Louis Dreyfus boss ousted after Glencore overture

The chief executive of Louis Dreyfus Company, one of the world’s biggest suppliers of agricultural commodities, was ousted after trying to start talks with Glencore and other rivals. 

LDC has been tight lipped on the reason for the sudden departure of Gonzalo Ramírez Martiarena in September, although controlling shareholder Margarita Louis-Dreyfus has said it was not related to misconduct or a clash over the company’s strategy of moving “downstream” into higher margin processing activities.

His “resignation” was in fact the result of attempt to start discussions with Glencore Agri, a joint venture between the Switzerland-based commodity trader and two Canadian pension funds, according to people familiar with the matter. Mr Ramirez also tried to sound out other companies about possible combinations.

These moves unsettled Ms Louis-Dreyfus, a Russia-born heiress who has been tightening her grip on the 168-year-old company. Earlier this year she completed the buyout of family shareholders, bringing more than 95 per cent of the holding company that controls LDC under the ownership of her family trust. 

Mr Ramirez’s resignation was announced on the same day as LDC parted company with its chief financial officer, Armand Lumens, who resigned for personal reasons.

LDC is one of the leading crop traders in the world, buying and selling agricultural commodities including grains, soyabeans, sugar and coffee. Like its rivals, LDC has been grappling with tough market conditions and a structural shift in trading that has depressed profits.

Under Mr Ramirez, LDC had refocused on its core operations, trading grain and oilseeds, after selling its metal and fertiliser businesses.

He was looking to go further and reposition LDC as a diversified food and nutrition company as well as a commodity trader. But he realised that a push into more complex processing activities, where margins are higher, would need scale and possibly a deal or partnership with a rival, the people said.

LDC declined to comment as did Glencore. Mr Ramirez, who has not spoken about the reasons for his departure, also declined to comment.

While there has been speculation about consolidation in the agricultural commodity industry, so far no deals have happened partly because of competition issues but also because of a mismatch in valuation expectations.

Speaking at the FT Commodities Global Summit in Lausanne last week, Chris Mahoney, the head of Glencore Agri said there was too much capacity in the sector.

2018 was a difficult year for Glencore Agri, which was hit by poor crop sizes in Australia and Argentina, continued industry margin pressures and a decline in the price of sugar.

The agricultural trading sector was “too fragmented” and consolidation was needed to remove that extra capacity, Mr Mahoney told the conference, adding that the industry needed “bigger companies with a better geographic footprint with a disciplined approach”.

Speaking at the same event, Ian McIntosh, LDC’s new chief executive, said the company would consider regional partnerships and joint ventures in Asia as it looks to push downstream.

The rising expectations of consolidation comes as the traditional hierarchy of agricultural trading that has been dominated by the “ABCD” trading houses — Archer Daniels Midland, Bunge, Cargill and Louis Dreyfus — is shifting.

While ADM, Bunge and Cargill are still the largest in terms of how much grain and oilseeds they move around the world, Glencore and Cofco International, the international trading arm of China’s state-owned food group Cofco, are challenging LDC, according to industry experts.

Jingtao Chi, chairman of Cofco International, told delegates at the FT summit that the company wanted to further increase its ability to trade beyond procuring food for China, and would look to do this through acquisitions and organically.