Commodities: "More Bumper Crops, Fewer Bumps at Bunge" (BG)

As the second smallest of the ABCD* agribusiness companies Bunge often gets lost in the crowd although I've thought for years that it would be a good fit for what George Soros appeared to want but then Gavilon was sold to Marubeni. The stock closed at $82.81 on Friday up 7.95% for the year.
From Barron's:

Shares of the giant agribusiness could sprout 15% higher if a new CEO can keep the unexpected from happening again.

After leaving investors hungry in the two previous quarters, the agricultural trading giant Bunge finally delivered a healthy meal in the second quarter: It made a profit of $262 million, or $1.76 a share, on revenue of $16.8 billion, topping Wall Street profit estimates by nearly 30%. The shares' subsequent 9% pop could be the start of a feast that pushes them another 15% higher over the next year or so.

With growing evidence of emerging markets' rising middle class and its craving for better, healthier food, a company that buys, processes, and transports grains and oilseeds in markets all over the world would seem well positioned. But in the past, Bunge has stumbled over unexpected obstacles. In the first quarter, for instance, it had to write down $31 million from a sugar futures hedge as prices spiked. Even after the recent jump, Bunge's cheap shares (ticker: BG) are flat in 2014, versus a 15% rise for agricultural-products providers.

Photo: Courtesy of Bunge

Soren Schroder, 52, who was named to the CEO spot in 2013, is trying to limit the volatility of a generally low-margin business. Schroder told shareholders the company has been "somewhat frustrated" it hasn't done better. "Our customers and our investors expect higher levels of performance and a disciplined approach to improvement," says Schroder, a Dane who worked for Cargill and Continental Grain before joining Bunge's executive ranks in 2000.

Founded by a German merchant, Johann Peter Gottlieb Bunge, in 1818, the company began as an import-export business in Amsterdam. Boasting a $12 billion market cap, Bunge today employs 35,000 people and operates more than 400 facilities in more than 40 countries. Wall Street expects the company this year to generate revenue of $63 billion and an adjusted profit of $910 million.

Nearly 75% of revenues and 65% of profits come from agribusiness. First, there's grain—wheat, barley, and corn—sold to feed and food processors. Then come oilseeds such as soybeans, canola, and sunflower seeds, used in the creation of vegetable oils. Finally, there are milling and oil-products operations, which account for 18% of revenue and nearly 30% of profit. These units turn the grains and oilseeds into food for humans and feed for livestock. Bunge is involved in almost every step of food creation and distribution, brokering crops among farmers, milling for bakers, and crushing feed, plus handling many in-between steps. It owns and operates ports, grain elevators, ships, mills, barges, and railcars that store and move these items around the world.....MORE

Four quarter revenue run rates, in billions of USD.
ADM      $86
Bunge    $67
Cargill    $136
Dreyfus  $63

Previously:
"10 top global commodity trading firms: Smart money or bad boys?" 
Glencore, Bunge Eye Sale of Soros-backed Gavilon 
WTF? "Bunge to Buy Climate Change Capital" (BG)

I'm still trying to figure out why the ICE didn't get sued for bailing out Al Gore, Goldman Sachs and President Obama's pal Richard Sandor by way of their $604 million purchase of Climate Exchange, PLC..

And many more. Use the search blog box if interested.

"Glencore takeover of Bunge 'could be possible this year'"—Credit Suisse (GLEN; BG)

Early in the current decade we were pitching the idea that George Soros should use his position in Gavilon to acquire Bunge:

August 12, 2011
At What Price Does George Soros Find Bunge Attractive? (BG)

No, that's not a reference to the Brazilian girlfriend who's suing him for $50 mil., it's a ref. to Mr. Soros' love affair with all things ag.

We'll have more next week. BG at $61.11, down 24 cents. 

But then Mr. Soros and Ospraie Management ended up selling Gavilon to Marubeni for $3.6 billion and we got bored watching Bunge, the worst-managed of the ABCD grain traders, current price, almost six years to the day later: $77.56, which, as Warren Buffet might say:

“Now I’m known as a long-term investor and a patient guy, but that is not my idea of a big move.”*

Anyhoo, on to the headline story from Agrimoney:

A takeover by Glencore of US-based ag giant Bunge "could be possible this year", Credit Suisse said, cutting its scepticism on a deal after the commodities group unveiled some wriggle room in its financial guidance.

Credit Suisse analysts - who last month flagged a "diminished risk" of Glencore succeeding in the takeover, after using up financial firepower on the acquisition of a stake in Hunter Valley coal operations – said that a Bunge could in fact be possible "in the near term".

The analysis followed Glencore comments on Thursday, as the group unveiled a return to first-half profit, signalling some potential for raising its debt above its self-proclaimed ceiling of $16bn

Steven Kalmin, the Glencore finance director said that while $16bn was "a pretty robust cap that we've been looking to manage the business around, I'm not saying we're going to die in a ditch" if it is breached in the short term.

"It's not going to go to $27 billion or whatever," Mr Kalmin, but signalled that it might "temporarily" exceed the cap, depending on the asset acquired it taking out the debt.

Sugar division sale?
Credit Suisse said, following the comments, that "we therefore infer that a Bunge acquisition could be possible this year [and] that the company is keen on exploring ways to do it".

A deal could be facilitated by Glencore taking on "a bit more debt", although the bank added that "we would think management would not want to do this in a significant way, say out to $18bn and then soon back".

The acquisition of Bunge, which has a stockmarket value of some $11bn, could also be enabled by making the US group a smaller target, through the sale of some operations....MORE

*That was Warren commenting on the secular bear market that ended in August 1982:

December 31, 1964: DJIA 874.12
December 31, 1981: DJIA 875.00

Previously on It's a small world after all:
February 2012
WTF? "Bunge to Buy Climate Change Capital" (BG)

I'm still trying to figure out why the ICE didn't get sued for bailing out Al Gore, Goldman Sachs and President Obama's pal Richard Sandor by way of their $604 million purchase of Climate Exchange, PLC.....

