Olam boss warns on threat Trump poses to global ag traders

15.11.2016

Sunny Verghese, one of the Asia's most respected ag entrepreneurs, highlighted the strength of his Olam International group in domestic markets, as warned on the threat to ag traders from the election of Donald Trump as US president.

Mr Verghese, the Olam founder and chief executive, said neither China nor Mexico - countries on which Mr Trump said in the run-up to his election that he would impose hefty import duties - were "important in our portfolio".

Olam would suffer only "very, very limited" impact should Mr Trump realise threats of a 45% duty on US imports from Mexico, and 35% on purchases from China.

"But obviously overall there will be tit for tat in terms of a trade war breaking out globally" if Mr Trump fulfills pre-election promises, which also include withdrawal from some free trade deals.

"And that could have bigger consequences for all countries," Mr Verghese said.

'Watching very carefully'

Indeed, he added that "I think de-regulating liberalised trade is always positive for a trading company like Olam.

"And more regulated, protected markets poses a little bit more of a challenge for trading businesses like ours.

"So, we are waiting and watching very carefully" how Mr Trump's presidency, which starts in January, evolves, Mr Verghese said, stressing Olam's strength in its domestic markets, and demand not related to global trade.

"That is why we have hedged ourselves in all of the markets that we operate, in terms of very actively participating now in the domestic opportunity and not only the export or important opportunity.

"We are very big players in the domestic demand story" in most countries it operates in, "and therefore, I think we are relatively well hedged."

Trump's 'genius'

He added the US itself would be badly hurt by any attempt to curb imports from China and Mexico, with Olam seeing the US economy "de-growing by almost 2%, 2.1%", and falling into "a real recession".

"So, I hope his advisors will advise him against that, and the Trump who is going to govern the US will be different from the Trump who campaigned as a presidential candidate."

However, Mr Verghese cautioned that Mr Trump's election, besides the UK's vote for Brexit, were part of an "anti-establishment, anti-globalisation trend… stoked by widening income disparities and the people who are being impacted by globalisation" – a movement which may yet have further to play out.

"Much as some of you sitting here and many of us might not agree with Trump's policy and politics, it was genius on his part to see this trend that others missed.

"But more than just Trump's victory in the US, one has to look out for what happens in the Italian referendum. And then next year we have elections in France, Germany and Holland."

'Trying to position ourselves'

The chances have "heightened dramatically" of Italy's government losing its referendum, and of French, German and Dutch elections revealing a swing to the right in political terms.

"That is something that we have to watch out for more than just what's happened in the US with Trump's election," Mr Verghese said.

"Overall we are doing various scenarios in terms of what the impact of all this could be in our business.

"And we are trying to position ourselves as well as we can to hedge ourselves and also take advantage of what are opportunities that this might present."


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