms, is dominated by high value horticultural crops, then oilseeds and then cereals. Trade volumes are dominated by flows of soy from the Americas to China and in terms of calories, trade is dominated by the major commodity crops: The amount, and type, of food trade is both growing and changing every year.
For example, the global demand for meat and dairy is driving a rapidly evolving growth in livestock feed which includes oilseeds like soya, fodder crops and concentrated feed. It is now the most traded agricultural commodity, dominated by flows from Brazil, the US and Argentina to China.
Of course, a country that imports high-protein feed permits a volume of feed supply greater than the local constraints on feed production would otherwise enable.
This allows for the expansion of meat and dairy production, which then further stimulates exports in meat and dairy products. The rapid expansion of soy production has led to widespread land conversion for those countries where there is a comparative advantage.
This new land often converts forests to fields, such as has occurred in the Brazilian Amazon. This forest clearance has a variety of consequences for delivery of the range of ecosystem services that forests supply — carbon storage, production of rainfall, livelihoods for indigenous people, as well as providing a hotspot for biodiversity. Conversion of forest to agriculture is also importantly a significant contributor to the global greenhouse gas balance sheet: A product embodies all the resources used to produce it: Purely in terms of resource, a country with an abundance of supplies may have a competitive production advantage over a country where that resource is scarce.
These can be viewed for the majority of agricultural trade flows in the Chatham House Resource Trade Database. Flows illustrated are those between the 10 largest producer- and consumer-nations of embodied land in global trade in non-livestock agriculture. This is 32 per cent of the total embodied land traded. As growing demand puts more pressure on production systems, access to the strategic resources of land and water will become more acute, perhaps exacerbated by changing dynamics of water supply through climate change.
To produce a green bean requires about a gallon of water, and a kilo of beef requires about tonnes. Flows illustrated are those between the 10 largest producer- and consumer-nations of embodied green and blue water in global trade in non-livestock agriculture. This is 38 per cent of the total embodied water traded. A recent study shows that about 11 per cent of food trade - mostly exports from Pakistan, the US and India - has embodied non-renewable groundwater used in irrigation, providing some long-term food security risks for those countries that rely on the trade.
This trade growth is partly taking advantage of cheap transport - it is very cheap to ship from the US to China due to the imbalance of trade: Countries with less access to water can make it go further by importing goods from countries which have greater access to water for production purposes.
A good example of this occurs in the Middle East, with countries like Israel. Cross-border trade is dynamic in space and time. Changes in production, such as caused by weather, geopolitics and government policies, interact with the market to change prices and availability. Sometimes this dynamic is very fast, causing the rapid evolution of policy and market responses, leading to food price spikes, and a myriad of impacts on society.
Sometimes, they play out in a slower way, in response to more gradually emerging changes. For some crops - for example soy and tree nuts like almonds - the majority of production is exported. Imagine a world where the US administration honours in full its campaign promises, perhaps imposing tariffs on goods from China, including on non-agricultural produce like steel; while at the same time dismantling NAFTA.
The global community would potentially retaliate in kind, leading to high tariffs on US exports. Under WTO rules such tariffs can be substantial on agricultural produce. Such changes in tariff structure would undoubtedly lead to a reconfiguration of global agricultural trade.
China is currently the number one destination for US agricultural produce, with close to half of US soybean exports ending up there primarily for animal feed and vegetable oil.
If China were to introduce countermeasures in response to any US action, or if Chinese consumers were to boycott US supply, even if sold at a loss, then this could result in significant reductions in this bilateral trade flow. This has consequences that may play out in a variety of ways. Most of our customers have been dealing with Marex Commodities for a long time. We establish long term partnership with a limited amount of receivers at destination to ensure good sales.
Our succes comes from the succes of our customer and we believe that a permanent presence of our products on the market with a good price and a guaranteed quality is necessary.
This is the reason why we developped full range of products as Monica range, Royal Gala range or Le Bon Cuisinier range. Marex Commodities effects most of its shipments in containers, allowing its customers to benefit from just-in time supply of the required commodities as well as smoothened-out cash flow requirements.
As an example, Marex is able to deliver brazilian sugar in west africa within 12 days from booking the order from its customers. Marex Commodities sources its products directly from selected manufacturers in the countries of origin. The company has developped closely-knit relationships with suppliers in Malaysia, Turkey, Brazil and Europe. Marex entertains long-term partnership relationships with its selected suppliers, enabling to reach optimal trade fluidity and consistency in price and quality.
In Brazil, Marex sources its sugar on a ex-mill basis from the most reputable mills. Our local office, organizes the The company provides its customers with real-time market analysis enabling them to benefit from market opportunities in terms of physical market, underlying futures markets and currency markets.