Is Trump naïve about grain trade or just misinformed?

For at least 100 years grain trade has been controlled by the “five sisters” Continental Grain, Archer Daniels Midland, Louis Dreyfus, Cargill and Bunge Corporations that have monopolized international grain trade markets until recently when the Chinese dragon COFCO International (CIL) made its stumbling entrance in 2014-17 paying its entrance fee with billions in loses while everybody was laughing but no one is laughing now as the dragon eats its way into the market.

The five sisters developed a sophisticated network of farmers’ relationships, silos, ports, grain carriers controlling shipping and grain trade markets all over the world over a period of decades. Their balloon is about to get a hole from a Chinese dragon nail as it throws a 21^st century monkey wrench into the works.

When Trump placed tariffs on Chinese goods the Chinese responded with tariffs of its own on American soy beans injecting pain in the growing areas that must rigorously supports Trump’s policies and authoritarian governing style. But the Chinese are now position to take away his blow horn and serve him humble pie as negotiations on tariffs of manufactured Chinese goods are linked to grain trade.

It seems that whoever convinced Trump of following this route was not aware of the Chinese inroads in the grain markets or perhaps Trump believe the Chinese would beg him not to impose tariffs and thus hurt its economy. However, it is public knowledge that Trump does not read his intelligence briefings and was caught off guard by the Chinese.

Lacking arable land China is investing heavily overseas in the breadbaskets of the world including Russia, Argentina, and North America and is making aggressive moves into the established grain trade markets which will probably include swallowing the weakest links in the market like Bunge and Dreyfus.

CIL’s pockets seem to be pretty deep. Aside from the fact that most of its shares are owned by the Chinese state other shareholders include Singapore’s Temasek, the World Bank private investment sector and Standard Chartered a British bank as reported by the Economist on its first of February edition.

Going public with an IPO might be in the cards for this new “sister” regardless of the scrutiny it will bring to it. Nonetheless, planners might also be considering the a long term game venturing into shipping and information technology to learn what the market is doing ahead of the competition. However, in this regard China has the advantage of its enormous consumer market and therefore can set new rules for grain traders.

On the other hand, China cannot control the weather or the planting seasons, yields, storage facilities like grain elevators near production fields, port facilities and the bulk carrier fleet needed to transport the grain along the trade lanes of the world. Moreover, in the age of the Internet and satellite communications and observation of our planets behavior others can play a new role in coming years as big data is collected and analyze for the benefit of being the most inform in the playground.