ABF and Cargill agree UK merger
increasingly unstable market and rising costs, have announced they
will merge to insulate themselves and compete more effectively
through local grain markets, writes Chris Mercer.
Grain and seed processors and suppliers Allied Grain, owned by food conglomerate Associated British Foods (ABF), and Banks Cargill Agriculture, subsidiary of international food and management services provider Cargill, are to form a new jointly owned company called Frontier.
David Irwin, Allied Grain's managing director, said the merger, which should begin in around 12 weeks, "will help us to provide a broader product offering over a wider geographical area, identify more sustainable and profitable markets for grains and oilseeds and contain costs throughout the chain".
Both firms hope to benefit from a larger company which is more able to insulate itself against rising energy costs, recently announced to rise further in 2005, as well as price fluctuations on the grain market. The two subsidiaries have a combined annual turnover of around £700 million.
Martin Adamson, ABF Chairman, said at the company's annual general meeting today that "general economic conditions are more volatile than they have been for some time", citing exchange rate fluctuations, rising interest rates and strong competition eating into profits and operations.
New company Frontier will aim to get ahead of this competition by offering farmers and food industry customers the convenience of strong local markets, therefore lowering transport costs. "Our strong farmer relationships mean we will be able to offer high quality, locally sourced grain anywhere in the UK," said Irwin.
Average UK haulage rates have increased by 6.5 per cent in 2004 compared to last year; going from £3.92 to £4.05 per ton for a 10 mile journey and rising more steeply from £9.87 to £10.68 per ton for a 150 mile journey, according to the Home Grown Cereals Authority.
Mark Aitchison, Frontier's new managing director, who currently holds the same position at Banks Cargill, said the merger was a milestone for Britain's agricultural development and demonstrates both parent companies' long-term commitment to British agriculture.