2011 Cargill Annual Report

2

About the cover:

A partnership between Cargill and CARE is helping 100,000 people in seven countries lift themselves out of poverty, including these children in the Kutch district of

India’s Gujarat state. The five-year initiative promotes economic opportunities for rural families, while enhancing educational and nutritional support for children.

This version is available in electronic format only.

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prior year. The breadth of performance

was notable, with 38 business units

posting stronger results than a year ago

and 14 delivering record earnings. Four

of Cargill’s five segments—origination

and processing, agriculture services,

food ingredients and applications, and

industrial—increased earnings from

last year. Results decreased in the risk

management and financial segment.

Cargill recorded an additional $1.55

billion from discontinued operations—

income attributable to Cargill’s former

majority ownership position in The Mosaic

Company. Cargill also recognized

a one-time accounting gain of $11.49

billion on the divestiture of the Mosaic

shares. The shares were exchanged for

Cargill stock and Cargill debt.

Sales and other revenues increased 18

percent to $119.5 billion. Cash flow from

operations equaled $4.6 billion.

GRowTh. Cargill invested more than

$3 billion globally in fiscal 2011—a

record. About a fourth went to base-level

expenditures that extend the lives of our

Cargill has a long history of performing

at our best during times of enormous

challenge. In fiscal 2011, significant events

gave rise to renewed attention to food

and agriculture. The dynamics included

the uneven global economic recovery,

Japan’s earthquake and tsunami, armed

conflict in Côte d’Ivoire, the Arab Spring,

the eurozone’s sovereign debt crisis,

looming U.S. deficits, weather-related

supply shocks in food commodities, grain

export restrictions and dramatic price

swings across a range of raw materials.

With uncertainty and risk high, Cargill’s

strengths came to the fore. Supported by

a strong balance sheet, we drew on our

abilities to source food and feedstuffs

from multiple origins, handle the logistics,

manage the risk and deliver reliably. In

short, we sought to be a “port in the storm”

for our customers, dealing with the year’s

challenges and helping customers and

communities do the same.

REsulTs. Cargill earned a record

$2.69 billion from continuing operations

in fiscal 2011, up 35 percent from the

In this year’s annual report, we discuss an issue of universal importance: food security. Today almost 1 billion people go without sufficient food. The calories required to meet their nutritional needs exist but too often the physical or economic access does not. Ahead we share how Cargill and leading institutions are working to feed the world.

Pictured: Greg Page, Chairman and CEO David MacLennan, President and COO

4

Financial highlights dollARs In bIllIons

sales and

other revenues $ 119.5

Earnings from

continuing operations $ 2.69

Cash flow

from operations $ 4.6

Percentage of sales and other Revenues by destination

noRTh AMERICA 56,000 employees

37%25%

AsIA PACIFIC 32,000 employees

lATIn AMERICA 21,000 employees

12%

EuRoPE 17,000 employees

19%

noRTh AFRICA/ MIddlE EAsT

1,000 employees

6%1%

sub-sAhARAn AFRICA

3,000 employees

plants and help keep them safe, energy

efficient and environmentally sound.

Of the nonbase allocation, about half was

directed to acquisitions that will help us

better support our customers. Examples

include the AWB commodity management

business in Australia, Unilever’s shelf-stable

condiments business in Brazil, Indonesian

starch and sweetener maker PT Sorini,

Royal Nedalco’s potable alcohol operations

in Europe, a Chinese port facility, a

Canadian grain facility and a U.S. corn wet

mill ethanol facility. The remainder

was invested in new or expanded plants

and innovation centers in about 40

countries. As the new fiscal year began, we

completed the purchase of German cocoa

and chocolate company KVB and Central

American poultry and meat processor

Corporación Pipasa.

As Cargill grows, we continue to improve the

company’s environmental, health and safety

processes. We achieved the lowest rate of

reportable injuries, with two-thirds of 1,100

facilities operating injury free. To reach

our 2015 goal of zero fatalities, we are

implementing new processes for identifying

and mitigating precursor conditions.

Relative to baseline, we realized significant

improvements in energy and freshwater

efficiency and in reduced greenhouse gas

intensity—returns realized from the past five

years of investments in capital and process

improvements.

EnAblInG FuTuRE GRowTh. Our plans for

fiscal 2012 are ambitious because we aim to

deploy a record level of capital. Guided by

Strategic Intent 2015, these investments will

reflect Cargill’s resolve to operate globally

with a balanced, diverse and resilient

portfolio. It means investing, for example,

in both trading and processing, physical and

intellectual property, domestic and export

facilities, and mature and emerging markets.

Importantly, it means pairing growth

with frugality. As a private company, we

depend on internally generated cash flow

and borrowing, at debt levels appropriate

to Cargill’s high-quality credit rating, to

finance growth. For every dollar saved,

the company gains access to $3 in growth

capital.

5

One of Cargill’s long-term enablers of

growth is Tartan. This multiyear investment

in common processes and supporting

technologies gives us access to better

information for decision making and

connections across business units and

functions that open up new solutions for

customers. In fiscal 2011, Tartan produced

about $100 million in benefits from process

improvements projects. We passed a

milestone last August, when the first three

business units went “live.” Four more are

set for September. By December 2015, well

over half the company will be using the

Tartan solution.

We salute the progress made in becoming a

more connected company. When we reach

across the full breadth of Cargill, we can

bring solutions to customers that no other

company can match. This year’s launch of

TasteWise™ reduced calorie solutions is

a good example. Cargill tapped scientific,

ingredient, applications, intellectual

property protection and communications

resources across the company to develop

and commercialize this patent-pending,

proprietary technology. It optimizes the

balance of texture, sweetness and flavor,

enabling beverage makers to more quickly

develop and deliver better tasting low-

calorie products.

