ADM's Woertz stresses importance of Australian agriculture

by World Grain Staff
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SYDNEY, AUSTRALIA — Archer Daniels Midland Co.’s (ADM) President and Chief Executive Officer Patricia Woertz visited Australia and spoke Nov. 8 about the importance of global and Australian agriculture.

Woertz spoke during a private business lunch at the offices of U.S. investment bank Citi. The bak is one of ADM's advisers in its bid to buy GrainCorp. Some Australian officials have recently expressed concern over the proposed buyout.

Below is the speech Woertz made during her visit:

This is my second trip to Australia in the last several months, and I’m very pleased to be here.

As I travel, the question I get asked more than any other is: ‘How can we feed and clothe a global population that is growing and whose income is rising?’

There’s no single answer, but I can tell you that it cannot happen without the growth and success of Australian agriculture and Australian growers. This is one of the places the future is depending on.

That future is one that will be very different from how we lived 50, 25 – even 10 or five years ago. Two decades ago, the World Wide Web didn’t exist – now 1.5 billion people are online. Twenty years ago, China had barely entered the global economy – now it’s the world’s second largest economy.

Fifty-four percent of urban households in China own a computer – and 99.9 per cent have cell phones. Global policy emanated from the G-5, G-7 – now we talk about the G-20. And here’s one example of the daily impact of this growth: in Indonesia, where cars were a rarity, traffic jams have become part of the daily commute in Jakarta.

I’m not an expert in all the trends. In fact, at ADM, we are currently undertaking work to look deeply at the next couple of decades, and the trends that will shape them, and review and test our strategy in light of those trends.

But there are some trends we’ve been watching closely for quite some time; trends related to where populations are growing, and where the middle class is exploding, and what that means for growing demand in our business, for food, feed and other agricultural products.

Let me back up a moment and explain what ADM is, what we do, and why these trends matter so much to us.

We don’t grow the crops that become the food on your plate. Rather, we’re the connector of crops — the processor of crops — between the field and your plate.

With net sales of about $90 billion dollars in our last full fiscal year, ADM is one of the world’s largest agribusinesses. We operate in more than 75 countries and sell into more than 140 countries.

We source crops from the most productive regions in North America, South America, Europe, sell about 2/3 of them and process the other 1/3 in our facilities where we produce food ingredients, feeds, renewable chemicals and industrial products, and deliver these products to customers around the world.
In order to do this, we operate the world’s premier crop transportation network. Each day, ADM processes:

• Enough wheat to make 90 million loaves of wholegrain bread.
• Enough oilseeds to make 6 million gallons of soybean oil.
• Enough corn to make 99 million boxes of corn flakes.
So it is from this perspective — of a leading global agribusiness — that we work to understand the impact of the changes we see around the world: of growing populations and the rising global middle class.

And here is where Australia becomes so important.

Because what we see when we look at those changes is what some have called the West to East shift; the Big Crossover; the Great Rebalancing.

It is the recognition that, in this decade, the focus of economic growth and the middle class that is rising with it will shift from the OECD nations to the emerging economies.

That shift is happening very fast.

Over the next 10 years, GDP per capita will rise nearly five times faster in emerging economies than in OECD nations.

Just two years from now, the number of Asian middle class consumers will equal the number in Europe and North America.

By 2021, if present trends continue, there could be more than 2 billion Asians in middle class households.

If we look out to 2030, for the first time, a majority of the world’s population will not be impoverished, and the middle classes will be the most important social and economic sector in the vast majority of countries around the world.

Asia will have surpassed North America and Europe combined in GDP, population size, military spending and technological investment.

Of course, these changes won’t happen all at once. There is what some have called a ‘sweet spot,’ in which people start moving out of poverty and toward the middle class in the millions. We’ll see Indonesia and India hitting that sweet spot in the next three years. A couple years later, the Philippines and Vietnam will get there. And for places like Pakistan, Nigeria, Bangladesh, it’s a bit further off, say 2025, but it’s coming.

What does that mean for agriculture in general, and Australian ag in particular?

Quite a lot.

Australia is perfectly positioned to play a significant role in meeting growing and changing global demand.

The global wheat trade is estimated to double – to 240 million tonnes – by 2050. As will trade in barley and canola. ANZ estimates that Australia could supply an additional A$0.7 to $1.7 trillion in agricultural exports by 2050; more than double current value of agricultural exports.

Australian grain would be welcome throughout the world. It’s high quality and recognized as such in key markets. And ADM wants to build this reputation into new markets and give deeper penetration into existing markets.

Australian grain growers are among the most productive in the world. They are innovative, responsive to customer demand, internationally competitive, and passionate about their industry.

But even with these competitive advantages, Australia will need more to fulfill its agricultural promise and create a vibrant future for growers. It will need strong, global partners.

As you know, ADM would be proud to be one of those partners. We are going to be part of the global solution to growing demand. So how will we do it? At ADM, we look at meeting demand – both from a growing population and a growing middle class – in terms of three key concepts: productivity, connectivity, and sustainability.

We will all need to be more productive.

