Born from the merger of Allied Grain and Banks Cargill in 2005, Frontier Agriculture Limited has become the U.K.’s largest grain trader
by Chris Lyddon
Frontier Agriculture Limited is the largest grain trader in the United Kingdom (U.K.), but there’s a lot more to it than that. Frontier, backed by two giants of the world’s agriculture and food industries, is involved in virtually every aspect of producing and trading grain.
"Our main focus is on customer service," Frontier Agriculture’s Trading Director Jon Duffy told World Grain. "It’s all about quality of service delivered for a fair margin." Frontier Agriculture was formed in April 2005 by the merger of Allied Grain, which belonged to Associated British Foods (ABF), and Banks Cargill, which belonged to Cargill.
"They were, in terms of size, the number two and three companies in the grain market in the U.K. at the time," said Duffy. "The result: Frontier Agriculture is a strong number one in grain as well as in fertilizer and seed. It’s also very strong in agrochemical advice and sales."
Frontier Agriculture has a turnover of more than £750 million (approximately U.S.$1.5 billion) and employs some 600 people based in 35 regional offices and stores, stretching from northeast Scotland to the south coast of England.
"The basis of the company is a joint venture between the two original owners," he explained. "It’s 50-50 between ABF and Cargill. Cargill is the largest grain trading company in the world by a long way."
Associated British Foods is a diversified international food, ingredients and retail group with sales of £6 billion ($11.9 billion) and 75,000 employees in 46 countries. Its huge range of activities stretches from beet sugar processor British Sugar, to the hugely successful discount clothing retailer Primark, as well as flour milling company Allied Mills.
The two parent companies are powerful friends to have. For example, Cargill’s sweetener business, Cerestar, has a plant that uses more wheat than any other facility in the U.K. In 2007, Cerestar plans to switch to wheat from maize, which will add an extra 750,000 tonnes of demand for U.K. wheat.
Cargill is also one of the U.K.’s biggest oilseed crushers, with rapeseed crushing plants in Liverpool and Hull.
Cargill’s stake also gives Frontier Agriculture access to Cargill’s international network, which means expert advice on markets and future trends to help Frontier analyze international markets.
ABF owns the U.K.’s biggest animal feed company, AB Agri, as well as one of its biggest millers, Allied Mills. British Sugar is at the forefront of developing alternative crop uses, including work on producing ethanol from wheat.
The companies that own Frontier tend to take a hands-off approach. "We have complete managerial independence," Duffy said. "That includes having our own executive board."
Duffy, who is in charge of trading, sits on that board, which is led by Managing Director Mark Aitchison. Nonexecutive directors of Frontier include representatives from Cargill, such as David Rogers, senior vice-president of Cargill Europe, and ABF representatives such as David Yiend, the chief executive of AB Agri.
"We are very much a farmer- and consumer-focused organization," said Duffy. "The company is split, in terms of turnover, in half. Half of it is inputs into the farm and half is outputs from the farm."
However, for Frontier’s grain traders the emphasis is on providing the best service to customers. "Our grain trading is very much customer focused," he said. "We serve the whole grain industry including the distillers, the maltsters, the flour processors, pea and bean processors and animal feed compounders. That’s just in the U.K. We also serve a huge range of overseas customers.
"We trade in total about 4 1/2 million tonnes of grain in a year. That’s not paper transactions; that means grain we physically handle."
To handle that much grain, the company has access to large-scale storage facilities. "We also have the ability to store about 600,000 tonnes of grain in the U.K., either in our own stores or in stores that are available to us under deals with others," he said. Duffy said Frontier believes in maintaining control of the logistics. "We have our own dedicated haulage fleet which we feel is an added advantage for farmers," he said. "Logistics in the grain trade are going to get harder and harder. Having our own haulage fleet means that we are in control of the logistics process."
The company is the U.K.’s largest exporter of combinable crops, shipping around 1 million tonnes per year. In 2004-05, Frontier was responsible for more than 25% of total U.K. exports (3.9 million tonnes). Of that total, Frontier had found markets for 45% of the beans, 35% of the oats, 26% of the barley and 23% of the wheat.
Frontier has access to some of the biggest export facilities. "There are six or seven ports in Britain capable of taking the larger vessels," explained Duffy. "We own silos in one of the larger ports, Hull. We also co-own the one in Southampton."
Frontier owns the Boston silos at a port on England’s east coast that can handle the smaller vessels, and the company has arranged access to other facilities. Situated in the wash bay, the Boston silos are 100% owned and operated by Frontier and have storage capacity for 5,000 tonnes in 200-tonne bins.
"We have agreements which mean that we can use all the other ports," Duffy said.
The trade is not all one way. The company also imports around 250,000 tonnes a year of products that are not available in the U.K., including maize and specialized types of wheat and pulses.
Duffy said Frontier puts a lot of effort into making sure grain buyers get the quality they want. "We have a specialized quality assurance team," he said. "They ensure that what we’re doing will lead quality standards in the industry. Our mantra is: ‘A high-quality service supplying high-quality goods for a fair margin.’"
"We’re passionate about getting closer to our customers," Duffy said. "We work closely with them and we help them get over their problems and some of the obstacles that they have in their business."
From a trading point of view, that means helping trading partners get the best deal. "With the massive volatility that there often is in the grain market, we can use our expertise to help our trading partners," said Duffy. "We advise farmers on what to grow and how to go about selling it in the best way for them. We also advise consumers on when is the best time to buy and how to minimize risk. We’re trying to take away risk from consumers and producers."
Frontier operates pool marketing schemes for farmers, which offer one of the simplest ways to a good return. From October through December 2006, Frontier’s wheat pool achieved £5.11 (U.S$10.24), a tonne more than the average of ex-farm sales for the U.K., despite a volatile grain market.
That is not the only marketing pattern. Frontier is recruiting farmers located within 100 miles (160 kilometers) of Cargill’s Manchester plant to become part of a specialist wheat suppliers’ club called Manchester Gold.
As well as advice on how to produce grain and how to market it, Frontier Agriculture also offers farmers advice on how to comply with the many environmental rules that are becoming part of their lives. It has developed a Whole Farm Policy that looks at all the environmental and legislative requirements, providing documentation and advice, which is constantly kept up to date
The company is also the U.K.’s top fertilizer merchant, with close relationships with fertilizer manufacturers, including a partnership with Yara U.K. Frontier has more than 150 fertilizer specialists trained to provide up-to-date advice for farmers. It has achieved accreditation under the Fertilizer Industry Assurance Scheme (FIAS) Merchanting Standard. Many of the Farm Assurance schemes in operation in the U.K. require that fertilizer is supplied by an FIAS-accredited merchant, giving full traceability of the products supplied.
A Frontier Agriculture agronomy service advises on varieties, chemistry and agronomic practices. The company has its own contractors who apply pesticides and fertilizers for farmers. It has a specialist services operation, with activities that include sampling and providing and operating irrigation equipment. It also offers storage and drying facilities to farmers.