© REUTERS/Denis Balibouse/File Photo
A Cargill logo is pictured on the Provimi Kliba and Protector animal nutrition factory in Lucens, Switzerland, September 22, 2016.
A Cargill logo is pictured on the Provimi Kliba and Protector animal nutrition factory in Lucens, Switzerland, September 22, 2016.
The world's largest agricultural commodities trader has agreed to sell its Cargill Protein China operations to private equity firm DCP Capital, a company spokesperson said, without disclosing terms. The deal is expected to close in 2023, subject to regulatory approval.
The sale comes as meatpackers like Cargill struggle with thinning margins, and inflation that's eroding demand. Relatively high grain prices are also boosting the cost of feeding animals, all challenges new Cargill's Chief Executive Officer Brian Sikes will have to tackle.
Poultry farming in China is struggling to make a profit with consumer demand weaker than expected as the country recovers from Covid and animal feed costs staying elevated. Broiler chicken farmers still can't make any money by raising birds, according to the latest government data.
The deal includes all Protein China entities in Chuzhou in Anhui province, which have both farm locations and manufacturing sites. It also comes less than a year year after the Minneapolis-based trader closed on its $4.5-billion takeover of US chicken producer Sanderson Farms Inc., in partnership with Continental Grain Co.
DCP Capital, led by former partners of KKR & Co., has invested in companies including China Mengniu Dairy Co. and COFCO Joycome Foods Ltd., according to its website. David Liu, DCP's executive chairman, was involved in KKR's $400 million investment in chicken meat producer Fujian Sunner Development Co. in 2015 when he was chief executive officer for China at the global buyout firm.
Broiler Chickens
Cargill's plants in Anhui have an annual output of nearly 65 million broiler chickens and also include feed production, hatching, breeding and processing facilities. They were built in 2011 to satisfy rising consumer demand "for safe and high quality protein products," according to the company's website.
The company also launched plant-based meat products under the brand PlantEver in 2020, made by its operations in Anhui.
Cargill, owned by descendants of the founding Cargill and MacMillan families, is America's largest private company. It's the C in the so-called ABCDs, a group of four merchants that have dominated the world of crop trading. The others are Archer-Daniels-Midland Co., Bunge Ltd. and Louis Dreyfus Co.
Comment: A similar scenario of rising costs, reduced demand, and producers reducing stock, is playing out elsewhere on the planet, with the ultimate result being that the food supply chain becomes ever more vulnerable. Although it's notable that China has been proactive in its attempts to support farmers and shore up stocks.
Meanwhile, and particularly in the West, there's highly suspect food processing plant fires; supermarkets refusing to pay producers for the cost of production and producers in turn reducing the number of stock; extreme weather and erratic seasons wiping out harvests; outbreaks of animal diseases, and the sometimes excessive response by the authorities; lockdown backlogs and their subsequent culls; soaring inflation and energy prices, as well as a draconian crackdown by, primarily Western, governments, that are clearly intended to throw farmers out of business; all of which, taken together, it seems that a collapse of the food supply chain is all but inevitable.
Further to this, it's also notable that Cargill would sell off now, what with the significant uptick in provocations by the US against China: