TRADING in agricultural commodities is an age-old business activity, indispensable for the sustenance of countries. But for myriad factors it is also at the nexus of sustainability challenges.
Now more than ever, because of climate change and scarce resources such as water, food security is at the forefront of the world’s concerns, including Singapore.
Vishal Vijay, second-generation executive of homegrown Agrocorp International, believes the company plays a key role in enhancing the sustainability of food supply chains not just regionally but also globally. It is also key in helping to address food security. Vijay is the firm’s director of strategic investments.
For Vijay, joining the family business was not a matter of course. “I have been in the business formally for seven years, but informally, all my life… My father hosted dinners at home with key customers and partners; a lot of business was brought home. But it wasn’t the case that I expected to join the business.’’
Vijay studied material science and engineering at Cornell University and worked initially as an engineer for a renewable energy company. But he was shortly drawn to the sustainable aspects of Agrocorp’s business.
“I could see the impact that agriculture makes in addressing food security. Many of our customers are in food-insecure markets such as Bangladesh and Pakistan; 99 per cent of our sales are to developing markets. I could see the role we played and the value we provide.
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“We were shifting away from being just a trader, towards investing in food processing which my engineering background could contribute to.’’
Vijay’s father Vijay Iyengar set up Agrocorp to trade in agricultural commodities in 1990, with just S$25,000 in capital. Today the business has burgeoned with a presence in various phases of the agricultural value chain, from seed procurement to processing and packaging, and downstream food manufacturing.
The breadth of its activities today is a far cry from humble days when the firm co-shared premises. Agrocorp is active in 50 countries and trades in over 30 commodities, moving more than 10 million tonnes of commodities a year. It generates a revenue of over US$3 billion a year.
Vijay’s role centres on initiatives that can help “future-proof’’ the business. So far much of its efforts have focused on the development of plant-based protein. “We have to be at the forefront of food trends, otherwise we become irrelevant fairly quickly.’’
Agrocorp’s investment arm Agrocorp Ventures (2019) scouts for promising early-stage startups with an innovative and disruptive business model, executed through sustainable practices. One of the investees is LivFresh which cultivates edible greens such as kale, butterhead lettuce and bokchoy using state-of-the-art hydroponics. Its 0.8-hectare farm in Kranji uses 86 per cent less water than traditional farming, and forms part of Singapore’s vision to produce 30 per cent of its nutritional needs by 2030.
Vijay has helped to spearhead the group’s efforts in the extraction of plant protein, which leverages its existing operations and takes it into new directions. Agrocorp is consistently one of the world’s largest traders in the global pulses market. Pulses are a low-cost sustainable source of protein. They are also nitrogen-fixing crops, able to convert nitrogen in the air into plant-available nutrient. This reduces the need for nitrogen fertilizers and contributes to the sustainability of agriculture.
The group has created a vertically integrated chain for its plant protein business which spans R&D, protein extraction, and manufacturing and retail. For research and development (R&D), it has partnered the Singapore Institute of Technology to better understand plant protein, the extraction techniques and application into food products. For the extraction process, it has its own plant in Canada which has processed 25,000 tonnes of peas, and produced 4,200 tonnes of protein concentrate.
It also launched Herbyvore, its own brand of plant-based protein. In the pipeline are plant-based eggs and cheeses.
Recently, Agrocorp entered into a joint venture with Japan-based Megmilk Snow Brand to manufacture and market plant-based food ingredients.
Vijay notes that demand for plant-based protein is rising. “We expect it to become a core part of people’s diets. In Singapore, growing locally is also an important part of our goal of addressing food security and the sustainability of our supply chain. We think these two areas will contribute significantly towards reducing our carbon footprint.’’
Agrocorp actively participates in food supply tenders for developing markets, such as Pakistan, Bangadesh and Ethiopia, where it is often the sole participant. Vijay sees these efforts as key in helping to ensure the continuity of food supply. “Some of these countries face severe impact from global warming. In Bangladesh, rising sea levels reduces their liveable area. Pakistan has been devastated by floods.
“While we’re in the implementation phase, there is a cost to developing a more sustainable food supply chain. But eventually as the process becomes established and scale builds up, there would no longer be an issue of increasing costs.
“The entire ecosystem is shifting. As a company we are nimble and we adjust to changing demand and geopolitical situations. To a certain degree, the company would have taken the (sustainability) path, even if I weren’t so intimately involved. But for me it’s an area of focus.’’
The group has secured sustainability loans, an explicit recognition of its efforts. There is an eight-year US$32.5 million facility with the International Finance Corporation to sustain the flow of nutritious and calorie-rich staples to Bangladesh.
There is also a US$50 million borrowing base facility with FMO, a Dutch entrepreneurial development bank, and Rabobank to support Agrocorp’s efforts to serve food-challenged markets. The facility has two tranches – FMO is to cover prepayments and inventory and Rabobank finances receivables and acts as facility agent.
Vijay notes that banking has become more challenging than in the past, but at a time when institutions are under pressure to lend to sustainable businesses, the firm may well find lenders lining up. At the time of the interview, Vijay was in discussions to convert an existing facility into a green loan, “which is not that difficult for us to do’’. “We’re able to prove quickly that our activities have a strong environmental footprint because we are market leaders in products such as pulses which have a strong function in returning nitrogen to the soil and providing protein as a core, stable product. We find there is a strong push from our lenders to have an environmental component built into their facilities.’’
Technology is a key enabler in multiple dimensions, such as raising crop yields and improving flavours in its plant protein business. “In a facility like LivFresh, we use modern farming technology to achieve high yields in a small space. In protein extraction, if there is 25 per cent protein, how do we get all that protein extracted into a powder that manufacturers can use?’’ Tech, he says, also plays a role to enable the firm to mimic flavours, tastes and textures of plant-based products.
Tech of course enables the quantification, reduction and monitoring of carbon emissions.
Agrocorp’s size and extensive business relationships keep the second-generation executives on their toes. Vijay points to his father as a role model for both his family and business. “Even today, he’s the first in and last out; his attention to detail is very impressive. We try to emulate some of those aspects, but we also try to each bring unique perspectives.
“He’s always interested in our views and respects our decisions. That has been important for us in building a healthy environment for a family to be in business together.
“We don’t want to rest on our laurels and bank on the fact that we have the market share. We have to make sure we keep working to provide value to our customers. We have to keep growing and looking at new initiatives.’’
BFI msg:
Next-gen leaders in family firms have an advantage in driving innovation. They have a long-term vision, and can leverage established business relationships, deep industry knowledge and existing operational capabilities to implement innovative ideas that will maintain their family’s legacy, while creating positive long-term impacts for their community.
Associate professor Kenneth Goh, academic director, Business Families Institute, Singapore Management University
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