...Last week, James Cameron, founder and vice chairman of CCC, told Reuters the company was being sold "at a low point" in its valuation....MORE

It sure as hell better be.
As a side note, we don't own any Bunge but think it would be a good fit with either Louis Dreyfus or Glencore. 

March 2012
Glencore, Bunge Eye Sale of Soros-backed Gavilon
March 2012
Grain Handler Viterra gets Takeover bid from Glencore, report says (VT.tsx; GLEN.L)
August 2014
Commodities: "More Bumper Crops, Fewer Bumps at Bunge" (BG)

Nothing since.

"Bunge to merge with Viterra to form $18 billion agriculture trader"

Although not nearly as large as  Cargill you can be sure that this tie-up has raised some concerns at the "Grain merchant to the world."

From Reuters via Yahoo News, June 13:

U.S. grains merchant Bunge and Glencore-backed Viterra on Tuesday announced an $18 billion deal to merge, creating one of the world's largest agriculture trading firms.

The deal brings Bunge closer in global scale to leading rivals Archer-Daniels-Midland and Cargill and will be examined closely by antitrust regulators.

Bunge is already the world's largest oilseed processor and analysts said it and Viterra's crushing businesses could face regulatory scrutiny in Canada and Argentina.

Bunge last year was the largest corn and soybean exporter from Brazil, the world's top source of the staple crops for making animal feed and biofuels, according to data from shipping agent Cargonave. Viterra was the third-largest corn exporter and No. 7 soybean shipper.

Combined, the companies accounted for about 23.7% of Brazil corn exports in 2022 and 20.9% of Brazil soybean exports, Cargonave data showed.

In the United States, Viterra's business of buying and selling grain expanded via its purchase of Gavilon last year. The merger would enhance Bunge's grain exporting and oilseed processing businesses in the world's No. 2 corn and soy exporter, where it has a smaller presence than ADM and Cargill....

....MUCH MORE

We have so many posts on both Viterra and Bunge (along with Grain Corp+AWB, Gavilon and the rest of gang) that it is easier to simply link to search blog' results.

This one has always amused me. From 2017 referring back:

Early in the current decade we were pitching the idea that George Soros should use his position in Gavilon to acquire Bunge:

August 12, 2011
At What Price Does George Soros Find Bunge Attractive? (BG)

No, that's not a reference to the Brazilian girlfriend who's suing him for $50 mil., it's a ref. to Mr. Soros' love affair with all things ag.

We'll have more next week. BG at $61.11, down 24 cents....

 Gavilon was purchased by Viterra in 2022.

Continental Grain Increases Stake in Bunge (BG)

From the World Grain Council:

NEW YORK, NEW YORK, U.S. — It appears Continental Grain Co., a powerful force in the global grain industry for many years, could play a key role in the potential sale of U.S.-based agribusiness giant Bunge.

Multiple media outlets on March 5 reported that Continental Grain, an investor in agricultural and food businesses, has filed with regulators about a previously undisclosed position in potential takeover target Bunge and plans to hold discussions with the U.S. agricultural commodity trader about a potential sale.

Continental, which owns 1% of Bunge, has secured approval from U.S. regulators to buy more shares, according to reports.

Under the U.S. Federal Trade Commission’s Hart-Scott-Rodino Act, if a group or individual purchases more than $84 million of stock in a company its investment is considered “non-passive,” it needs clearance to increase its position, which would allow it to hold talks with that company about things such as strategy.

Bunge, which has a market valuation of about $11 billion, has been a takeover target during the past year. In early 2017, Glencore, a swiss miner and commodity trader, approached Bunge with an offer but was rebuffed. More recently, Archer Daniels Midland Co. (ADM) reportedly held discussions with Bunge about a possible deal that would combine two of the world’s largest grain traders....MUCH MORE

Bunge Agrees to Buy Corn Products for $4.2 Billion (BG; CPO)

Well, except for having the wrong acquirer and the wrong target we nailed the buyout.*
From Bloomberg:

Bunge Ltd., the world's largest oilseed processor, agreed to buy Corn Products International Inc. for $4.2 billion in stock, gaining control of corn-based sweeteners at a time of record grain prices.

Bunge will pay the equivalent of $56 for each share of Westchester, Illinois-based Corn Products, Bunge said today in a statement. That's 31 percent more than Corn Products' closing share price of $42.90 on June 20.

Bunge Chief Executive Officer Alberto Weisser will gain control of refining operations that sell high-fructose corn syrup and food additives to customers including Coca-Cola Co. and PepsiCo Inc. Bunge, founded 190 years ago, buys grains from farmers across North America, South America and Europe....MORE

*Three Quarters of Ethanol Plants to Shut Down?

WTF? "Bunge to Buy Climate Change Capital" (BG)

I'm still trying to figure out why the ICE didn't get sued for bailing out Al Gore, Goldman Sachs and President Obama's pal Richard Sandor by way of their $604 million purchase of Climate Exchange, PLC..
From Reuters:

UPDATE 1-Bunge to buy Climate Change Capital
Says financial terms will not be disclosed 

U.S. agricultural commodity trader Bunge on Wednesday said it will buy UK-based investor Climate Change Capital (CCC) for an undisclosed price after the transaction was approved by the UK's financial regulator earlier this week.

The sale comes at a time when the balance sheet of CCC, a once high profile investor in carbon offsets, has been damaged by a plunge in the benchmark U.N.-backed carbon price to a record low below 4 euros ($5.31) a tonne late last year.

The UK's Financial Services Authority (FSA) approved the transaction on Monday, while CCC has obtained the required shareholder approvals for the deal to proceed, Bunge said in a joint statement with CCC.
"The transaction is expected to close in the coming weeks; financial terms will not be disclosed," the statement said.

