Dr. William Wilson, a distinguished professor in the Agribusiness and Applied Economics Department at North Dakota State University, recently undertook a study of the global grain trade. The international grain trading industry has undergone significant and rapid changes during the last 50 years. He said the study took a fresh look at the competitiveness of the global grain trade.

“Yeah, this is a new study that was recently published in Applied Economics Perspectives and Policy, where we’re taking a fresh look at the competitive and global grain trade. This industry has changed radically. We use very microeconomic data on shipping and sales, and found the market is really not dominated by a handful of companies as traditionally thought. Instead, there’s really no dominant player, and in fact, the industry would be considered fiercely competitive.”

The last study in 2012 said four companies control 73 percent of the global grain trade. Wilson said his study showed those four companies controlled only about 30 percent of the market. Instead, some new players are shaking up the grain trade.

It’s not inconsequential that since about 2014, we’ve seen the growth of state-backed trading entities. One is by the name of COFCO, which is Chinese. And then in Russia, there are a group of firms that control the industry, that are backed by the Kremlin. More recently, a trading company was bought by SALIC, which is a Saudi Arabia Sovereign Investment Fund, and Louis Dreyfus was invested by an Abu Dhabi Investment Fund. We have a growth in state-backed entities, which is changing the structure of the industry quite sharply.”

He talks about how these findings will affect people participating in the industry during the years ahead.

“Competition is thought to be good, or I kind of take the view of the reason why there are big firms is because they’re small firms. The reason why they’re small firms is because there are big firms. But at the end of the day, the competition is more intense than previously thought. As a result of that, margins become more compressed, and the competitors seek to be better competitors, providing more differentiation and a wider range of options and flexibility. So ultimately, it’s good for consumers, or in this case, farmers, predominantly from North America.”

Based on his extensive research, Wilson said the industry should continue to remain fiercely competitive.

By definition, because of the large number of firms we have, we indicated that there are 38 firms in the competitive fringe, so you got four dominant players and 38 on the competitor fringe, plus half a dozen state-backed entities that are fiercely, fiercely competitive. Will that continue in the future? I suspect that it will, at least in the next five to ten years, driven by a number of things, but partly food security, which fosters the development of state-backed trading companies, but also the events around climate and deforestation and all of these point to a more ruinously competitive environment during that time period.”