Bunge eyes other assets in $60m push

22 Sep, 2014 05:50 AM
We are deliberately moving down the value chain, specifically in grain and oilseeds

ONE of the world's biggest agricultural traders, Bunge, is considering further expansion in Australia after splashing more than $60 million building new ports aimed at taking market share from the nation's biggest grains handlers, GrainCorp and CBH Group.

New York-based Bunge chief executive Soren Schroder officially opened its first Australian grain terminal in Bunbury, two hours south of Perth, on ­Friday. The $40 million terminal is the first competition to hit the nation's biggest grains handler CBH.

In an interview with The Australian Financial Review, Mr Schroder said the company would focus on getting its new terminals running efficiently, which includes one under development in Geelong, before taking "another look" for expansion or ­acquisition opportunities.

"We will spend the next year or two getting them up to capacity and then we will have another look [at expansion opportunities]," Mr Schroder said.

Asked whether a decision last year by treasurer Joe Hockey to block Archer Daniels Midland's planned takeover of GrainCorp had increased sovereign risk he said "no".

Bunge, the 'B' in the ABCD moniker used to describe global agricultural trading titans (that also include Archer Daniels Midland, Cargill and Louis Dreyfus), is chasing processing assets to increase its global returns from wheat, barley and oilseed trading.

About 22 per cent of Bunge's earnings come from "valued added" assets. Mr Schroder wants to boost this to 30 per cent to 35 per cent.

He is eyeing flour or corn milling assets and oil seed processing businesses, which convert oilseeds in to fats and oils.

"We are deliberately moving down the value chain, specifically in grain and oilseeds," Mr Schroder said.

Critics sceptical

Some critics are sceptical Bunge - 10 times the market size of GrainCorp - can make good returns from its port infrastructure and argue it's using deep pockets to control the supply chain in a bid to own more of the nation's grain.

New terminals are being built across the country but typically involve a group of agricultural traders backing the development. Bunge however has gone it alone. New port terminals are opening even though existing infrastructure on the east and west coasts can handle more than double the average winter harvest.

"We have done the math and we believe we can get a reasonable return on this [Bunbury terminal] while still providing farmers a better outlet," Mr Schroder said.

Mr Schroder said some farmers, particularly those close to the terminal, would enjoy better returns than "traditional outlets".

More demand

Mr Schroder said there was more demand from customers in the five to six months after winter crop was harvested.

"To calculate capacity on an average annual basis is probably not the right way to do it," he said.

He said the port facilities would run at 80 per cent to 90 per cent capacity for half the year and "maybe at 60 per cent for the rest".

"That's how it happens across the world," Mr Schroder said.

Global agricultural players are increasingly expanding to Australia to diversify geographical risk and because of its close proximity to Asia, where demand for food is surging.

Mr Schroder said Australian farmers should feel "very encouraged" by the outlook.

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22/09/2014 10:45:36 AM

We welcome Bunge with open hands. At last some serious investment coming our way. The agrarian socialists are bankrupt so they won't be building anything anytime soon. Without investment our ability to move the grain will be compromised in the future and that will take bids out of the buy side. Just ask Canadian canola growers what happens to grain prices when the rails are down.
22/09/2014 11:06:02 AM

a cursory glance at the subsidy structure that has prevailed in the US since the 20s will show you D8, who the socialists really are, the corporate socialists , that is. Are the "rails" in Canada owned by Govt or the private sector? If they are down, presumably from snowstorms, does a transport failure not affect all players? From what I have seen the private sector never "invests " in transport networks, if it does it is only with the assistance of taxation revenue. Just like the sale of Graincorp, growers and taxpayers paid for it and now shareholders pocket the dividend.
22/09/2014 11:48:49 AM

Don't stop at the group you call agrarian socialists you grain trader mouth pieces and stooges. Show us the Australian owned corporations which are financially powerful. You would have enough space in this little box to do so. The question is, why? It certainly does not help when, our Govt allows productive industries like farming and farm service businesses, to carry the welfare burden of the nation while the ABCD multi nat mega corps, use Govt subsidized grain markets and tax havens to grow and take over those here. Our Governments have either deliberately or ignorantly sunk us.
Jock Munro
22/09/2014 11:59:58 AM

And the foreign merchants continue to swoop and why not? Rudd and the Liberals gifted them the Australian wheat industry when they abolished the single desk and they are only taking full advantage of the situation that was presented to them by our treacherous urban elite politicians.. Who cares about Australia's wheat quality and relative value and what this is costing us as a nation!
22/09/2014 1:15:22 PM

LT you can confuse yourself in conspiracy theories or take note that wheat is now under $195/t in Chicago, yet anywhere from $60/110/t (depending on where you are in Oz) of premium basis is being offered by the trade TODAY. Without this demand for our high quality grain you would be delivered into the hands of your banker much earlier than even I couldhave predicted. Theres speculation and then there is cold hard cash. Money talks and agrarian bull dust walks.
Philip Downie
22/09/2014 1:49:50 PM

D8 think you have mixed your metaphors talking is the easy part walking is the hard part, as in talk the talk, walk the walk.
john from tamworth
22/09/2014 2:03:36 PM

Bunge is a private company that has been investing in Australia for decades.I first came across them in 1977 when they were building large scale piggeries and rebuilding the Herbert Adams frozen food brand.They would seem to fit the profile of an ideal foreign investor.Investment is good.It is the economic activity that drives productivity and increased production which makes us all better off.This irrational ranting from the NSW grain belt is bizarre.
22/09/2014 5:17:25 PM

You once again failed to answer the central question deregul8. Obviously you are unable to name the Companies.
22/09/2014 5:25:19 PM

Deregul8, that $60 you speak of as an Aussie premium over the Chicago market of $195. Did you not tell us it was $60 when Chicago was at $295? If so your deregulated market is delivering you $100 less now. And according to your prediction, it is heading lower now. That is not much support for your claims of how the mega traders in a deregulated market do such a good job for Aussie growers is it. By harvest time when all the grain floods the market here, will it be down a further $100?
john from tamworth
23/09/2014 7:38:19 AM

Exactly what was your question LT?
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