Glencore International Plc and Bunge Ltd. expect more agriculture mergers and acquisitions in coming years as companies need to broaden geographic reach.
“Even the large companies are too small,” Alberto Weisser, Bunge chief executive officer, said today at the FT Global Commodities Summit. “We will see more consolidation.” Bunge is the second-largest publicly traded sugar processor.
The only viable models for agriculture trading are global companies exploiting arbitrage and market dislocation in food supply, and small regional players such as Ukraine’s Kernel Holding SA, according to Chris Mahoney, Glencore’s head of agriculture. “There’s no middle ground,” he said in Lausanne.
Glencore bought Viterra Inc., Canada’s largest grain handler, for C$6.1 billion ($5.9 billion) last year and Marubeni Corp. agreed to pay $5.6 billion for Gavilon Group LLC. Sydney-based GrainCorp Ltd. rebuffed a A$2.8 billion ($2.9 billion) takeover bid from Archer-Daniels-Midland Co.
Asset-rich agriculture traders “will always be a target for consolidation,” Mahoney said. Cooperatives are obvious candidates, while consolidation among major players such as ADM, Bunge and Cargill Inc. is unlikely, he said.
Medium-sized companies are likely targets, said Claudio Scarrozza, Europe CEO at CHS Inc., the largest cooperative in the U.S., marketing 2 billion bushels of grains and oilseeds a year. Bunge redirected 6 million tons of grains to importers within three days when Russia banned wheat exports in 2010, Weisser said. “Only big companies could do that,” he said.