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.
Long term projections for Potash demand are stable and likely to moderately increase year-over-year. The quantity of high-quality arable land is decreasing. Human population is expected to increase by 3 Billion people in the next 37 years. There are no precise substitutes for potash. It is proven to considerably increase yield quantity and quality on almost all crops. The cumulative effects of the above factors will drive demand.
"China, with plenty of field and great demand for crops, has great potential in GM crops. Stimulated by safety certificates issuing of GM rice, key grain crop in Asia, GM technology and GM crops have attracted unprecedented attention of China and the world.
By interviewing researchers, governmental officers and citizens, CCM tries to find out whether GM rice will come into commercial production in the near future and what is the future for Chinese GM crops industry.
To figure out future trend of GM crops, especially GM rice in China, CCM will carry out deep investigation in this research in order to:
- Help clients understand Chinese GM crops industry
- Find out influencing factors for GM crops development
- Analyze competitive landscape of Chinese and multinational GM crops producers
- Assess market risks and identify business opportunities
- Find out GM crop prospect "
Long term projections for Potash demand are stable and likely to moderately increase year-over-year. The quantity of high-quality arable land is decreasing. Human population is expected to increase by 3 Billion people in the next 37 years. There are no precise substitutes for potash. It is proven to considerably increase yield quantity and quality on almost all crops. The cumulative effects of the above factors will drive demand.
"China, with plenty of field and great demand for crops, has great potential in GM crops. Stimulated by safety certificates issuing of GM rice, key grain crop in Asia, GM technology and GM crops have attracted unprecedented attention of China and the world.
By interviewing researchers, governmental officers and citizens, CCM tries to find out whether GM rice will come into commercial production in the near future and what is the future for Chinese GM crops industry.
To figure out future trend of GM crops, especially GM rice in China, CCM will carry out deep investigation in this research in order to:
- Help clients understand Chinese GM crops industry
- Find out influencing factors for GM crops development
- Analyze competitive landscape of Chinese and multinational GM crops producers
- Assess market risks and identify business opportunities
- Find out GM crop prospect "
The global outlook series on the Agriculture Industry provides a collection of statistical anecdotes, market briefs, and concise summaries of research findings. Illustrated with 59 fact-rich market data tables, the report offers a rudimentary overview of the industry and highlights latest trends and demand drivers. Regional markets briefly abstracted and covered include United States, Canada, Europe (Germany, Spain, UK, Russia, and Turkey) Asia-Pacific (Australia, China, India, Indonesia, Japan, Malaysia and Philippines among others) Latin America (Argentina, Brazil and Chile among others) and South Africa among others. The report offers a compilation of recent mergers, acquisitions, and strategic corporate developments. Also included is an indexed, easy-to-refer, fact-finder directory listing the addresses, and contact details of 352 companies worldwide.
National and global food security, Dr Will Martinfood2050
Dr Will Martin , World Bank speaking about national and global food security: what roles for trade and trade policies? Based on a paper written with Prof Kim Anderson.
Agcapita is Canada's only RRSP and TFSA eligible farmland fund and is part of a family of funds with almost $100 million in assets under management. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita created the Farmland Investment Partnership to allow investors to add professionally managed farmland to their portfolios. Agcapita publishes a monthly Agriculture Brief which deals with agriculture specific investment issues along with big picture macro-economic issues.
Agcapita is Canada's only RRSP and TFSA eligible farmland fund and is part of a family of funds with almost $100 million in assets under management. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita created the Farmland Investment Partnership to allow investors to add professionally managed farmland to their portfolios. Agcapita publishes a monthly Agriculture Brief which deals with agriculture specific investment issues along with big picture macro-economic issues.
Food Insecurity & Opportunities in OIC CountriesDinarStandard
State of food security across the 57 member OIC countries; Key drivers of food crisis; A unique OIC-wide food and agriculture cluster approach that identifies opportunities for sustainable growth and investments.
