uploads///GRAINS

How Bunge Plans to Extract More Value from Grains Segment

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Jun. 21 2016, Updated 4:28 p.m. ET

Grains segment

Bunge’s (BG) Agribusiness segment comprises of its grains and oilseeds business. In 2015, Bunge’s grains volumes have increased at a CAGR (compound annual growth rate) of 7%. Bunge has a global footprint in origination and export of grains. The company’s focus has been to fill gaps in this segment and capture new opportunities through mergers and acquisitions. In 4Q15, the company closed a joint venture with SALIC, which helped improve the geographic balance of Bunge’s grain footprint by combining CWB’s Western grain assets with Bunge’s Eastern grain assets.

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Expanding global footprint is the name of the game

Bunge completed another project with logistic advantages in 2Q15 in Nikolayev, Ukraine, which increased port capacity by ~25%. As of 2Q14, another project in Northern Brazil was operational, which served as an alternative to congested ports. In Australia, the company started building an additional terminal at Geelong, which increased total combined export capacity to ~2 million metric tons. Bunge has a global presence with 36% of its processing capacity located in South America, 29% in North America, 20% in Europe, and 15% in Asia-Pacific.

Peers in the US and across the world

A major competitor for Bunge in this segment is Archer Daniels Midland (ADM), which has a similar business under the Agricultural Services and Corn Processing segments, which together earned $39.7 million in revenue for fiscal 2015. Ingredion (INGR) earned $56 million in revenue in fiscal 2015. The VanEck Vectors Agribusiness ETF (MOO) and the iShares MSCI Global Agriculture Producers ETF (VEGI) invest 6.4% and 7.8%, respectively, in Archer Daniel Midland’s stock.

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