Last week, James Cameron, founder and vice chairman of CCC, told Reuters the company was being sold "at a low point" in its valuation....MORE

It sure as hell better be.
As a side note, we don't own any Bunge but think it would be a good fit with either Louis Dreyfus or Glencore.

"Big Ag wants a cut of booming fake-meat market"

Very big. the introduction to last Wednesday's "Cargill pumps funding into meat & fish alternatives" (BYND)":
Cargill is quite large.
$113 billion in revenues, $5.19 billion in operating cash flow, an intelligence operation that makes the CIA envious: human intelligence from spies in just about every country on earth and satellites to watch over it all.
Beyond Meat is about to discover what the Harvard Business Review, back in 2001, called "First Mover Disadvantage"....


And today's deep dive from Reuters:

Bunge Ltd, one the world’s biggest grain traders, recently disclosed the 1.6% stake it had purchased in the fast-growing fake-meat startup Beyond Meat. 

The play looked smart after the stock surged more than 250% since the faux burger and sausage maker’s initial public offering in May. Indeed, Beyond Meat’s (BYND.O) market capitalization of $9.9 billion is now larger than Bunge’s (BG.N), a 201-year-old firm with 31,000 employees.

No wonder many top agricultural firms want to grab their cut of the booming market for plant-based fake meat. Bunge’s investment is just one example of how grain traders and seed companies are trying to capitalize on a market that now accounts for 5% of U.S. meat purchases - a share expected to triple over a decade, according to investment management firm Bernstein. That growth would mirror the fast ramp-up of milk substitutes made from crops such as almonds.

“I definitely think this is going to continue to drive demand,” said Vince Macciocchi, president of the nutrition group at Archer Daniels Midland (ADM.N), one of Bunge’s chief rivals.

ADM and privately-held grain trader Cargill are selling processed peas and soy proteins to consumer food companies and restaurants that use them to make vegetable burgers, sausages, fish substitutes and other faux-meat products. They are also getting into the business through acquisitions and corporate partnerships or by leveraging their labs and research capabilities to help make new plant-based products for clients including food and beverage makers.

Seed company Corteva (CTVA.N) - which spun off in June after a merger of Dow Chemical and Dupont (DD.N) - is studying potential vegetable seed offerings.

Grain traders and seed-makers are following the lead of Beyond Meat and another startup, Impossible Foods, along with traditional meat producers such as Tyson Foods (TSN.N) and Maple Leaf Foods (MFI.TO) that have cashed in on plant-based meat substitutes. Demand for meat alternatives has soared as consumers add plant-based protein to their diets for health reasons and out of concern for animal welfare and environmental damage from livestock farming.

Tofu, made from soybean milk, is the best known meat alternative and has been around for decades. But in recent years, other crops such as black beans, peas, lentils, canola, beets and sunflower have become popular in products made to taste like or replace meat....

....MUCH MORE

As Bunge Flails it Flags Sugar and China Oilseed Hopes (BG)

The stock is up 80 cents (1.29%) at $62.88. I keep thinking this would be a way for Soros-backed Gavilon to pick up some decent assets on the cheap.

From Agrimoney:

Bunge struck positive notes on sugar prices, and China's hunger for oilseeds, even as it unveiled a sharp drop in profits, depressed by setbacks from a poor cane crop to "aggressive competition" in vegetable oils.

The US agribusiness giant said that Chinese oilseed crushing margins, having improved from levels depressed by state controls on cooking oil prices, "should remain supported" by growth in demand for vegetable meal, an important feed source.

China's soymeal demand will soar 10% in 2011-12, to 47.6m tonnes, to keep the country's expanding hog herd fed, on US Department of Agriculture estimates.

And Bunge backed its case for expanding in Brazilian cane, despite another disappointing quarterly result, saying that prices of sugar and ethanol "should remain supported by strong demand, tight ethanol supplies in Brazil and the need to encourage Brazilian capacity expansion".

Indeed, strong prices were needed to encourage investment in Brazil's important Center South cane region, whose first fall in cane output this year in a decade has fuelled a recovery in sugar prices from a May low.

Brazil downgrade 

Bunge cut production prospects for its own Brazil sugar operations this year by a further 1m tonnes, to 14m-14.5m tonnes, following a similar downgrade in July....MORE

Here's the recent price action via BigCharts:

Grain Traders

From the Streetwise Professor, Jan. 23:

Why Are ABCD Singing the Blues?

It’s pretty clear that the major agricultural trading firms, notably the ABCDs–ADM, Bunge, Cargill, and Dreyfus–are going through a rough patch of tight margins and low profits.  One common response in any industry facing these conditions is consolidation, and in fact there is a major potential combination in play: ADM approached Bunge about an acquisition..

I am unsatisfied with most of the explanations given.  A widely cited “reason” is that grain and oilseed prices are low due to bumper crops.  Yes, bumper crops and the resulting low prices can be a negative for producers, but it does not explain hard times in the midstream.  Ag traders do not have a natural flat price exposure. They are both buyers and sellers, and care about margin.
Indeed, ceteris paribus, abundant supplies should be a boon to traders.  More supply means they are handling more volume, which is by itself tends to increase revenue, and more volume means that handling capacity is being utilized more fully, which should contribute to firmer margins, which increases revenues even further.

Greg Meyer and Neil Hume have a long piece in the FT about the potential ADM-Bunge deal. Unfortunately, they advance some implausible reasons for the current conditions in the industry. For example, they say: “At the same time, a series of bumper harvests has weakened agricultural traders’ bargaining power with customers in the food industry.” Again, that’s a flat price story, not a spread/margin story.  And again, all else equal, bumper harvests should lead to greater capacity utilization in storage, logistics, transportation, and processing, which would actually serve to increase traders’ bargaining power because they own assets used to make those transformations.
Here’s how I’d narrow down where to look for more convincing explanations. All else equal, compressed margins arise when capacity utilization is low. In a time of relatively high world supply, lower capacity utilization would be attributable to increases in capacity that have outstripped gains in throughput caused by larger crops.  So where is that increased capacity?

