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.
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".
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.