Cereal Killers

Where there’s muck there’s brass.

This little ditty is best said with a broad Yorkshire accent—and for those less familiar with obscure English slang, the skinny is: where there’s shit there’s money. Or we could have a go in Yiddish: where there’s drek there’s gelt—not at all sure that exists, but it could.

Okay, enough with the cunning linguistics already, although I must say drek is such a nice word for shit.

Drek before you trek, drekday, dipdrek… the mind wanders.

One thing is certain—troubled places and troubled times always share two qualities: danger and money.

And there are always hustlers, gamblers, conmen, and pavement artists ready to cash in.

For a minute, I wandered down the rabbit hole of conmen and discovered one unsavory fellow by the name of William Chaloner—in a nanodigression, I’ll share with you that this chap lived in the XVIIth century and was executed by hanging in 1699, after none other than Isaac Newton proved him guilty of high treason—to wit, forging the coin of the realm.

Chaloner merits a line in today’s article because during his career as a forger and conman he also sold dildos—I admire his devotion to his nature as a forger by… forging penises.

There’s an anonymous biography of yer man, called Guzman Redivivus—please do enjoy a short trip into obscurantism, courtesy of the Newton Project.

The Ukrainian war presents much muck and not a little brass. Energy companies are raking in profits, but today let’s talk about cornflakes.

And bread.

And biscuits.

And meat—in fact, and practically everything that contains starch, sweeteners, gums, or gluten.

Central to the supply of raw materials that drive the world food system—the emphasis here is on grain—are four gigantic multinationals called ABCD. These are ADM, Bunge, Cargill, and Dreyfus—the first three are American, the last is French—Dreyfus is a well-known name in France for all the wrong reasons.

Archer Daniels Midland (ADM) and Bunge are both publicly traded, so how are these guys doing?

ADM five year-to date stock prices on the NYSE.

Very well, thank-you.

For example, ADM’s net income is up 74% in Q2, its net profit margin is up 46%, and in the second quarter it handily beat its earnings per share forecast by 25%, with a 10% increase in revenue. Bunge’s stock is not quite so sanguine, but it’s still pretty healthy—the dips in its price reflect charges previously incurred.

The ADM chart shows the Covid dip in early 2020 followed by a steady increase until early 2022. As soon as the Winter Olympics ended—there are multiple reports that China told Putin not to invade until the end of the Olympics—the ADM stock began its steep climb.

Cargill is the largest private company in the world, with a revenue (2018) of 115 billion USD, and is notoriously tight-lipped about its business—Dreyfus is French-owned but based in Switzerland, and not much is known about it either.

Because of this uncertainty, it’s difficult to pin down what proportion of the world grain market ABCD control—estimates range from seventy to ninety percent. These are remarkably high numbers—even with uncertainty—and do not really fit the free-market concept.

Food prices are up by twenty per cent, and Cargill’s revenue is now 165 billion USD, up one third since 2018—Dreyfus revenues are about 1% of Cargill’s, but it reported a significant increase in profit.

With so many people in the US and Western Europe now suffering the kind of food insecurity they’re only used to seeing on TV in shows about developing nations, the pressure is rapidly mounting on ABCD.

There’s an argument that the profit margins on the grain giants have not increased, so what’s the fuss?

The fuss is that if you have a 5% profit margin on fifty billion sales that’s 2.5 billion, but on 100 billion it doubles. That extra 2.5 billion is made on the same volume—the sales haven’t doubled, just the unit price.

I’ve now been writing these pieces for almost fifteen years—during the early 2010s I forecast that austerity in Southern Europe might well lead to serious blood-letting—fortunately it didn’t happen then. With the benefit of hindsight, I very much believe it can happen now.

It is axiomatic that what happens in the US and Europe will always have a worse outcome in Africa, Asia, and South America—many countries there are already at a tipping point.

Desperate people do desperate things, wherever in the world they live, and…

violence is contagious.

The India Road, Atmos Fear, Clear Eyes, and Folk Tales For Future Dreamers. QR links for smartphones and tablets.

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