There are some hints of better explanations along these lines in the FT article.  One thing it notes is that farmer-owned storage capacity has increased.  This reduces returns on storage assets.  In particular, when farmers have little on-farm storage they must sell their crops soon after harvest, or pay grain merchants to store it.  If they sell their crops, the merchant can exploit the optionality of choosing when to sell: if they store at a local elevator, they pay for the privilege. Either way, the middleman earns money from storage, either in trading profits (from exploiting the timing option inherent in storage) or in storage fees. If farmers can store on-farm, they don’t have to sell right after harvest, and they can exploit the timing options, and don’t have to pay for storage.  Either way, the increased on-farm storage capacity reduces the demand for, and utilization of, merchant-owned storage. This would adversely impact traders’ margins.

The article also mentions “rivals add[ing] to their crop-handling networks.” This would suggest that competitive entry/expansion by other firms (who?) is contributing to the compressed margins.  This would in turn suggest that ABCD margins in earlier years were abnormally high (which attracts entry), or that the costs of these unnamed “rivals” have gone down, allowing them to add capacity profitably even though margins are thinner.

Or maybe it’s that the margins are still healthy where the capacity expansions are taking place. Along those lines, I suspect that there is a geographic component to this. ADM in particular has its biggest asset footprint in North America. Bunge has a big footprint here too, although it also considerable assets in Brazil.  The growth of South America (relative to North America) as a major soybean and corn exporting region, and Russia as a major wheat exporting region, reduce the derived demand for North American handling capacity (although logistical constraints on Russian exports means that Russian export increases won’t match its production increases, and there are bottlenecks in South America too).

This would suggest that the circumstances of the well-known traders that have more of a North American (or western European) asset base are not representative of the profitability of grain trading overall. If that’s the case, consolidation-induced capacity “rationalization” (and that’s a major reason to merge in a stagnant industry) would occur disproportionately in the US, Canada, and western Europe.  This would also suggest that owners of storage and handling facilities in South America and Russia are doing quite well at the same time that owners of such assets in traditional exporting regions are not doing well....MUCH MORE

Singapore Wealth Fund Extends Resources Spree With Purchase of Bunge Shares (BG)

From the WSJ's Deal Journal:

Singapore’s sovereign wealth funds continue to step up their investment in resources companies.

As Dow Jones Newswires reports on Friday, the Government of Singapore Investment Corp. bought a 5% stake in U.S. listed global agribusiness and food processing company Bunge Ltd., with a market value close to $500 million. The fund bought 7.305 million shares in Bunge but did not disclose the price at which the shares were purchased....MORE

The Financial Times dives a bit deeper:
Singapore’s GIC builds stake in Bunge

...GIC will become the largest shareholder in the trading house, ahead of blue-chip asset managers such as Vanguard Group, Fidelity and BlackRock.

GIC is already a major shareholder in Glencore, the London-listed commodity trader, through convertible bonds and shares, alongside Aabar, one of Abu Dhabi’s sovereign funds. Singapore’s other sovereign wealth fund, Temasek, is the second-largest shareholder in Olam International, the Singapore-listed trader. Beijing’s China Investment Corp holds 14.5 per cent of Hong Kong-based Noble Group, the second-largest investor after the trading company’s chairman.

Both Louis Dreyfus Commodities, the agricultural trading house, and Mercuria, a leading oil trader, have also in the past indicated that they may seek strategic investments from sovereign wealth funds in Asia and the Middle East....

...It is unclear over what period of time GIC built up the stake, but the trading company’s shares have been rising steadily since the start of the month, and on Thursday were at $67.83, up 18.4 per cent since the beginning of February....MORE

Glencore, Bunge Eye Sale of Soros-backed Gavilon

From Reuters:

Global trading companies including Swiss Glencore (GLEN.L) and U.S.-based Bunge (BG.N) have expressed interest in the possible sale of U.S. energy and grains trader Gavilon Group, according to a source familiar with the matter.

Gavilon, owned by hedge fund manager Dwight Anderson and investors such as billionaire George Soros, began exploring fund-raising options in January, offering the chance to buy into a leading fertilizer distribution system, a network of grain storage bins and oil storage facilities in Oklahoma.

Bids are due soon for the potential sale, which could be worth up to $5 billion, the source said. Canadian grain handling firm Viterra (VT.TO), which has expanded significantly with acquisitions in recent years, could also be interested, according to the source.

Bloomberg previously reported the news and said that other potential bidders include Wilmar International (WLIL.SI), which does not have a significant footprint in the United States, and Japanese trader Mitsui & Co (8031.T).

Bloomberg said the company has also discussed a possible initial public offering with its bankers, it said.
Private equity funds have been excluded from the bidding, while leading traders like Cargill Inc CARG.UL and Archer Daniels Midland (ADM.N) have been discouraged from bidding due to potential antitrust risks, according to the Bloomberg report.

Gavilon has hired Morgan Stanley to advise on the process.

Bunge declined to comment. Glencore and Viterra could not be immediately reached for comment....MORE

Who wins and who loses as wheat prices spike: Archer Daniels Midland Up Almost 6% (ADM; BG)

It seems like only yesterday that we posted "Ethanol: Archer Daniels Midland Profit Soars and Comments on the Wheat Market (ADM)".
[it was Tuesday, get some sleep -ed]
From MarketWatch::

A ban on Russian wheat exports rippled through shares of U.S.-based agricultural and food companies Thursday as investors weighed the impact of Moscow's four-month moratorium.

Gainers included U.S. grain merchants Archer Daniels Midland (ADM 30.04, -0.22, -0.71%) and Bunge (BG 53.39, -1.05, -1.94%) .

Decliners included U.S. cereal makers General Mills (GIS 33.78, -0.07, -0.21%) , Kellogg (K 49.63, -0.21, -0.42%) and Ralcorp (RAH 56.11, +0.01, +0.02%) .

