A Conversation with Ivo Sarjanovic

Ivo is a Certified Public Accountant from the National University of Rosario (UNR), with a master’s degree in economics from Universidad Francisco Marroquín. He has completed executive education programmes at Oxford University, Harvard Business School, and IMD Business School.

He was the former Global Head of Soybeans and Sugar at Cargill in Geneva, where he was also responsible for the company’s operations in the Middle East and Africa. He was the former CEO of Alvean, the world’s largest sugar trading company.

Ivo currently serves as a non-executive director on the boards of several international agribusiness and livestock companies. He is a visiting professor of Agricultural Commodities at the University of Geneva, Erasmus University Rotterdam, Universidad Torcuato Di Tella (UTDT), Universidad Austral, and UCEMA. He is the author of Commodities as an Asset Class (Palgrave Macmillan, 2022).

Good morning, Ivo. First question: Do the ABCD+ agricommodity trading companies collaborate as an oligopoly, enabling them to control prices?

Agricultural commodity markets tend to be open. Entrepreneurs can enter, compete, identify arbitrage opportunities, and attempt to earn profits—but only if they offer something better, faster, or more efficient than incumbents. This openness generates continuous competitive pressure, reflected in slim gross margins, often thinner when accounting for risk. Firms constantly enter and exit the space—new ventures, bankruptcies, divestitures, and acquisitions. Because the capital required to become a physical participant in ag trading is relatively modest, unlike in energy trading, the sector remains highly dynamic and entrepreneurially vibrant.

Some people interpret any deviation from the textbook model of perfect competition as market failure. However, from a market process perspective, this view is fundamentally flawed. Real-world markets are not static equilibria but dynamic, evolving arenas of entrepreneurial discovery. In practice, few markets operate under anything resembling perfect competition. Instead, we observe markets embedded within specific institutional frameworks, ranging from less to more competitive, where firms engage in continuous entry and exit, growth and retrenchment, and adaptation to dispersed information.

In this view, competition is not a static condition defined by structure, such as the number of firms or market concentration indices like CR4 or the Herfindahl-Hirschman Index. Instead, it is a process of entrepreneurial rivalry—constantly searching for new efficiencies, arbitrage, and innovation. What matters is not the number of firms that exist, but how open the market is to new entrants and new ideas—how contestable it is.

Still, to understand the competitive environment properly, it's important to distinguish between the three main segments of the value chain.

The first is origination, from the farm gate to FOB. These markets vary widely by region. In major exporting countries like the US, Canada, Argentina, Brazil, Russia, Ukraine, Australia, and Europe, you'll find a mix of global, regional, and domestic players competing to serve both export and domestic demand.

On the other hand, you have destination markets, where multinational and regional food processors coexist with a wide range of local firms. Apart from crushing activities in some locations, international traders typically play a limited role in this segment. Local processors tend to lead the industry, and in many cases, they can also source from domestic crops, broadening their supply base and reducing dependence on international suppliers.

In the middle, you have the international trading space—maritime flows from FOB to C&F—where most public attention tends to go. In 2024, EY and others prepared a discussion paper for the EU's Agriculture Committee titled "The Role of Commodity Traders in Shaping Agricultural Markets." They added up the reported volumes traded by the four ABCD companies. They concluded they "handle around 50–60 per cent of the worldwide trade in essential COPSs (Cereals, Oilseeds, Protein crops and Sugar), and 70–80 per cent if you include CIL (COFCO International Ltd) and Viterra."

However, there is a major methodological issue with that estimate. The researchers used total sales volumes from company financial reports as the numerator—yet those figures include all sales to third parties, not just FOB-to-C&F flows. The latter is only a subset of the total volumes, with other transactions occurring at different stages of the value chain; therefore, this approach overstates the numerator.

Then there's the issue of the denominator. The authors based their calculation on international trade flows of essential cereals, oilseeds, protein and sugar crops—yet many of these companies have diversified business models, not limited to grains and oilseeds. Some also trade other commodities—locally and globally—including meat, cotton, rice, cocoa, coffee, orange juice and biofuels. These are included in their reported sales volumes but excluded from EY's calculation of the denominator. So, depending on how you define the scope of traded commodities, you can end up with very different—and quite arbitrary—market shares and concentration ratios.

The total FOB-to-C&F flow of the ABCD companies is probably around 225–250 million tonnes. The following four major players—CIL, Olam, Wilmar, and Viterra—add another 170–190 million tonnes. That puts the top eight at a combined 400–440 million tonnes.

But again, what should we use as a denominator? If we broadly define agricultural international flows, the total global maritime ag trade is around one billion tonnes.

It suggests that the ABCD companies hold a market share of approximately 25 per cent in maritime agricultural trade, with the top eight players accounting for around 40–45 per cent. These figures do not point to a cartel-like structure controlling prices. On the contrary, the data reveals high rivalry, reflecting a vibrant and competitive environment. Of course, these are aggregate figures. A more nuanced understanding would require disaggregating by commodity and trade flow to better assess each player's relative position and overall industry footprint.

It is also worth noting that the traditional "ABCD" grouping no longer reflects the current market structure. The top four are now more accurately described as "ABCC," with CIL effectively replacing Louis Dreyfus as one of the leading global traders.

A recent article that addresses these issues and arrives at similar conclusions to mine is "Dynamic Changes in the Structure and Concentration of the International Grain and Oilseed Trading Industry" by William W. Wilson, David W. Bullock, and Isaac Dubovoy, published in Applied Economic Perspectives and Policy in 2025.

But what about the origination and destination pieces?

