Marcel Smits, chairman of Cargill’s Asia Pacific region and Simon George, president, Cargill India, say they are focused on increasing the agro major’s presence in India and building a unique business model for the country. In an interview with Fortune India, Smits and George spoke about a host of issues including increasing farm productivity to reducing the company’s carbon footprint. Edited excerpts:
Are you happy with the progress of Cargill so far in India?
Smits: My view is that we should become bigger in India. India currently represents a little less than 1% of Cargill’s gross investment. I see a significant opportunity in India for a variety of reasons, including lots of people moving into the middle class, which is good because we cater to the needs of these people. Moreover, the markets in which we operate, they are showing very high growth numbers. For example, we are in the oils business...certain segments are growing very, very rapidly and the overall edible oil market is growing at a very healthy rate too.
George: In August 2019 we completed the first quarter of our fiscal year (Our fiscal starts in June) and all our businesses are growing much better than last year. Overall growth is in good double-digits. We have talked in the past about a $240 million investment in India in the next three-to-five years. We have already completed an investment of around $80 million in India and we will be doing more.
You have been talking about a trade deal between the U.S. and China. Should market access be allowed in agriculture?
Smits: We've always been very vocal about the importance of trade for the development of the global economy because it is not a zero-sum game. Free trade is an economically win-win proposition because the comparative advantage of different countries coming out to play. We would add that if you want to create a more globally sustainable food supply system, you're going to have to trade.
The fear is that small farmers may not be able to compete if free trade is allowed?
Smits: In India, over 80% are very small farmers, 50% of your population is in the agricultural sector. And it produces only about 15% of the GDP. It is important to support the farmers and schemes like the direct benefit transfers as it puts farmers in control and prevents the distortion of markets. However, it is also important to increase production and improve market access.
George: We appreciate the steps that the government is taking for improving market access by promoting reforms like the APML (Agricultural Produce and Livestock Marketing) Act 2017 which has progressive provisions of single levy of market fee, single license for traders and de-listing perishables from the ambit of the APMCs. The second one is the eNAM ( a digital National Agriculture Market) which will actually make the country ‘One Agricultural Market’ and allow better price realisation for farmers through enhanced competition. Thirdly, as an industry, we need to recognise that in India only about 6% of the agro products are being processed.
Can you tell us about some of Cargill’s new initiatives?
George: At Cargill there are many initiatives, which in a small and indirect way help farmers in India increase productivity. For instance, in partnership with the global NGO, TechnoServe, we work with farmers in a town like Davangere in Karnataka. We have directly impacted 25,000 plus people across 27 villages there on how they can increase the productivity of the crop and maximise farm profits.
We are also working with women backyard poultry farmers through a programme called ‘Hatching Hope’ with the NGO, Heifer International, to improve livelihoods and nutrition levels of 3.2 million people in Odisha. We will work directly with 30,000 women smallholder farmers and connect them to markets and equip them to be part of the poultry value chain. In the digital sphere of agriculture, you see a lot of startups coming in. And all of them are working on raising efficiency & productivity using technology. In the next few years, this is what could truly revolutionize agriculture.
What about developing agricultural infrastructure?
George: In September 2019 we inaugurated 60,000 tonnes of corn storage silos in Davangere, Karnataka. It is the first of its kind, not from a volume perspective, volume is one of the highest but in terms of keeping the conditions of the corn intact for a period of six to eight months, which means we are actually trying to help the farmers who rather than keeping the produce in their own place can store it here to eliminate any wastage.
The other big issue is of climate change and reducing carbon footprints. How is Cargill managing that?
Smits: It starts with an understanding of your own greenhouse gas footprint. And we have built up that understanding, about all of our locations around the globe, something like 1,200 locations where we have physical activities and we have to understand what our carbon footprint is and how much energy we consume.. We've made a plan to reduce emissions by 10% in absolute terms, by 2025. There is this whole understanding inside the organisation about what is called Scope one and Scope two footprint, then we are increasingly looking at Scope three. Scope three is all of the supply chain all the way from the origin to all the way to the end. Our animal nutrition business has just made a commitment that they are now going to try and reduce the footprint, the greenhouse gas footprint of scope three by 30%. So then it becomes complicated because now you are going to have to influence other people who are further down the value chain.
George: One of the examples of our commitment to climate shows in our Davangere plant. There we consume about 48 million units of power a year. So we went into a solar plus wind power based power generation model in partnership with an Indian company. With a special vehicle investment, we did this and therefore, we are reducing the carbon footprint using renewable energy. It is also aligned with the Prime Minister’s commitment towards renewable energy.
On the other hand, in our edible oil business, we are reducing plastic use. In association with Dow Chemical, we have reformulated our plastic material, making 90% of our plastic packaging recyclable. Also, we are recovering about 70% of used plastics and we're trying to increase it to as much as possible.
Do you plan to introduce a new model for India?
Yes, we will build a unique model for India and that works very well and increasingly run by Indians.