By afternoon, ADM had shot up 6% to $30.29, while Bunge gained 5% to trade at $54.45.
Both agribusiness companies, which process wheat and other grains for food companies, could see more export demand, one analyst said. See related First Take: Return of the Big Squeeze.
"In past years, this is where ADM and Bunge have stepped in to fill the void for livestock producers in the Eastern Hemisphere and make outsized profits," Credit Suisse analyst Robert Moskow said in a report Wednesday.

For packaged-food producers, the spike in the prices of wheat and food commodities may dent future profits if those costs continue to climb. While food makers don't talk about specific hedging strategies, they often hedge their ingredient costs at least six months out. See slide show: Wheat prices soar as Russia sizzles.
Since May, food commodities have climbed on the U.S. futures markets: Wheat prices are up 53%, oats are up 44%, coffee is up 24%, and corn is up 13%.

On Tuesday, J.M. Smucker Co. (SJM 58.81, +0.01, +0.02%) raised retail prices by 9% for its Folgers, Dunkin' Donuts and Millstone coffee brands. This followed on a 4% increase enacted in May. Smucker shares have fallen 4% so far this week. See full story on Smucker's coffee prices.
 
Tom Graves, a food analyst Standard & Poor's, said higher wheat prices will become a challenge for cereal and bread producers, perhaps forcing them to cut costs elsewhere.
Shares of General Mills, Kellogg and Ralcorp (RAH 56.11, +0.01, +0.02%) were each down about 3% in afternoon trading....MORE

See also this morning's "Wheat Limit Up on Russian Decision to Halt Exports; Wheat Sales From Australia to Get `Very Strong Start'... (BG)"

"It appears China has stopped buying soybeans from the US altogether because of trade fight"

Soybeans are used as a major food source for pigs and there are reasons to think China has hit "peak pork" so the country doesn't need as much feed, regardless of source. This is what we were getting at in last week's "China and Pigs and Soybeans: It's Complicated" although I am told I didn't explain the thinking as well as I should have. More after the jump.

From CNBC, May 2:

• "Whatever they're buying is non-U.S.," Soren Schroder, CEO of New York-based Bunge, the world's largest oilseeds processor, told Bloomberg in a phone interview.
• China canceled a net 62,690 metric tons of U.S. soybean purchases in the two weeks ended April 19, the Bloomberg article pointed out, citing USDA data for the current marketing year.
• The country is the second largest market for U.S. agricultural exports, and soybeans have historically have been one of the top products sold to the Asian giant, according to the U.S. Department of Agriculture Foreign Agricultural Service.

China is apparently no longer buying U.S. soybeans amid the rise in trade tensions, Bloomberg reported Wednesday.

"Whatever they're buying is non-U.S.," Soren Schroder, CEO of New York-based Bunge, the world's largest oilseeds processor, told the news outlet in a phone interview. "They're buying beans in Canada, in Brazil, mostly Brazil, but very deliberately not buying anything from the U.S."

A Bunge representative did not immediately respond to a CNBC request for comment.
China canceled a net 62,690 metric tons of U.S. soybean purchases in the two weeks ended April 19, the Bloomberg article pointed out, citing USDA data for the current marketing year.
Soybean futures fell 1 percent Wednesday, but are up 8 percent on the year.

In response to the Trump administration's proposed tariffs on $50 billion worth of Chinese imports, China's Ministry of Commerce announced duties in early April on 106 U.S. products, including soybeans. No effective date was announced at the time....MORE

For years we've marveled at what The Economist once called 'The Empire of the Pig' and were able to forecast the purchase of the largest US pork processor, Smithfield, as a result of all that marveling.

Then last year we started seeing stories similar to this at Fortune, June 20: "Increasingly Affluent Chinese Want Healthier Food and that Has Big Implications for Meat Producers".

Here's the ten second tutorial on Ag cycles, first posted in 2008:

The Hog Cycle
No not Harley-Davidson, although I imagine some econ grad student has written the paper.
Wheat and hogs are two commodities with long price series. We mentioned the hog cycle back in January:

The hog price series is one of the longest we have records for, back to the 1200's. The cycle is:
slaughter begets scarcity begets higher prices begets breeding begets over-supply begets slaughter. It's been going on for a while....

And some of the the more recent stuff, March 3:

"China Unveils How It Will Retaliate To US Tariffs, USDJPY Snaps"

If I was a pig in the Midwest I'd be tempted to vote for Donald Trump in 2020.
And I'm not talking deplorables.
As my favorite translator of Mandarin tells me, Chinese people love pork. And we've been babbling on about China's Strategic Pork Reserve for over a decade. Here's 2010's '"...Pork Signals Record Meat Prices' and China's Strategic Pork Reserve (SFD)":

I just threw Smithfield's symbol into the headline, neither story directly mention's the country's largest hog and pork producer. We first mentioned the Strategic Pork Reserve in an October 2007 post "Is China Going to Own the World?".

As it turned out, Smithfield was purchased by China's largest protein processor, Shuanghui International Holdings (now WH Group), in 2013 in a move that triggered a national security review in the U.S., I kid you not,

Anyhoo, China has been playing power politics for something like 5000 years and should President Trump go through with the threatened tariffs the Chinese will strike directly at his base while the porkers breathe a little easier as a major export market is taken off the table, so to speak....

Pork prices, with the exception of 2014 have been trading between $60 and $100 for a decade:

In 2014 you had the American bacon binge (2011 - 2014) combined with  porcine epidemic diarrhea virus (PED).
When it was realized PED was not as deadly as rumored/feared (but still quite messy) prices came back down.
Finally both the stock price and comments of China's largest soy buyer, New Hope Group belie the headline of Bloomberg's March 3 story "China Pig Feed King Says U.S. Trade War Will Hurt":

..."In case of a trade war, we are able to find other solutions," said Liu, who is also chairman of New Hope Liuhe, a publicly traded animal feed producer controlled by New Hope Group. “We have to raise pigs, and citizens have to eat pork.”...