Each day we draw on the engagement,

talent, diversity and ethical conduct

of Cargill employees. These qualities

strengthen our company and the trust

that customers and others place in all

of us. We added more than 100 women

to managerial levels in fiscal 2011, an

important step toward meeting our goal

of becoming a more diverse, inclusive

company capable of achieving our long-

term strategic objectives.

ChAllEnGEs AhEAd. Price volatility,

with all of its risks and opportunities,

returned with extraordinary scale to

agricultural markets in fiscal 2011. As

shown above, small changes in food

production today are triggering large

movements in price, much more so than in

the past. Last year’s drought in Russia, for

example, reduced global grain production

by 1 percent but sparked price increases of

Global Food Production and Price Volatility

small changes in food production today have large effects on price, much more so than in the past. source: u.s. department of Agriculture (production) barchart.com Inc. (Chicago board of Trade prices)

80 70 60 50 40 30 20 10 0- 10- 20- 30

1976

1.37

2.77Percentage change in price (corn, soy and wheat futures price index)Global food production (billions of metric tons)

Percentage change in production (grain, rice, oilseeds, palm oil and fish meal)

1981 1986 1991 1996 2001 2006 2011

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and CEO, United Technologies Corporation;

and, from Cargill, Sergio Rial, executive vice

president and chief financial officer, and

Emery Koenig, executive vice president and

chief risk officer.

Cargill aspires to be the global leader

in nourishing people. We recognize our

employees for the creativity and commitment

they bring to this purpose. Together, we

grow as a company and as a partner in

helping solve the global food and agricultural

challenges of our time.

Gregory R. Page

Chairman and Chief Executive Officer

David W. MacLennan

President and Chief Operating Officer

Aug. 9, 2011

60 to 80 percent. In 2009, the trend worked

in reverse, with modestly higher production

driving prices down.

The instability has brought global attention

to agriculture and raised concerns about

food security. Much of the discussion has

focused narrowly on prices because, as they

rise, they can lower people’s standards of

living, especially in poorer countries where

food accounts for larger shares of family

budgets. Prices also can motivate producers

around the world to grow more food, and

they can attract much needed investment in

agricultural productivity, infrastructure and

innovation.

The broader challenge of creating a more

food secure world is fundamental to Cargill’s

corporate purpose. In this report, we share

our work and highlight that of leading

organizations. We firmly believe the world

has the capacity to feed its people and that

all of us can accomplish more together.

In ClosInG. Four new directors joined

the Cargill board this past year: Bernard

Poussot, former chairman, CEO and

president, Wyeth; Louis Chênevert, chairman

Cargill Contributions Fiscal 2007-2011 dollARs In MIllIons

$10

0

$20

$30

$40

$50

$60

In fiscal 2011, Cargill contributed

$61.1 million in local communities

in 51 countries. over the last five

years, the company has invested

more than $55 million in partner-

ships to support hunger alleviation

and food security.

2007 2008 2009 20112010

57.561.1

37.244.0

58.2

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About 925 million people—just over 15 percent of the world’s population—are undernourished today. The majority live in developing countries.

Among countries, the largest numbers of under-nourished people are in China and India, and the highest prevalence of undernourishment is in sub-Saharan Africa.

NEAR EAST & NORTH AFRICA

37M LATIN AMERICA & CARIBBEAN

53M

AsIA & ThE PACIFIC

578Msub-sAhARAn

AFRICA

239MdEVEloPEd CounTRIEs

19M

The world’s undernourished:

925 million

Source Food and Agriculture Organization of the United Nations (FAO) and World Food Programme (WFP)

Source FAO and WFP

8

Growing population and per capita incomes will add to the demand for food.

Source OECD-FAO Agricultural Outlook 2010-2019

Hunger and malnutrition are due less to the

unavailability of food and more to the inability of the poorest members

of society to access food at an affordable price.

Source Oxfam International

Source U.S. Department of Agriculture

2.8

2.6

2.4

2.2

2.0

1.8

1.6

1.4

1.21176 81 86 91 96 01 06

Global Production bIllIon METRIC Tons

186

174

162

150

138

126

114

102

90 1176 81 86 91 96 01 06

Yield and harvested Area IndICEs, 1975 = 100 YIEld AREA

Most of the increase in food production will need to come from increased yields and productivity rather than from the use of additional land— a challenge met in prior years.

9

Growth: population, economies, incomesDiets: diversifying, including proteinDemand: for food, feed, biofuelWeather: unpredictabilityEnergy: rising prices; links to agricultureSupply & demand: imbalancesTrade: export and import restrictions

CoRn soYbEAns whEAT CRudE oIl

Source Chicago Board of Trade Nearby Futures (average weekly)

17

15

13

11

9

7

5

3

12005 2006 2007 2008 2009 2010 2011

150

135

120

105

90

75

60

45

30

$ PER BUSHEL $ PER BARREL$ PER BUSHEL $ PER BARREL

10

Source Estimates, OECD-FAO Agricultural Outlook 2011-2020

The use of agricultural output as feedstock for biofuels is projected to grow, largely driven by biofuel mandates and support policies.

Agricultural output used for biofuel production by 2020 »

of global coarse grain production

of vegetable oil production

of sugar cane production

Source Cargill

only about 15% of the world’s calories cross international

borders, but for countries dependent on imported

supplies, this share can be a lifeline.

Exporters:

North America

South America

Australia

Eastern Europe

Post-Soviet States

Central America

Western Europe

Asia

Middle East

Africa

Importers:

Trade plays a crucial role in ensuring food security by allowing agricultural commodities to move from places of surplus to places of deficit.

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Investments in agricultural R&D … will be a pivotal determinant of long-term growth in the supply, availability and price of food over the coming decades. Source Global Conference on Agricultural

Research for Development, 2010

“Across much of the developing world, the agricultural system is powered by smallholder farmers, more than three-quarters of whom are women …

…Large-scale systems can play an important role in directly supporting small farmers through technical advice and support and access to markets.”Source Kofi Annan, Keynote Address, The 2010 World Food Prize

women

12

open Markets

Egypt is the world’s top importer of wheat. when several countries barred grain exports last year, Cargill rerouted wheat from Europe to keep Egypt supplied. we then arranged to ship corn from brazil to Europe for use as animal feed. Cargill also was one of the first companies to resume operations after the Egyptian revolution, providing crucial commodities to food and feed customers.

Agricultural Productivity

Tens of thousands of small-holder farmers in Zambia depend on the income they receive growing cotton to feed their families. but the land has been worked a long time, and harvests can be poor. Through more than 1,600 field schools, Cargill teaches affordable and sustainable practices that improve soil quality, raise yields and lift incomes. we also encourage rotating cotton with food crops, which provides more nutrition at home.

Global Investment

In fiscal 2012, Cargill plans to invest more than $3 billion in assets and facilities that create new capabilities and more capacity to better feed the world.

farmers trained in past two years

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Research and Innovation

Cargill is conducting research on the variables that

affect corn yields in order to help farmers harvest more

corn from the same acreage. working on test plots across

the u.s. Midwest, we developed a program to identify the

best combination of crop inputs and agronomic practices.

The result has been an average yield increase of 20 percent.

now we are expanding to soybeans.

average bushels of corn per acre on

Cargill test plots

better nutrition

hundreds of thousands more people will consume

vitamin-enriched vegetable oil with Cargill’s recent

launch of a new brand of fortified palm olein oil in

eastern India. we enrich all of our refined oils in

India, reaching nearly 30 million people. Cooking

oil is consumed in 99 percent of Indian households,

making it an ideal vehicle to fight malnutrition. A

Cargill-commissioned study will soon evaluate the

program’s impact on health.

Improving diets

nearly 20 percent of nicaraguans do not eat enough daily to maintain good health.* Cargill is helping improve diets there by making chicken more accessible and affordable. our fleet of refrigerated trucks delivers poultry products to 12,000 small shopkeepers, many of whom are isolated by poor roads. not all of their customers can afford whole birds, so we offer lower-priced packages of chicken parts.* source: FAo

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we spoke with thought leaders on food security, both within Cargill and involved organizations, to define the challenge and identify solutions.

EMIlIo CAsTIllo

General Manager,

Cargill Mexico

GREG PAGE

Chairman and CEo

RoZ nAYloR

director,

stanford university’s

Program on Food

security and

the Environment

PAul ConwAY

Vice Chairman

PRoFEssoR

M s swAMInAThAn

Chairman,

M s swaminathan

Research Foundation;

Member of Parliament, India

sIRAj ChAudhRY

business unit leader,

Cargill India

josETTE shEERAn

Executive director,

world Food

Programme

RobERT b. ZoEllICK

President,

world bank

dAVId MClAuGhlIn

Vice President,

Agriculture,

world wildlife Fund

Cargill

Food security thought leaders

EMMAnuEl MbEwE

Project Manager,

Cargill Cotton, Zambia

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pricing, so we need a code of conduct that

at least exempts humanitarian purchases

from bans.

RoZ nAYloR, sTAnFoRd:

Poverty is the main issue driving food

insecurity—it’s a question of access rather

than food availability. The majority of poor

people derive their incomes from agriculture

either directly or indirectly, so low incomes in

agricultural settings, particularly where there

is low productivity and limited market access,

are a big component of food insecurity. Price

spikes are another significant contributor,

especially in urban areas where high

prices for staple foods essentially reduce

disposable income for poor people. The third

and much more difficult issue is the lack of

political stability that would enable markets

to work efficiently so food producers could

sell their commodities and consumers could

buy them at a reasonable price.

GREG PAGE, CARGIll:

Food is not a single issue—it is an

interdependent and interconnected set of

issues surrounding our environment, energy,

RobERT b. ZoEllICK, woRld bAnK:

There are two interrelated challenges as

we work to ensure global food security in

the face of rising prices. First, we need to

increase food productivity and production

in developing countries, especially in

sub-Saharan Africa and with smallholder

farmers. To do so, we need to fix problems

all along the value chain, including property

rights, research and development for seeds

and inputs, irrigation, fertilizer, agricultural

extension, credit, rural infrastructure,

storage and connection to markets. The

second problem is the volatility of food

prices, often because of events outside

poor countries’ control. An interconnected

combination of steps could help ensure that

the most vulnerable countries and people

get the nutrition they need. For example,

we can increase public information on

the quality and quantity of grain stocks to

reassure markets and calm panic-induced

price spikes. We can improve long-range

weather forecasting and monitoring,

especially in Africa, to better prepare for

dangers. Export bans exacerbate panic

Multiple, interrelated factors contribute to the complexity of food insecurity around the world today

Food security

16

agriculture and food trade. These factors

contribute not to a caloric famine (the

inability to grow the food we need) but to

an economic famine (the inability of millions

of people to pay for an adequate diet). The

calories exist to feed the world’s hungry

people, but collectively we have not put

the resources in place to do so. The United

Nations estimates that 925 million people

are undernourished. Given their average

caloric deficit, it would take 30 million tons

of whole grain equivalents to feed them.

That is one-sixth of the grain we currently

convert to biofuels. Feeding the hungry is

first an issue of economic capacity to put

enough price into the agricultural system

to create sustainable agriculture. Water,

seed, technology, agronomy—they are all

important. But the fundamental ingredient

of sustainable agriculture is an adequate

price to reward farmers for their efforts and

provide enough money so they can do it

again the following year. Then we must build

supply chains that are efficient enough to

help farmers sell their crops profitably and

help consumers buy their food for less.

josETTE shEERAn, woRld Food

PRoGRAMME:

The challenge of ensuring access to

nutritious food for the most vulnerable

has been compounded by a converging

set of global crises that have now,

unfortunately, become the new normal.

First, we are confronted by an increasing

number of natural disasters across all

continents. Recent floods and droughts

around the world and the devastating

earthquake and tsunami in Japan are just

the latest examples of such destabilizing

and catastrophic events. Last year,

263 million people were devastated by

disasters—110 million more than in 2004,

the year of one of the most destructive

tsunamis in history. Thus far, this year has

the potential to surpass even those record

numbers. Second, we are witnessing

escalating insecurity associated with

ongoing conflicts. Driven by political

unrest, particularly in low-income food

deficit countries, hundreds of thousands

of people are fleeing conflict and in need

of humanitarian assistance. The third

Food security (cont’d)

17

factor is volatile food prices. Food prices

are expected to remain higher in the next

decade than over the previous one, given

the projected supply and demand of

agricultural production.

PRoFEssoR swAMInAThAn,

M s swAMInAThAn REsEARCh

FoundATIon:

Generally the factors we now see driving

food insecurity include international price

volatility, which can come from higher prices

for petroleum, fertilizers and other inputs,

and climate aberrations. In India, the farmers

say their fate is linked to the monsoon and

the market—rainfall patterns and what kind

of prices they are likely to get in the market.

This is true for farmers around the world as

normal climatic variations and increasingly

uncertain weather events, such as extreme

droughts, floods, tsunamis and so on,

affect harvests. At the same time, the price

of agricultural inputs is rising. We have to

be prepared to help farmers meet these

challenges. Food security itself has three

aspects. First is the availability of food in the

market, which is a function of production.

The second is access to food and the ability

to buy food. In India, for example, the

availability of food is quite good, but nearly

14 percent of the people do not have the

money to have access to balanced diets.

Finally, the third aspect of food security

is absorption of food in the body, which

includes clean drinking water, primary health

care and sanitation. All three factors must

come together to ensure food security.

dAVId MClAuGhlIn, woRld

wIldlIFE Fund:

There are a number of drivers of food

insecurity. Increased prosperity in high

population countries, such as China and

India, has greatly increased demand for

agricultural commodities, including more

edible oils and proteins. This increased

demand has dropped global stock positions

in key commodities, so the traditional

buffering systems in the food supply are

not as robust as they have been in the

past. Overlay these factors with variability

in supply and production—due to weather

factors, poor harvests and biofuels—and

it’s clear the global food system is being

strained. We have seen this clearly reflected

in prices and market volatility.

Food security (cont’d)

18

Increasing productivity in a sustainable manner will be necessary to feed the world’s growing population

Production PRoFEssoR swAMInAThAn:

The term “green revolution” was coined in

1968 to designate higher productivity per

unit of land. Today, we refer to the need for

an “evergreen revolution” because we

have no other option except to produce

more from less land and water, but that

has to be done without harm to the

environment. People realize you can’t go

on extracting from the land and water

indefinitely without giving something

back to promote soil health and so on. So

today the question is: How do you achieve

an evergreen revolution, especially in

developing countries where land is a

shrinking resource for agriculture? One

method is through organic farming using

animal manure with integrated pest

management and nutrient supply. This does

not mean no chemical use at all, but using

the minimum essential chemicals that are

needed along with biological control, genetic

control and so on to ensure environmentally

sound agriculture. Whether it is in the

United States, India, China or elsewhere,

we have to produce more from less per

capita land and water availability and do so

in an environmentally benign manner. That

is the evergreen revolution—productivity in

perpetuity without ecological harm.

dAVId MClAuGhlIn:

We are using natural resources at a rate faster

than they can be regenerated. Our current

consumption of natural resources requires

1.5 planets to meet current demand. We only

have one planet. Clearly the expansion of

the agricultural frontier will have impacts on

finite resources and conversion of critical

habitats. We are running out of land—and

we are seeing a global land grab securing

land and water resources in order to feed

growing populations. Over half the countries

in the world have declining water tables.

Given this increased pressure, we need to

look at how we get more production from

existing land and use natural resources, such

as water, more efficiently. We can’t afford to

take anything off the table; we need to do

more with less. There are wide variations

in crop yields. Access to seed, technology

and inputs are all part of the equation, as

are better management practices, use of

degraded lands, preserving and conserving

soils, reducing food waste, infrastructure,

19

land use planning and protecting land tenure

rights. Overlay all of these concerns with

the uncertainties of climate change, and it is

clear, we are facing significant challenges.

We need multiple strategies, and we can’t

afford to bet on just one.

RoZ nAYloR:

The question is this: Will we get additional

food from intensification—higher yields on

existing cropland—or move new lands into

production? It is estimated that about 6

million more hectares per year in developing

countries will be needed, and much of

that could happen in forested areas.

Weakening of forest protections will have

a lot of repercussions for the environment

and biodiversity as well as for regional

and global climate change. In addition to

the threat to rainforest areas in Brazil and

Indonesia, land purchases in Africa also

have risen enormously in the past few years.

How this land actually gets used will be

interesting to watch. Most of the increases

in new farmland, or the purchases of land,

are happening where land institutions are

pretty weak. Is this expansion going to help

food security or hurt it? That depends on

whether the expansion puts capital into the

right hands or the right strategic processes

to make an agricultural system really work.

PAul ConwAY, CARGIll:

It is clear the world needs to produce more

food. In Asia, for example, China is becoming

the motor of world economic growth—and

the world needs China to grow. While the

country is a huge consumer of petroleum

products, iron ore and all sorts of other

products flowing in, in terms of food, the only

product where China is a major factor on

the world market today is soybeans. China

has gone from essentially minimal imports of

soybeans a decade ago to 60-70 percent of

the world’s seaborne flow of soybeans today.

In the future, China’s population is expected

to become increasingly more urban—

approximately 20 million people a year over

the next decade supposedly will move from

rural areas to Chinese cities. The change

will have a major impact on the nature of the

food they eat, including different sources of

protein and more processed foods. China

also faces desertification in some land areas.

These factors point to China’s increasing role

in global trade flows in the years to come.

