Century-Old U.S. Grains Trader Bets on Asia as Food Demand Grows
(Bloomberg) -- A century-old American grains trader is betting on Asia, opening up new offices and running assets in the region, as growing populations drive up demand for food and livestock feed.
Scoular Co. expanded its business to Indonesia and Myanmar, and has plans to open another office in the region over the next 12 months, said Adrian Gasparian, managing director of Asia-Pacific. The Omaha, Nebraska-based trader is now operating assets in both countries with a focus on supplying the local food and feed industries with everything from soybeans to fish meal.
Asia is fueling growth in agricultural markets, with China buying record amounts of American corn and soybeans to feed a hog population that’s recovering from a deadly pig disease faster than expected. But it’s not just China. Indonesia has become an import powerhouse, ranking as the world’s second-largest buyer of wheat and top importer of raw sugar. Traders have also been attracted to high growth in places like Vietnam and Thailand.
“If you look 5 years from now, I think we will be in Vietnam, Thailand, Korea, Philippines, Cambodia,” said Gasparian, a former Archer-Daniels-Midland Co. executive hired in 2019 to oversee the expansion. “I think Southeast Asia will probably have higher growth rates, both of GDP and of feed milling and food industry growth. I think parts of North Asia are interesting as well.”
Tempeh and Tofu
Privately-held Scoular has swelled its ranks in Asia from a handful less than two years ago to 51 today, including 18 in the Singapore office that serves as the trader’s Asian headquarters. The company, which also has offices in Shanghai, is focused on expanding its business in Southeast Asia.
In Indonesia, the trader has opened an import and distribution business to supply makers of tempeh and tofu with food-grade soybeans sourced directly from American farmers. The company started running soybean cleaning facilities in Surabaya and Semarang earlier this year.
“By 2050, Indonesia will have more people than the U.S., so it’s a growing population still,” Gasparian said. “Tempeh and tofu are such a staple food in the country that just with the population growth, we do see a growth in the market year on year.”
In Myanmar, the trader is supplying the feed industry with things like soybean meal and is also planning to set up a fish meal facility to capitalize on growing aquaculture markets in the region.
“Generally what we’ve seen is that feed-milling capacity increases a couple of percentages more than GDP growth on average in Southeast Asia,” he said. “So I think you are going to continue to see feed-milling growth, flour milling growth.”
Scoular is handling about 500,000 metric tons of crops in its Asian subsidiaries on top of the regular deals the company already had with clients in the region. The trader is distributing products on the ground instead of just selling crops for delivery at Asian ports, and adding value by cleaning and packaging crops as well as supplying tailor-made feed ingredients to customers.
The company was already one of the top three exporters of American agriculture products in containers and its biggest market was soybeans, many of which were shipped to Indonesia.
Asia is poised for a strong economic recovery as the world emerges from the global pandemic, which hammered demand in these countries. But the hardest part for the trader founded in 1892 was the inability to travel.
“We were looking at a potential M&A deal before, which fits Scoular’s size and scope, and we haven’t talked about it in the past year because we cannot go visit potential partners,” he said. “That makes things more difficult for sure.”
Scoular expanded in Asia just as a crunch in commodity-trade finance crimped smaller rivals, with European banks from BNP Paribas to ABN Amro NV either retrenching or pulling out of the market altogether. Some smaller Asian traders were forced to reduce volumes, opening up space for another player.
“We have a really strong balance sheet and excellent banking relationships, so we haven’t had that,” he said.
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