It seems to be more a logistics problem than a scarcity situation.

Wheat Limit Up on Russian Decision to Halt Exports; Wheat Sales From Australia to Get `Very Strong Start'... (BG)

The futures are locked at limit up, last $8.03.
Or, as the headline at the Wall Street Journal says "Wheat Goes Up, Prices to Follow ".
First up, Reuters:
Wheat races to new highs as Russia halts exports

Wheat markets raced to fresh highs on Thursday, with Chicago wheat trading limit-up, as Russia announced a halt to grain exports from next week in response to a drought that has withered crops.

Russia's worst drought on record has devastated crops in parts of the country and sent international grain prices soaring as markets have speculated on restricted supply from one of the world's leading exporters.
Prime Minister Vladimir Putin told a government meeting on Thursday that a temporary ban on grain exports was needed, with a spokesman later saying this would come into force from August 15 and would apply to contracts that had been already signed.

The announcement followed feverish speculation about possible export curbs, which was fueled by a report from Russian news agency Interfax earlier on Thursday that a ban on grain exports could be implemented as soon as next week.

September wheat on the Chicago Board of Trade rose by a limit-up 60 cents to $7.85-3/4 by the close of the electronic session, a high for the contract and a 23-month high for front-month prices....MORE

Here's some backround from the Journal's Tom Polansek:

Wheat futures' eight-week rally regained steam on Wednesday by surging 6.7% to above $7.25 a bushel on the Chicago Board of Trade, their highest since September 2008....

...For some firms, higher wheat prices could turn out to be a boon. Agribusiness giant Bunge Ltd. said the latest rally could have a "positive impact" on its grain business, which includes transporting agricultural commodities. The persistent drought in Russia could shift demand for wheat to the U.S., which has ample supplies, and boost shipments from the U.S. to faraway destinations.

Drought-stricken wheat crops in Europe and Russia could boost the company's agribusiness margins later in the year, as the amount of wheat available for livestock feed declines, Bunge CEO Alberto Weisser said last week on an earnings conference call. That could drive demand for Bunge's products, including corn and soybean meal.

The Food and Agriculture Organization reaffirmed the tightening supply situation as the latest organization to cut its 2010 global wheat production forecast. It pegged production at 651 million metric tons, down 3.7% from its previous estimate, but said that figure represented an adequate supply of the food staple.

Traders are worried that scorching heat and dryness may push Russia to ban wheat exports and could hinder plantings of the next crop this autumn. Russia, a major wheat producer, is not expected to see significant relief from the drought for at least seven to 10 days, according to private weather firm Telvent DTN.
"I can see some problems if we don't have rain this fall in Russia," said Sid Love, an analyst at Kropf & Love Consulting.

Egypt, the world's largest importer, on Wednesday booked 180,000 tons of Russian wheat in a tender, its second such purchase this week. Some market watchers said the deal showed Russia still had wheat to sell at a competitive price, but others said it showed exporters were scrambling to make sales before a ban takes effect.

Finally, from Bloomberg a look at one of the producers that will be needed to fill the gap left by the Russian decision: 

Wheat shipments from Australia’s next harvest will probably begin at a rapid pace as dry weather cuts Russian production, said AWB Ltd., the nation’s largest exporter of the food grain.
“Given the current market conditions we would expect a very strong start,” AWB Trading Manager Tim Hutchison said in Melbourne by phone today. The marketing year starts Oct. 1.

Wheat soared to the highest level in 23 months as a heat wave in Russia and dry weather in Kazakhstan, Ukraine and parts of Europe cut production. Australia’s export program accelerated after a slow start caused by a surplus and competition from Black Sea countries and Germany, Hutchison said. CBH Group said today there was “plenty of demand” in the Australian region.

“We have picked up certainly from the pace we would have expected several months ago and that will continue to ramp up,” he said. Buyers purchasing wheat according to price were more likely to turn to Australia, he said.

Wheat for December delivery, the contract with the largest open interest, jumped as much as 3 percent to $7.7825 a bushel in Chicago, the highest level since September 2008. The price touched $4.255 in June. ASX Ltd.’s January-delivery Western Australia wheat futures contract traded at A$304.10 ($278) a metric ton at 5:33 p.m. Melbourne time.

Uncertainty over Russian export policy and supplies from other shippers including Australia and Argentina would help underpin prices, Hutchison said.

Big Pull-Back Unlikely
“It’s a question of trying to get some of the uncertain questions answered,” he said. “Until that occurs it is going to be difficult to have major pull-backs in the market, although when we are moving at the rate we are, you can certainly expect some steep corrections,” he said....MORE

Bunge Sees Upside to Drought (BG)

So what if they whiffed on earnings, even the Black Death wasn't all negative.
From Agrimoney:
Corporates squabble over impact of drought on farm profits

Will the US farm economy be brought low by drought-reduced yields, or will the boost to prices more than make up for lost production?

Agco warned over a potential setback to agricultural equipment groups, at least, from the US drought even as it unveiled a 50% jump in earnings, and raised expectations for its full-year performance.

However, the caution contrasted with those from many other agribusinesses, including fertilizer giant PotashCorp and crop trader Bunge, which highlighted benefits from the squeeze on crop supplies.

'Strong execution'

Agco, the maker of Massey Ferguson and Fendt farm equipment said that earnings for the April-to-June quarter hit $202.1m, or $2.08 a share, up from $133.9m a year before,

The increase reflected, besides the acquisition of silos group GSI, price rises, especially in North America and Europe, which lifted revenues by 14.1% to $2.69bn.

Meanwhile, costs were constrained by "low levels" of inflation in raw materials costs, reflecting less buoyant energy and metals markets.

"Agco's strong execution in the second quarter produced record earnings and operating margins of nearly 10%," Martin Richenhagen, the group's chairman and chief executive, said.

