Cargill Inc. is the largest privately held corporation in the United States. It is involved in the purchasing, trading, processing and distribution of food, agriculture, financial and industrial products and services. Cargill is also one of the largest food companies in Brazil, where it operates 22 processing factories, six port terminals, and 192 warehouses and transshipment points. It is one of the main soy traders in Maranhão, a booming soy state that has seen high clearing rates of native Cerrado vegetation. Planned soy expansion in the state threatens remaining Cerrado forests, as Brazil’s 2015 Forest Code allows for 65 percent of Cerrado land to be cleared legally. Cargill’s approach to zero-deforestation supply chains still leaves room for ongoing land clearing by its suppliers in Maranhão. This could result in a number of business risks, including reputation risks and market access risks.
- Cargill holds a soy export market share of 21 percent (454,000 MT out of 2,140,000 MT) in Maranhão, making it the largest trader in the state. It operates four soybean silos in Maranhão, three of which are strategically located in the state’s main grain producing areas in the south.
- From 2010 to 2017, an estimated 336,426 ha of land was cleared for soy in south Maranhão. 1.5 million ha of native vegetation remains that is economically viable for soy production.
- Cargill’s zero-deforestation approach still leaves room for ongoing deforestation in its supply chain. Its 2030 cut-off date and prioritization of tackling illegal deforestation allows producers to continue Cerrado deforestation. Opaque supplier relations may keep environmental and social risks from sight of investors.
- The value of Cargill’s fixed assets in Maranhão is less than USD 100 million, equaling only 0.4 percent of its global total fixed assets. As Cargill exports 454,000 MT (USD 180 million annually) from Maranhão and only a part of this comes from recently deforested Cerrado land, the impact of ending these supplies will be less than 0.2 percent on Cargill’s global sales and profits.
- Revenue-at-risk of USD 7 to 17 billion may be linked to the European signatories of the Cerrado Manifesto. This risk is limited due to the dominance of a few large traders in the global supply chain, a lack of alternatives for European customers and the dominance of Asian buyers of Brazilian soy.
- Privately-owned Cargill is mainly financed by bondholders with no significant deforestation policies. In recent years, Cargill has paid down bank debt. Future loan deals with banks with deforestation policies may raise discussions around legal deforestation in valuable natural habitats entering Cargill’s soy supply.