Production (cont’d)

“It is clear the world needs to produce more food.”PAul ConwAY

20

Driven by a multitude of factors, high volatility in commodity and food prices can threaten food security

Price volatility josETTE shEERAn:

After a 25-year trend of stable and

relatively low prices, the world has

witnessed much volatility in the prices of

agricultural commodities over the past five

years. The vulnerability of the poor was

made all too visible by the recent crises,

often referred to as the three Fs—food,

fuel and financial. For the world’s food

insecure, it became the perfect storm

that resulted in more than 100 million

additional people becoming poor and

hungry, a global total that is pushing 1

billion people—or one of every seven on

earth. Additional shocks to already volatile

food prices would be devastating for those

struggling to maintain their livelihoods.

WFP and other international organizations

have mapped out possible approaches to

emergency humanitarian food reserves.

The idea is to explore whether a cost-

effective system of targeted, prepositioned

stocks can help ensure the poorest and

most vulnerable people have rapid access

to sufficient supplies during shocks.

GREG PAGE:

Governments must encourage open

trade and a fair, transparent, rules-based

and rigorously enforced system so food

surpluses can reach areas of food deficit.

In the 2008 food crisis, more than 30

countries imposed export restrictions,

and that action merely pushed prices up

further. Trading bans isolate local markets

and give farmers little incentive to expand

production for the next season, limiting the

potential supply response to soaring prices.

To ensure access to food in emergencies,

governments would do better to supply

temporary assistance to consumers who

are otherwise unable to access food,

ensuring the demand side of the market

continues to operate. During the last three

years, we have seen governments whose

response to price volatility and supply

interruptions has been to pursue self-

sufficiency. If every country on earth tried to

grow all the food necessary to adequately

feed its own population, there would be

much less food available. The world will

always raise the most food economically

21

and in the most environmentally

responsible way when farmers raise the

right crop in the right soil using the right

technology, then trade with others for the

benefit of all.

RobERT b. ZoEllICK:

We have been in a period of extraordinary

volatility in food prices, which poses a

real danger of irreparable harm to the

most vulnerable nations and people. Food

accounts for a large and increasingly

volatile share of family budgets for poor

and urban families. When prices of staple

foods soar, poor countries and poor

people bear the brunt. High, uncertain and

volatile food prices are the single gravest

threat facing the most vulnerable in the

developing world. Since June 2010, rising

and volatile food prices have led to an

estimated 44 million more people living in

poverty—under $1.25 a day. People are

hungry for food and for action on a global

level. Greater transparency on food stocks

around the globe sends a powerful signal

and would help reduce food price volatility

by reassuring markets.

sIRAj ChAudhRY, CARGIll IndIA:

Food inflation in India is largely related to

perishables, primarily fruits and vegetables.

The prices of basic food ingredients

have been relatively stable. In the case

of perishables, and to a certain extent

in the case of the broadacre crops, we

have not been able to predict the outlook

for potential shortages stemming from

inopportune timing or the severity of

monsoons. To effectively manage price

volatility in India, we must get a good

grip on supply and demand, manage the

information flow about crop outlooks and

address situations as they arise.

PRoFEssoR swAMInAThAn:

At the global level, there is a need for

more transparent information systems so

we know how much food is available in

terms of food reserves and food stocks

and where this food is located. Today,

with modern technology for sensing and

satellite imaging, it is possible to have a

much better monitoring and prediction

system. We need a better early warning

system so we can anticipate the shortages

Price volatility (cont’d)

22

that are to come and how best to prepare.

We need a whole series of international and

national actions, which is why the United

Nations has now established a committee on

food security. The committee is examining

price volatility and land use patterns,

including diversion of prime farmland from

food to biofuels and alternate land uses

that can reduce food production. Globally,

there should be greater cooperation to

help manage price volatility. Farmers, the

agriculture industry and the public sector

should combine together to help insulate the

poor consumer from undue price fluctuation.

EMIlIo CAsTIllo, CARGIll MExICo:

Our food system doesn’t always respond

to changes in demand from one day to the

next—sometimes it takes a few growing

seasons. We all need a transparent pricing

mechanism that allows the food system

to reach the appropriate supply-demand

equilibrium. Sometimes governments

consider restricting price increases without

having a clear understanding of how those

decisions affect supply in the short-,

medium- and long-term. Because everything

in the global food system is connected, what

is done in Ukraine or Russia affects food

prices and availability in Mexico, Africa, the

United States and elsewhere. Often, market

changes are due to weather uncertainties.

For example, this January in Mexico we

experienced a very significant frost that

damaged a major portion of the white corn

crop. Cargill and others on the ground

visited farmers to determine estimates of

the crop damage, then we looked for ways

to supplement the local crop with corn

from elsewhere, including South Africa and

the United States. We were able to bring

in yellow corn to be used for animal feed

in Mexico and free up white corn that our

customers could use to make tortillas, a

staple of the Mexican diet. This type of open

trade is critical to cover crop shortfalls in

times and places of deficit.

Price volatility (cont’d)

23

smallholders

Smallholder farmers need support to fulfill their expanding role in feeding the hungry and fighting malnutrition

GREG PAGE:

Besides inputs and cash, four basic things

are required for smallholders to help

improve food security. First, smallholders

need the opportunity to plant the crop that

makes the most sense for their geography

to capture their greatest comparative

advantage. Second, smallholders need

property rights. They have to be able to

own their land and pledge it as collateral

if they are expected to reinvest and

raise their productivity over time. Third,

smallholders need a reliable market into

which to sell their crops. Smallholders

in developing countries lack sufficient

revenue certainty. With price volatility,

capital investment in higher productivity is

severely discouraged. Often, smallholder

farmers are forced to sell at harvest

when they are cash flow destitute and

have limited access to real credit. Selling

at depressed prices creates a cycle of

discouraging further production in future

years. And fourth, these farmers need

physical connectivity to world markets

where they can sell at a more reliable price.