'Some uncertainty'

However, Mr Richenhagen added that while North American "farm economics remain healthy, the current drought conditions across much of the US have added some uncertainty for farm equipment demand for the remainder of 2012 in the region".

The statement clashed with more positive assessments on Thursday of drought implications for agribusiness giants.

PotashCorp and agrichemicals giant Syngenta forecast that higher crop prices would feed through into higher demand for crop inputs, while Bunge said that market uncertainty would drive farmers and consumers to larger crop traders....MORE

Barron's Loves the Ag Companies: "Prepare for a Bountiful Harvest" (ADM; BG; MON; DE)

From Barron's:

Seed companies, crop producers and farm-equipment makers are poised to prosper, as food demand increases with population growth.

Following two years of healthy gains, farm-related stocks have yielded a bumper crop of losses. The S&P Global Agribusiness Index, which tracks shares of 24 of the world's largest agribusiness companies, has fallen more than 16% this year, while familiar names such as Archer Daniels Midland and Deere are trading at or near 52-week lows.

Investors down on the farm might want to reconsider. Agribusiness companies have been posting strong revenue and profit gains, and the long-term outlook is even brighter for industries involved in feeding a hungry and growing world. Besides, after a particularly punishing third quarter, the stocks are dirt cheap, and some, like Monsanto (ticker: MON) and Deere (DE), offer tempting dividend yields.

The bullish case for agriculture investments is based largely on demographics. According to the United Nations, the world's population is projected to rise to 9.1 billion by 2050, from 6.8 million in 2009. In addition to their expanding ranks, the planet's residents are becoming wealthier and more urban, two trends that are fueling growing demand for meat and feed crops, such as corn and soybeans.

The U.N.'s Food and Agriculture Organization estimates that agricultural production will need to increase by at least 70% worldwide between now and 2050 to meet the needs of more protein-hungry populations, particularly in the developing world. That means almost a billion more tons of annual cereal production and 200 million more tons of meat. In the emerging markets alone, the FAO sees annual investments of $83 billion in agricultural production and "downstream" services such as processing and storage, not to mention billions of dollars for seeds, fertilizer, farm equipment and irrigation to coax more production from the land. By 2050, the organization forecasts, the world will have only 5% more arable land than it did at the start of this decade.

Such numbers suggest immense long-term opportunities for a wide array of companies in the U.S. and abroad. "Getting better seeds, fertilizers, water pumps and farming equipment to where it's needed is what the private sector is well suited to accomplish," says Roy Steiner, deputy director of agricultural development at the Bill and Melinda Gates Foundation, a $36 billion humanitarian institution. "Smart companies can make a difference, and make a profit."

So, too, can smart investors, whether in agribusiness stocks and exchange-traded funds or commodities and farmland. For individual investors seeking broad exposure to the market, giant commodities processors such as Bunge (BG) and Archer Daniels (ADM) might be a good place to start. A major oilseed processor and commodities trader, Bunge hit a 52-week low of 54.03 last week, and is down 22% from an April high of 76.13. (Like most farm-related shares, the stock peaked at a much higher level in 2008, at 133.) Shares are trading for a discounted 8.3 times next year's expected earnings of $6.93 a share; 0.15 times estimated 2011 sales of $54.8 billion; and 0.7 times book value. Bunge is likely to benefit from rising demand, especially for sugar. Standard & Poor's has a 12-month price target of 81....MORE


...FARMLAND IS THE MOST DIRECT WAY to invest in feeding the world, but it is also the least liquid. And, after surging in value in recent years, it is among the most expensive. Analysts at Rabobank calculate that the value of productive farmland has increased at a rate between 20% and 70% in the past five years, depending on location, with gains driven by higher commodity prices, low interest rates and a scarcity of available land—some of which has been acquired by financial buyers such as pension funds. The bank sees no near-term correction but thinks prices could fall some in three to seven years, as production costs and interest rates rise.
Legendary investor Jim Rogers views farmland as a long-term investment but notes that it's cheaper outside the U.S. "Myanmar is opening up as we speak, and there will be enormous opportunities there," he says. Angola and Cameroon also offer "magnificent opportunities in farmland."
Fortunately, you don't have to go to Cameroon to find compelling agribusiness investments these days. There are plenty ripe for the picking on Wall Street.

...Up on the Farm

Agribusiness stocks and exchange-traded funds have been hammered this year, leaving many at tempting levels. Some, such as ADM and Deere, also pay nice dividends.

	Recent	YTD	Market	EPS	EPS	P/E
	Price	Change	Val (mil)	2011E	2012E	2012E
BRF Brasil Foods /BRFS	$18.34	8.6%	$16	$1.14	$1.24	14.8
Potash of Saskatchewan /POT	46.49	-9.9	40	3.73	4.47	10.4
Deere /DE	66.57	-19.8	28	6.44	7.21	9.2
Archer Daniels Midland /ADM	25.91	-13.9	18	3.95	3.10	8.4
Source: Thomson Reuters

	Recent		Assets	YTD	3-Yr.
ETF/Ticker	Price	Category	(mil)	Return	Return
Market Vectors Agribusiness /MOO	$44.94	Equities	$4,811	-16.06%	19.96%
PowerShares Global Agriculture /PAGG	26.53	Equities	110	-17.09	13.69
PowerShares DB Agriculture /DBA	30.10	Commodities	2,505	-6.96	5.55
Sources: Morningstar; company reports

RICHARD THOMPSON, a Barron's research assistant, provided additional reporting

We're Swimming in Corn*, so Why Is Archer Daniels Midland's Stock Down? (ADM)

Ya got me. ADM makes stuff out of corn.
Quick and dirty, their products are food, feed and fuels.
And biopolymers. And de-icers. And superabsorbants used in adult incontinence products.
All made from corn.
Having a major feedstock trade lower will help the company. The question is when.
:
The stock is down 1.69% at $32.02.

