The document outlines recommendations for Bunge's strategy in response to rising commodity prices and growing biofuel markets. It recommends that Bunge (1) focus on food production and exports from Brazil to China, (2) divest non-core operations in India, (3) intensify risk management by acquiring assets in China to mitigate counterparty risk, and (4) continue research into new food products.

1. Ulyana Kravchenko
Amet Seitibraimov
Igor Serpak
QUADRA
Konstantin Yakunenko
Contents
Case question
Develop Bunge’s strategy 1. Framework
response to rising oil prices and
growing interest for biofuels 2. Impact of Global Trends: 1. Rising
Volatility of Commodities’ Prices
Goal
3. Impact of Global Trends: 2.
Define unique positioning,
Development of Biofuel Markets
leveraging Bunge’s core
business model and strengths, 4. Impact of Global Trends: 3. Potential for
sustaining the balance between Food Market Growth
integration and decentralisation
5. Resultant Opportunities and Risks for
Recommendations summary Bunge
Maintain focus on food,
6. Analysis of Specific Opportunities
concentrate on risk
management 7. Risk Management
8. Summary on Strategy

2. Framework
Rising Volatility of Commodities’ Prices
Development of Biofuel Markets
Potential of Food Market Growth
Bunge
Risks Opportunities
Recommendations
Ulyana Kravchenko ■ Amet Seitibraimov ■ Igor Serpak ■ Konstantin Yakunenko

3. Impact of Global Trends:
1. Rising Volatility of Commodities’ Prices
• As agricultural commodities became inputs for
fuel production, markets for energy and
agricultural commodities converge. This adds
volatility to the food supply chain.
Energy Transmission Agriculture
market of volatility market
Ulyana Kravchenko ■ Amet Seitibraimov ■ Igor Serpak ■ Konstantin Yakunenko

4. Impact of Global Trends:
2. Development of Biofuel Markets
• We view that biofuel market is positioned to
develop thanks to both
– advancement in technologies and
– favourable influences from three groups of interests.
Politicians Environmentalists Businesses
 Alleviate dependence on  Protection of  New investment options
oil environment:  Higher prices on markets
 Develop new industries  promotion of less with inelastic demand
 Satisfy economic intensive usage of oil (food, fuel), which
interests of electorate  promotion of generates higher profits
 Promote politically- alternative “green”
beneficial low prices of fuels
oil and food
 Promote environmental
protection
Ulyana Kravchenko ■ Amet Seitibraimov ■ Igor Serpak ■ Konstantin Yakunenko

5. Impact of Global Trends:
3. Potential for Food Market Growth
Potential for food market growth
Due to impact of biofuel
Due to internal potential
market
 Growing population (1.35% p.a.)  Because of growing biofuels market,
 Growing income (1.40% p.a.) agricultural lands are diverted from
 Increase in meat and fish food production. Therefore, unmet
consumption among 83% of world demand on the food market will
population (due to increasing drive food prices higher
demand for feedstock
requirements)
Ulyana Kravchenko ■ Amet Seitibraimov ■ Igor Serpak ■ Konstantin Yakunenko

6. Resultant Opportunities and Risks
for Bunge
Risks (direct losses or lost
Opportunities
profit opportunities)
 Increase in food production to  Counterparty defaults on
meet growing demand contracts due to prices
 Higher revenues and profits volatility
due to growing food prices and  Distortions of supply due to
inelastic demand government export restrictions
 Emergence of new customer  High levels of tied working
segment for agribusiness capital due to high prices and
(biofuels producers) long shipment times
 Entry to emerging biofuel  Governmental intervention to
market food market pricing mechanism
(e.g. in response to food riots)
Ulyana Kravchenko ■ Amet Seitibraimov ■ Igor Serpak ■ Konstantin Yakunenko

7. Analysis of Specific Opportunities
State Products Pros Cons Conclusion
1. Low-cost 1. Overpriced assets
2. Idle lands 2. Increasing compeition
Brazil Sugar farming for 3. Strong local presence 3. US trade barriers eliminate cost
Reject
(origination) ethanol advantage
4. Required backward integration into
farming
1. Low-cost
2. Idle lands
3. Export potential growth thanks to US refocus on corn
Brazil
Soybeans farming Accept
(origination) 4. Expected twofold growth of China's import
5. Strong local presence
6. Leveraging of fertilisers production
1. Expected twofold growth of China's imports 1. Uncertainty regarding government's
China Soybeans regulation of market consolidation
Accept
(destination) crushing
2. Likely to decrease reliance on local counterparties
1. Competitive advantage against other oil brands 1. R&D-related risks
R&D (food) Intensify
2. Creation of new products
1. Growing market of oils 1. Underdeveloped infrastructure, 1. Divest
ethical practices, tax policies production
Vegetable oil
India 2. Lack of transparency 2. Export
(trading,
(destination) unbranded oil
production)
3. Underdeveloped market of branded
oils
1. Low costs of production 1. Different kinds of plantation-farming
Palm oil environments
Malaysia, (production, +
2. Growing demand from Europe 2. Unfamiliar political systems Reject
Indonesia input for biofuel
production) 3. Option to sell as input to biofuel production 3. Different business models
Ulyana Kravchenko ■ Amet Seitibraimov ■ Igor Serpak ■ Konstantin Yakunenko

8. Risk Management
• We recommend acquisition of crushers in China,
key destination country, …
– … (in addition to existent traders) so as to alleviate the
risk of counterparties’ defaults due to both price
volatility and long shipment. Therefore, price volatility
on commodities markets will have limited impact on
physical deliveries and the group’s consolidated
financials.
100-days transit time
+ Volatility on commodities markets
+ Small-capitalisation players Traders in
China
= Risk of local counterparties’ default
Elevator in
Brazil
Forward integration to Crushers in
mitigate the risk China
Ulyana Kravchenko ■ Amet Seitibraimov ■ Igor Serpak ■ Konstantin Yakunenko

9. Summary on Strategy
• Focus on food
– Concentrate on exports of soybeans from Brazil, as the low-
cost producer, to China. Engagement into soybean
“farming”.
– Divest production of branded oils in India. Maintain exports
to India.
– Reject risky expansions to Malaysia, Indonesia.
– Reject entry into non-core and intervention-dependent
sugar-and-ethanol business in Brazil.
– Intensify R&D of healthy soy products.
• Focus on risk management
– Build on-the-ground presence in China, including
acquisition of crushers, to mitigate the buyers’ default risk.
Ulyana Kravchenko ■ Amet Seitibraimov ■ Igor Serpak ■ Konstantin Yakunenko