PRoFEssoR swAMInAThAn:

A small farm is not a handicap for

ecologically efficient agriculture. What we

have to do is improve the productivity of

small farms by increasing the capacity of

smallholders through timely availability

of services in rural areas. We need to

strengthen marketing and transportation

services in these rural areas and attract

young people to agriculture by making

it more intellectually stimulating using

new technologies. Small-scale farmers

also need capacity building—through

technology and training—to help them

grow more nutritious food. This can be

done through farmer-to-farmer learning.

We also need the technology infrastructure,

such as storage structures and trade. We

are trying to give the power and economy

of scale to small producers by encouraging

them to form groups and cooperatives. We

need a small farm management revolution.

EMMAnuEl MbEwE, CARGIll ZAMbIA:

In Zambia, the main challenge facing

farmers is low yields due to production

techniques and poor soil conservation

24

practices. To help increase their yields

of cash crops (cotton and soybeans)

and staple foods (corn), Cargill trains

farmers in what we call the five-finger

approach to yield enhancement: proper

land preparation, timely planting, optimum

plant population, effective weed control

and integrated pest management.

Farmers learn these simple practices

in field schools, then witness their use

in strategically located demonstration

plots and finally use the techniques in

their own fields. The result is increased

production of higher quality crops, as well

as better management of water and soils.

We noticed that female farmers spend a

lot of time in the fields but most were not

attending training, so this year we launched

a new program—women’s clubs. These

clubs provide training to female farmers,

who immediately think of food security

challenges at home. We are also partnering

with TechnoServe to teach the women

about better nutrition and help them find

markets for their crops.

josETTE shEERAn:

Women are the secret weapon

against hunger. Closing the gender

gap in agriculture by giving women

farmers more resources could bring

the number of hungry people in the

world down by as many as 150 million.

In many countries, women form the

backbone of the agricultural sector and

food systems, making up the bulk of

agricultural laborers. This is why WFP

is helping smallholder farmers, many of

them women, through a program called

Purchase for Progress. This program,

which is now in 21 countries, helps

connect farmers who are marginalized and

disconnected from markets and gets them

into WFP’s supply chain and the broader

marketplace. We are seeing this transform

lives and empower rural communities by

enabling small-scale farmers to invest

and plan. Already more than 69,000

farmers, warehouse operators, and small

and medium traders have been trained

in agricultural production, post-harvest

handling, quality, marketing and finance.

smallholders (cont’d)

“Poor farmers must be helped not to be recipients of food aid but producers of food to feed the world.”josETTE shEERAn

25

And WFP has contracted nearly 185,000

metric tons of food valued at more than $66

million. Poor farmers must be helped not to

be recipients of food aid but producers of

food to feed the world.

EMIlIo CAsTIllo:

The northern Mexican states of Sonora and

Baja California have weather that is very well

suited to growing high quality durum wheat.

This wheat is used to make pasta and cous

cous in other countries, but there is a limited

market for it in Mexico, so farmers were only

able to sell it locally as feed for hogs. Cargill

is helping farmers sell their durum wheat

into the food chain in other countries, such

as Italy and Algeria, where it has a higher

value. This trade helps raise the incomes of

farmers in Mexico while providing desired

durum wheat to other regions at times when

local wheat is not being harvested, so it

contributes to food security and is beneficial

to all involved.

RoZ nAYloR:

Small-scale irrigation is a promising

technology niche for use in smallholder

agriculture, particularly in sub-Saharan

Africa and South Asia where population

growth, diminishing land plot size, low

yields for staple crops and low incomes

all contribute to food insecurity. For these

farmers, agriculture is highly seasonal work

because their systems are rainfed. Farmers

might only produce food four months a year.

There is not much market connectivity, so

after the harvest they all pour their crops

into the market at the same time and prices

slump. This sort of basic system where

the poorest farmers rely on low-yield,

staple crops that are not irrigated just

does not produce enough income growth

to achieve food security. With small-scale

water distribution systems, these farmers

can diversify into higher valued crops that

are more nutritious and can be grown

throughout the year.

smallholders (cont’d)

26

RoZ nAYloR:

Agricultural markets are highly affected

by policies, both within and outside of the

agricultural sector. Biofuel mandates are

one example of policy that distorts food

prices around the world. The development

of the ethanol industry, and policy incentives

that have promoted its growth, have made

the agriculture and energy sectors more

tightly connected. This connection is

particularly clear with regard to the U.S.

ethanol industry and global grain markets.

Essentially, renewable fuels mandates in

the United States, with a focus on maize-

based ethanol, have created a new level

of demand for grains that is inelastic or

unresponsive to market prices. This new

level of demand affects the prices of food

and animal feeds throughout the world. It

also creates a market that is highly variable,

especially when supplies are disrupted by

climate shocks. If global leaders are seeking

a world in which food prices are lower and

more stable for consumers, the answer is

easy: back off the promotion of biofuels. The

problem is that grain farmers would lose.

biofuels

Use of food crops as fuel and policy mandates for biofuels have an impact on food security

GREG PAGE:

The ethanol program in the United States

and the biodiesel program in Europe stem

from a period of agricultural surpluses,

when most farmers were operating below

their cost of production. There was little

agricultural reinvestment then, and we had

the distortion of direct subsidies in the

Western world distorting prices globally.

The upside of biofuel programs is they

brought prices back to a sufficiency that

reinvigorated investment in agriculture. The

great risk we have now—with mandates

for biodiesel in Europe and ethanol in the

United States—is we have injected volatility

into the food system. Taking a food system

that has all the disruptions in supply that

weather can bring and coupling it with

mandates can produce outsized volatility.

The challenge is to determine the right

size and mix of biofuel programs and put

in sufficient circuit breakers to help ensure

that enough revenue is coming into global

agriculture for reinvestment but, at the same

time, prevent the outsized price volatility that

disproportionately harms the world’s poor.