To serve overall demand, the world will have to produce as much food in next 40 years as it has in past 10,000. In addition to more food, the rising middle class will demand higher-quality diets, with more protein. In Southeast Asia, for instance, per capita consumption of meat is expected to increase some 60%, from 38 kilograms per year in 1990, to 60 kilograms a year in 2030. Globally, poultry consumption has increased 131% since the 1990s. As populations move up the income curve and move into cities, they also demand more convenience and indulgence foods.

In the late 80s, when I travelled to Nigeria to visit operations, it was only in hotels that you would find western-style food products.

Today, Nigeria has two dozen KFCs, two Dominos, a Johnny Rockets and a thriving Cold Stone Creamery. To meet this growing demand and changing food preferences, global agriculture will need to grow more crops. We need more capacity to store them safely. We’ll need more processing facilities to turn them into the products that middle class consumers demand. And we’ll need more capabilities to move these products around the globe.

Which brings me to the second concept we need to think about: connectivity, or the larger global network we will require. The larger, more geographically diverse middle class will require a larger global network to connect the goods it will consume. And not just goods, but money, data, ideas, people, will need to cross borders and flow around the world as never before.

In agriculture and the food industry, companies like ADM — companies with global networks and capabilities — will have to step up to the challenge of connecting the global harvest to more homes throughout the world.

You might know that, today, many of the geographic regions that are ideally suited for crop production — the right climate and rainfall — are not the regions in which demand for food is increasing.

We grow food in North America, South America, Europe and here in Australia.

But where are we going to need more food for growing populations, and more choices for those rising into the middle class? Asia, Africa and the Middle East. So, the world’s going to need a larger agricultural export, processing and marketing network. Today, ADM transports Brazilian soy to China, eastern European crops to the Middle East, not to mention our extensive North American network of trucks, trains and barges.

But we’ll need more. Which is why we are so eager to partner with Australian growers, helping connect their crops with markets that are going to need them.

The third concept we need to consider is resource constraints.

Quite obviously, as a growing middle class consumes more, there will be more demand on resources, some of them finite.

We’ve already made tremendous strides in this area.

Since 1960, global wheat production has nearly tripled, and yet we are using only six per cent more land than we did then.

We produce about two and a half times as much corn per acre as we did a half century ago. And we do it with less water, and less inputs.

And soybean production has increased at more than double the rate of the land used to grow it. So agriculture has a tremendous track record deploying innovation to improve resource productivity.  At ADM, we are continually focused on optimizing our own resource footprint; reducing the energy and water we use in production and making the most of every seed, kernel and stalk we touch.

We’re also active in the area of preventing loss. In 2011 we established the ADM Institute for the Prevention of Postharvest Loss at the University of Illinois.

One third of food produced for human consumption is lost or wasted globally; that amounts to about 1.3 billion tonnes every year.

So we think that’s an area where education and investment in better storage and infrastructure can make a tremendous difference.

It is challenging and tremendously exciting to think about how ADM can help feed a growing, changing global population, and about the role Australian ag can play in meeting those demands.

We would not be here if we did not see a bright future, and if we did not think we could help Australia and Australian growers make the most of this opportunity.

ANZ estimates A$600 billion in investment will be required for Australian agriculture to meet its potential by 2050.

We agree on the critical importance of agricultural investment.

We have already publicly committed to A$300 million in capital expenditures should our proposal for GrainCorp be accepted.

We’re going to maintain GrainCorp’s portfolio of quality assets and will invest, on average, between A$40 million and A$60 million annually in maintenance and improvement of existing infrastructure assets.

Because that is what we do. ADM has a long track record of infrastructure investment in companies and properties that we have acquired:

• Czech Republic—storage and processing;
• Romania—grain origination silos and barges for export terminal;
• Poland—increased capacity, upgraded grain origination storage capacity, and upgraded oilseed processing assets;
• Germany—added and upgraded grain origination storage capacity;
• Slovakia—added and upgraded grain origination storage capacity; and
• Brazil—expanding a port bulk grain export facility. And our commitment goes beyond infrastructure.
It’s about opening up new opportunities, by connecting Australian products to new and growing markets and to new customers around the world.

It’s about working with growers and helping them succeed, whether through our commitments on upcountry and port access, our proposed Grower and Community Advisory Group, or our ability to share our expertise in logistics and marketing, and our cutting-edge technology.

It’s about helping rural communities and the next generation of growers, by more than doubling GrainCorp’s current yearly community giving to $A1 million, by establishing an Agriculture Scholarship Program, and by our ongoing commitment to sustainability.

We’re here to help Australian ag be all it can be, to help those who grow our food also grow their own success.

We’re here because this is one of the places where agriculture can and will meet the challenges of tomorrow.

And we hope to be here for a long time; to be a good partner, to build and share in your successes. Food is a fundamental part of every culture in the world. We celebrate, we mourn, we negotiate, we bond, we romance and court each other over food. It’s not just sustenance for life, it’s quality of life. The work we do is noble.

And the knowledge that more and more people will have access to better diets – and to the better health, the improved education, the increased productivity, the better quality of life that a better diet can bring — means so much to me, and to the 30,000 men and women with whom I am privileged to work at ADM.

I look at the years and decades ahead with tremendous optimism. The future is bright, and I sincerely hope that we will help to build it together.


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