There are varying market shares across these geographies, as strong regional and local players compete actively with the global actors. At origin, key participants include AMaggi in Brazil, Molinos Río de la Plata and Aceitera General Deheza in Argentina, Invivo in France, CHS in the US, Demetra in Russia, and Nibulon and Kernel in Ukraine. Alongside them are numerous local feed and flour mills, biofuel plants, feedlots, dairy farms, and small crushers serving domestic demand.

At destination, the shōsha—Japanese trading companies—maintain a strong presence in Japan, as do the major Korean trading firms in South Korea. In China, the landscape is more fragmented, with a wide array of players besides COFCO and Sinograin. Other notable regional actors include Invictus and Al Ghurair in North Africa and the Middle East, Enerfo in Southeast Asia, and Cefetra in Europe.

All these environments are highly competitive marketplaces.

Is the sector becoming more concentrated?

My analysis suggests that, in relative terms, the market share of the top players is gradually shrinking as local and regional actors continue to gain ground in step with the expansion of crop volumes and trade flows. One of the most significant developments over the past decade has been the rise of CIL. At the same time, Russian and Ukrainian companies have assumed a dominant role in wheat and oilseed exports from the Black Sea region, and some regional buyers are also increasing their share of FOB purchases.

Contrary to common belief, the sector is becoming less concentrated and more competitive, moving further away from an oligopolistic structure.

Even so, the media often argues that agricommodity trading firms have made excessive profits in recent years. Do you agree?

Agricommodity trading profits are strongly associated with market volatility and sudden, unanticipated disruptions to established trade flows. These disruptions lead to sharp adjustments in relative prices, creating arbitrage opportunities that actors with superior analytical capabilities and interpretive judgment can capture.

Unfortunately, turbulent conditions tend to create more favourable trading opportunities, while the opposite is also true. One notable exception is when volatility arises from erratic or unpredictable political developments, such as during the Trump-era trade wars, which forced market participants to reduce exposure, ultimately capping potential gains.

Beyond that, trading profits do not always result from pure free market dynamics. In many cases, political decisions shape them. A clear example is the biofuels sector, where regulatory shifts—often driven by political agendas rather than economic fundamentals—can dramatically alter market behaviour and create or erode profitability.

Another point is that aggregate performance figures tend to lump together companies with vastly different business models. Some are pure commodity traders, while others are more diversified. Some operate in livestock, others in biofuels, some focus on grains and oilseeds, and others on soft commodities or consumer-facing products. There are both asset-light and asset-heavy firms. Some resemble commercial trading houses with logistics and industrial operations, while others operate like hedge funds. Grouping such diverse players can easily lead to misleading conclusions.

Moreover, media reports frequently present historical revenues and performance without adjusting for inflation—a mistake no Argentine would ever make. A company that earned $1 billion in 2010 would need to generate roughly $1.5 billion today to match that figure in real terms. Put differently, $1 billion today buys only about two-thirds of the fixed assets it could have acquired 15 years ago.

In real terms, the agri-trading sector earned less during the 2020–2023 cycle than in the previous high-return period from 2008 to 2012. And those earlier results were achieved with lower equity and investment levels, meaning that returns on capital employed—the metric that truly matters—were significantly more attractive then.

The same logic applies when assessing performance in relation to the volumes handled. As traded volumes have expanded considerably over the past 15 years, returns per product unit have naturally declined.

To gain a meaningful perspective, you must assess agricommodity trading performance over entire price cycles. Traders posted substantial profits from 2008 to 2012, followed by a leaner stretch from 2013 to 2019. Volatility returned with the US-China trade war, intensified with the COVID shock in 2020 and spiked again after Russia invaded Ukraine in 2022. That set off a brief period of exceptional profits, which peaked around 2022. Today, the sector appears to be returning to a more normalised environment.

It raises an important question: if traders truly possess the market power some people accuse them of—being able to widen margins at will, pay farmers less, and charge customers more—then why are their profits so cyclical? And why must these companies continually reinvent themselves through new business models, refreshed management teams, and recurring cost-cutting measures to meet their return targets?

Are some trading companies so big that they present a systemic risk in the case of failure? If so, should they be regulated like banks?

Most publicly listed agricommodity companies trade at market capitalisations close to their book value, typically at or near a one-to-one ratio, with only modest multiples. It provides a helpful benchmark for estimating the potential market value of privately held trading firms.

Based on that logic, I estimate the combined market capitalisation of the top eight ABCD+ agricommodity companies to be around $150 billion. To put that into perspective, Chevron has a market cap of roughly $250 billion, Nestlé around $230 billion, and PepsiCo approximately $200 billion. In other words, acquiring the eight largest agricommodity trading firms would cost you about two-thirds the value of Nestlé. Then you start wondering about your definition of 'big'.

My colleague Craig Pirrong, from the Master of Science in Commodity Trading program at the University of Geneva, has written an insightful paper titled "NOT TOO BIG TO FAIL: Systemic Risk, Regulation, and the Economics of Commodity Trading Firms." He argues that agri-trading companies are fundamentally different from banks. They typically operate with lower leverage—on average, four or five times equity—and are not engaged in maturity transformation. Rather than borrowing short to invest long, they generally borrow long to fund short-term positions. Moreover, in most cases, their assets are highly liquid and can be readily redistributed among competitors in the event of bankruptcy.

History shows that large agri-trading firms have failed without triggering systemic risk.

Thank you, Ivo, for your time and insights.

The above is an extract from the upcoming second edition of my book, Commodity Conversations – An Introduction to Trading in Agricultural Commodities, which I hope to publish in June 2025.

The full interview covers other topics such as biofuels and the impact of demographic changes on food demand.

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