27

biofuels (cont’d) dAVId MClAuGhlIn:

When we see global food stocks

at critically low levels, food prices

skyrocketing, and more and more people

becoming food insecure, it’s clear we need

more food right now. Going forward, the

problem is likely to become more severe

as society’s ‘ask’ of agriculture grows to

include energy, materials and products

such as renewable packaging. Many

agricultural commodities are closely linked

to the price of crude oil. As demand for

energy increases, we will continue to see

impacts on food security.

RobERT b. ZoEllICK:

We must look globally at easing subsidies,

mandates and tariffs on biofuels from corn

and oilseeds, especially as prices rise.

Additionally, we need to move toward use

of second-generation cellulosic biofuels.

Opening markets to sugar-based fuels that

do not compete directly with food, including

those from Africa, also will be important.

28

dAVId MClAuGhlIn:

On a global basis, we are more exposed

to food security issues when crop yields

suffer, given that we don’t have the surplus

stocks and buffer systems in our global food

system. The FAO Food Price Index clearly

shows we have undergone a dramatic shift

in the last five or six years. Just last year,

we saw a collapse in Russia’s breadbasket

due to drought. While further research is

still needed on exactly what and where

the changes may be, we do know we must

prepare for increasing variability in rainfall,

temperature and crop yields. Climate

change will alter water availability, affect

the spread of pests and diseases, and shift

crop distribution. The agricultural industry

needs to increase investment in research

and extension resources to find solutions to

address these impacts on traditional growing

regions. As a result, a lot of plant research

and breeding needs to be done to help

prepare for these changes and uncertainties.

Climate

Agricultural adaptations can help address changes in climate

PRoFEssoR swAMInAThAn:

There are several components to climate

change, including higher temperature,

drought and rising sea levels. There will

be a common but differentiated impact

of temperature change on food security –

some northern latitudes will benefit from

higher temperatures because the duration

of their growing time will increase, which

will increase crop yields, but other areas will

lose crop duration. In India, for example, the

wheat crop will mature earlier and we could

lose 6 million to 7 million tons of wheat.

That is why we have to start preparing now,

identifying crop varieties that are more

tolerant to heat and a shorter duration by

increasing per-day productivity. We must

prepare by researching more salt-tolerant

crop varieties. Ultimately, poor countries will

suffer most because they have less coping

capacity. Every country will have to have its

own strategy for developing crop varieties

that can cope with climatic changes.

29

RoZ nAYloR:

In addition to crops, we also need to focus

on livestock because with the expected

increased heat, animals will have a harder

time surviving. We will need adaptations,

such as solar-powered structures to

keep animals cool in the hottest seasons.

The worst scenario that needs to be

considered in certain locations is a

movement out of agriculture. There may

be areas in sub-Saharan Africa and in the

tropics more generally where it will be

too hot to farm at all. What we saw last

year with the extreme heat wave in Russia

is an example of the kinds of events we

can expect more of in the future. The

political responses of banning exports or

trade in response to these sorts of supply

disruptions just makes world markets more

volatile and reduces food security.

RobERT b. ZoEllICK:

The stresses on the world’s agricultural

system are compounded by growing

demand for food. Annual growth in rice and

wheat yields in developing countries – home

to four-fifths of the world’s population – has

dropped from 3 percent in the 1970s to just

1 percent today. Without strong adaptation

measures, some estimate that climate

change could reduce yields by 16 percent

worldwide and 28 percent in Africa alone

over the coming half century. We need to

be creative and innovative about farming,

so there are not only more crops but more

resilient crops, if we are to respond to the

challenges of feeding a growing population

under more difficult and unpredictable

conditions.

Climate (cont’d)

30

josETTE shEERAn:

When people have no food – because of

natural disasters, like last year’s earthquake

in Haiti or floods in Pakistan – we bring in

food, and that saves lives. But sometimes

there is food available – it’s just that the

poorest cannot afford it. That’s when we

can deploy tools to help the poorest while

protecting or even stimulating markets.

One of these tools is cash and vouchers. In

Palestine for example, beneficiaries are able

to use an electronic swipe card to purchase

nutritious food at local markets. All the

products in the program are produced locally

– milk, yogurt, cheese. It’s a win-win-win.

Local farmers have increased production.

Local shops have more customers and

profits. And families do not need to travel

long distances in order to receive their

Food aid

Innovation can help ensure access to nutritious food in emergency situations

nutritional food. They have the freedom

to use their electronic vouchers at any

time, reducing cost of transportation and

addressing storage problems. Because of

this innovative approach to promote food

security, WFP is increasing cost efficiency

and allowing for a better analysis of food

consumption patterns in real time.

RoZ nAYloR:

In relief situations when there are food

emergencies and the need for food aid, there

is a critical need to rethink the structure of

food aid programs. The United States, for

example, should contribute cash for regional

purchases and not just crop surpluses

transported on U.S. flagged vessels, which

usually arrive much too late and are much

too expensive.

31

R&d investment

Greater investment in agricultural infrastructure, research and development is necessary to increase global food production

PAul ConwAY:

Investment in the agricultural sector is

very important. For example, the cost

for a farmer in the midwestern United

States to get surplus crops to an export

port is less than a quarter of the cost for

a similar farmer in Brazil because of the

differences in local infrastructure. That’s

where government can have a big impact.

While today the issue of food security

is at or close to the top of government

agendas worldwide, that has not been

the case during the past two decades.

Although companies in the private sector

have continued to invest in assets to help

serve farm communities, public sector

investment in agriculture has declined

year on year for 20 years because we

had an era of surplus food. This long-

term underinvestment in agricultural

infrastructure globally includes both hard

assets, such as transportation, rail and

silos, as well as soft assets, like the ability

to bring new young talent into the industry.

Now there is widespread understanding

that in order to produce the additional food

that will be required in the next 20 years,

we need targeted public sector investment

in a manner that helps balance the paradox

of the need for intensification with the

requirement to increase productivity in a

sustainable way.