From Bloomberg:
Corn Futures Drop Most in Eight Months as U.S. Boosts Inventory Estimate

Corn prices fell the most in more than eight months after the U.S., the biggest grower and exporter, said inventories before the harvest rose to the highest level since 2006.

Stockpiles on Sept. 1 totaled 1.708 billion bushels, up 2 percent from a year earlier, the U.S. Department of Agriculture said today in a report. Analysts in a Bloomberg News survey expected 1.407 billion, on average. Corn usage in the three months ended Aug. 31 was 2.6 billion bushels, up from 2.59 billion a year earlier.

The inventory number “is a negative surprise, and the market is adjusting to more of a supply cushion,” said Dale Durchholz, the senior market analyst for Agrivisor LLC in Bloomington, Illinois. “It’s like adding 2 million acres to this year’s harvest.”

Corn futures for December delivery fell 23.5 cents, or 4.7 percent, to $4.815 a bushel at 10 a.m. on the Chicago Board of Trade. A close at that price would be the biggest drop since Jan. 12. Earlier, the grain touched $4.7825, the lowest level since Sept. 13....MORE

From Barron's:
ADM Has Upside Grains 

AS WORLD POPULATIONS GROW, they will require more food and fuel. With its portfolio of food ingredients, livestock feed and biofuels, Archer Daniels Midland may well be the company supplying them.

Shares of the grain-processing powerhouse have already gained ground this year as shortages caused by bad weather in Europe and Canada pushed up prices for corn and wheat. But analysts say ADM (ticker: ADM) still has plenty of growing to do before harvest time, which also reflects its modest current valuation.

The stock trades at only 10.6 times forward earnings, below the 11.4 times for competitor Bunge (BG). Analysts argue ADM should fetch a premium to Bunge, based on its stronger average return on assets over the past three years.
ADM's grain storage and export businesses should continue to benefit from elevated grain prices. Two pending decisions by regulators on approving higher ethanol blends for cars could be additional catalysts over the next few months.
ADM recently finished a spate of capital projects related to its ethanol and bioplastics businesses, leaving more cash available to buy back shares. The shares also carry a 1.8% dividend yield, rounding out the solid picture.

To be sure, higher corn prices are a negative for ADM's high-fructose-corn-syrup business, which has already been battered by the perception of the sweetener as unhealthy. The volatility of commodity prices and ADM's complex hedging also make projecting the company's quarterly earnings particularly difficult, leaving room for misses. But analysts contend corn syrup isn't going away, and fans of ADM say it is best evaluated on a longer time line.

"We think that this is a tremendous long-term holding," says D. Tysen Nutt Jr., a senior portfolio manager at Delaware Investments, which owns ADM shares. "It's a great company at a reasonable valuation that is going to be part of this movement toward greater demand for food as economies and populations grow."

Nutt and his team at Delaware are more bullish on commodities than they are on stocks and see ADM as a way to play that. They estimate the shares could have something on the order of 50% price appreciation over the next three to five years.

Weather, as it often does, has played havoc with commodity prices. A drought in Russia, a key European supplier, and wet weather in Canada pushed wheat prices up more than 45% since the end of June. Corn prices rose more than 35% over that period on speculation that hot, dry weather damaged crops. Prices for both grains have eased recently, but Credit Suisse analyst Robert Moskow says there could be more upside for ADM if the arbitrage opportunities for the grain shortage in Europe play out....MORE

And you can't really swim in corn.
If you fall into a grain bin it is a virtual certainty that you will die unless you get help fast. 

"Bunge warns on grain price pressures"

From the Financial Times:

The pressures driving grain prices to two-year highs will not subside for at least a year, the head of a leading agricultural trader has said in a warning that deepens short-term worries about food price inflation.

But Alberto Weisser, chief executive of Bunge, rejected a growing view that high food prices are here to stay.

The US-based company is one of the biggest traders of commodities such as soyabeans, giving its executives an inside view into global food markets.

Mr Weisser said tight grain conditions would persist well into next year. “For the next 12 months I think you will see volatility of prices,” he told the Financial Times in an interview at company headquarters in White Plains, near New York....MORE

A New Crop of Ag-Stock Deals? (ADM; BG; CPO)

From BusinessWeek:

Bunge's $4.4 billion deal to buy Corn Products could signal a new round of consolidation. Could ADM be the next big player to make a move?

With corn prices soaring (BusinessWeek.com, 6/18/08) since the floods in the Midwest put an estimated 3.3 million acres of crops under water, it's not surprising that companies with global reach and, more important, financial strength are looking to solidify their position in this increasingly vital market.

That's likely part of the rationale for food conglomerate Bunge's (BG) plan to buy Corn Products International (CPO) in an all-stock deal announced on June 23 and valued at $4.4 billion, or $56 for each share of Corn Products. The purchase price includes the assumption of roughly $414 million of Corn Products' net debt....MORE

Five arrested for 50-foot "green" protest at CBOT

From Reuters:

Protesters draped a 50-foot banner on the Chicago Board of Trade building on Wednesday, accusing agribusiness giants ADM, Bunge and Cargill of destroying rainforests to produce renewable fuels.

Chicago police arrested four men and a woman on charges of reckless conduct, criminal trespass and criminal damage to property after four of the activists scaled the outside of CBOT building to the 23rd floor to hang the banner, while the fifth person coordinated the effort from the ground.

The protest came one day after an activist group ran a full-page advertisement in the Chicago Tribune calling the companies the "ABCs of rainforest destruction" for their role in expanding soy and palm oil plantations by clear-cutting rainforests.

A Bunge Ltd spokesman said he was aware of the accusations, but stressed the company's environmental and social record. An Archer-Daniels-Midland Co spokesman declined comment.

Cargill spokesman Bill Brady said: "We take our environmental footprint in the rainforest geographies very seriously. Cargill is committed to responsible economic development around the world."

Streets around the landmark building were gridlocked as morning rush hour traffic was diverted, while curious pedestrians gawked at the banner, which eventually became tangled in the wind before authorities removed it....MORE