RobERT b. ZoEllICK:

Recognizing that the energy-food nexus

means more prices will stay high, our task

is twofold: to handle today’s danger for the

millions of people for whom securing food

has become a daily struggle, and then to

turn higher food prices into an opportunity

for developing world agriculture and for

farmers in developing countries. Increasing

global food production will require boosting

developing country agricultural products

and productivity by investing all across

the value chain, including land use, water

and irrigation, ways to cut wastage,

infrastructure and logistics, working

capital and linking small-scale farmers in

developing countries with retail outlets. We

also need more agricultural research, such

as new rice for Africa that could triple yields,

drought-tolerant maize and flood-tolerant

32

rice. We need financial and other tools to

help farmers and their governments manage

risk, whether rainfall or prices of inputs such

as energy. Collective action is necessary to

counter global risks.

PRoFEssoR swAMInAThAn:

Investing in genetic diversity is very

important because genetic homogeneity

increases crop vulnerability to pests

and diseases as well as vulnerability to

climate changes. Conservation of genetic

biodiversity is fundamental to food security.

Whether it is in animals or plants, we

must fight against genetic homogeneity.

For instance, the Indian government

has created a gene vault where several

million seed samples can be preserved for

posterity. At the community level, we are

also establishing local seed banks to help

us revive these dying crops and vanishing

wisdom. We must support this type of on-

farm conservation.

EMMAnuEl MbEwE:

The portions of the population who are

most vulnerable to food insecurity are in

the less developed rural areas where they

lack the basic infrastructure, networks and

resources that would allow participation

in better markets. These areas need

investment in rural development policies

that target resources to establish or

improve essentials such as accessible

roads, electricity and education. There

needs to be a stronger commitment to

invest in infrastructure to fight illiteracy

and to provide credit facilities that would

strengthen farmers’ capacity to produce

quality crops. We also need extension

services to communicate effective farming

practices and new technologies, and to

challenge farmers to take the initiative in

working together to solve the problems

they face.

josETTE shEERAn:

One of the key challenges to food security

is access. If you’re in a rural area and

you’re lucky enough to have surplus

crops, it may be the roads are inadequate

to get your crops to market, or there are

insufficient roads to get foodstuffs to you.

If you’re a government trying to address

food security, you may not have granaries,

R&d investment (cont’d)

33

R&d investment (cont’d) so if you have surplus you’re not able to

store it for lean times. This is why WFP

has food-for-assets programs around

the world. Providing food in exchange

for work makes it possible for the poor

and hungry to devote time and energy to

taking the first steps out of the hunger trap.

In countries where poverty often forces

farmers to overuse soil and grazing land,

WFP provides food rations to farmers who

practice soil conservation by planting trees

to help weather droughts and floods.

sIRAj ChAudhRY:

In India, investment is necessary to meet

the challenge of getting nutritious food

at an economic cost to the people who

need it. In addition to fighting malnutrition

by fortifying all of the edible oils Cargill

produces in India with micronutrients, we

are working with the Indian government and

NGOs to help establish and distribute food

through the India Food Banking Network.

We also are working with the World Food

Programme in collaboration with the local

government to increase access to nutritious

food for people—especially women and

children—living in Madhya Pradesh, a

state in central India with very high levels

of malnutrition. This program includes

organizing kitchen gardens, fortifying

wheat flour and providing education about

nutrition, health and hygiene. All these

efforts build trust between the government,

private sector and NGOs in the battle

against hunger, malnutrition and poverty.

34

outlook

Despite significant challenges, there is optimism about the world’s ability to adequately feed its growing population

PAul ConwAY:

We believe it is unmitigated good news that

rising incomes around the world have led to

improvement in the diets of tens of millions

of people. As incomes rise above that basic

subsistence level, so many people are being

lifted out of poverty. This intensification

of diets increases the requirement for

food sharply. At Cargill, we are extremely

optimistic that the world can meet this need.

josETTE shEERAn:

There are many reasons why I’m hopeful

that we can defeat hunger and malnutrition.

Working together, public, nonprofit and

private sector leaders can scale up

innovative strategies to help countries on

the front lines of hunger.

dAVId MClAuGhlIn:

I’m an optimist by nature. I believe that

innovation will play a huge role in our

ability to meet the increasing demand

for food. There will be impacts to the

planet and we need to plan better and

work together across the public sector,

private sector and NGOs. If we are to find

solutions, collaboration will be critical.

On a finite planet, sustainability must be

precompetitive, and we all need to work

together.

RoZ nAYloR:

I am optimistic about feeding the world,

especially when I go out and talk to farmers.

They are amazing and ingenious in how they

respond to the enormously difficult task

of working on the land. When I see them, I

think there is hope.

GREG PAGE:

We can harness the power of agriculture

to drive food security, environmental

sustainability and economic opportunity. I

believe fully and completely in the world’s

capacity to harvest photosynthesis to feed

every single person and to do it at a price

that can be borne by all.

35

Cargill is committed to promoting food security. It’s what we work at every day around the world.

These organizations are leading regional and global efforts to create a more food secure world.*

* Descriptions are taken from organizations’ websites; edited for length.

36

These organizations are leading regional and global efforts to create a more food secure world.

37

These organizations are leading regional and global efforts to create a more food secure world.

ouR APPRoACh is to be trustworthy, creative and enterprising. ouR PERFoRMAnCE MEAsuREs are engaged employees, satisfied customers, enriched communities and profitable growth.

ouR PuRPosE is to be the global leader in nourishing people. ouR MIssIon is to create distinctive value.

P.O. Box 9300Minneapolis, MN 55440www.cargill.com

Cargill is an international producer and

marketer of food, agricultural, financial and

industrial products and services. Founded

in 1865, the privately held company employs

130,000 people in 63 countries. Cargill helps

customers succeed through collaboration and

innovation, and is committed to applying its

global knowledge and experience to help

meet economic, environmental and social

challenges wherever it does business.

© 2011 Cargill, Incorporated. All rights reserved.