It is absolutely essential to eliminate any advert policies or legal framework in the world market posted by Oil giants that could affect bf production adversely. Oil companies can set a syndicated price (lowering price) alluring customers to depend on petroleum. Another important issue to stabilize the bf market is introduction of international standards and/or certification schemes. Legislations, mandates, policies i.e. blending mandates, government purchasing policies, and support of bio fuel-compatible infrastructure and technologies have been most successful in creating a consistent bf market. But other policies, loan guarantees, tax incentives for consumers and manufacturers, and direct industry subsidies, should be phased out to make bf production a self-sustained commodity as in Brazil and Germany. The necessity of certification in case of mass production of bio-fuel has become imperative with the growth of the industry. Some existing schemes are International Federation of Organic Agriculture Movements (IFOAM), Rainforest Alliance’s Standard for Sustainable Agriculture in Latin America; organic certification and labeling schemes, Forest Stewardship Council’s international forest certification system; UK environmental assurance programme linked to the country’s renewable fuels obligation; and the newly established Roundtable on Sustainable Palm Oil. In case of selecting schemes the following issues should be concerned 1. Select the most appropriate standards or certification approach possible: Laws or regulations, voluntary certification schemes, or criteria to qualify for subsidies or incentive programmes, 2. Achieve consensus among diverse stakeholders about basic underlying principles: consultation and participation in the process to make the system credible in the marketplace, 3. Design and adopt specific quantifiable criteria for sustainability indicators: The legislations should be flexible enough to be adapted to the particular requirements of a region, 4. Ensure that compliance with the criteria is enforceable in practice, without generating high additional costs: Issues of cost and who pays are critical to the success of a certification programme, 5. Avoid leakage effects: when crop production activities are expanded, leakage could occur disturbing natural habitats, increasing CO2 emissions from soil or other environmental impacts, and 6. Establish a system for monitoring and reporting : System for measuring and reporting on energy efficiency and on the carbon and energy balances of the resulting fuels
The global outlook series on the Agriculture Industry provides a collection of statistical anecdotes, market briefs, and concise summaries of research findings. Illustrated with 59 fact-rich market data tables, the report offers a rudimentary overview of the industry and highlights latest trends and demand drivers. Regional markets briefly abstracted and covered include United States, Canada, Europe (Germany, Spain, UK, Russia, and Turkey) Asia-Pacific (Australia, China, India, Indonesia, Japan, Malaysia and Philippines among others) Latin America (Argentina, Brazil and Chile among others) and South Africa among others. The report offers a compilation of recent mergers, acquisitions, and strategic corporate developments. Also included is an indexed, easy-to-refer, fact-finder directory listing the addresses, and contact details of 352 companies worldwide.
National and global food security, Dr Will Martinfood2050
Dr Will Martin , World Bank speaking about national and global food security: what roles for trade and trade policies? Based on a paper written with Prof Kim Anderson.
Agcapita is Canada's only RRSP and TFSA eligible farmland fund and is part of a family of funds with almost $100 million in assets under management. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita created the Farmland Investment Partnership to allow investors to add professionally managed farmland to their portfolios. Agcapita publishes a monthly Agriculture Brief which deals with agriculture specific investment issues along with big picture macro-economic issues.
Agcapita is Canada's only RRSP and TFSA eligible farmland fund and is part of a family of funds with almost $100 million in assets under management. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita created the Farmland Investment Partnership to allow investors to add professionally managed farmland to their portfolios. Agcapita publishes a monthly Agriculture Brief which deals with agriculture specific investment issues along with big picture macro-economic issues.
Food Insecurity & Opportunities in OIC CountriesDinarStandard
State of food security across the 57 member OIC countries; Key drivers of food crisis; A unique OIC-wide food and agriculture cluster approach that identifies opportunities for sustainable growth and investments.
It is absolutely essential to eliminate any advert policies or legal framework in the world market posted by Oil giants that could affect bf production adversely. Oil companies can set a syndicated price (lowering price) alluring customers to depend on petroleum. Another important issue to stabilize the bf market is introduction of international standards and/or certification schemes. Legislations, mandates, policies i.e. blending mandates, government purchasing policies, and support of bio fuel-compatible infrastructure and technologies have been most successful in creating a consistent bf market. But other policies, loan guarantees, tax incentives for consumers and manufacturers, and direct industry subsidies, should be phased out to make bf production a self-sustained commodity as in Brazil and Germany. The necessity of certification in case of mass production of bio-fuel has become imperative with the growth of the industry. Some existing schemes are International Federation of Organic Agriculture Movements (IFOAM), Rainforest Alliance’s Standard for Sustainable Agriculture in Latin America; organic certification and labeling schemes, Forest Stewardship Council’s international forest certification system; UK environmental assurance programme linked to the country’s renewable fuels obligation; and the newly established Roundtable on Sustainable Palm Oil. In case of selecting schemes the following issues should be concerned 1. Select the most appropriate standards or certification approach possible: Laws or regulations, voluntary certification schemes, or criteria to qualify for subsidies or incentive programmes, 2. Achieve consensus among diverse stakeholders about basic underlying principles: consultation and participation in the process to make the system credible in the marketplace, 3. Design and adopt specific quantifiable criteria for sustainability indicators: The legislations should be flexible enough to be adapted to the particular requirements of a region, 4. Ensure that compliance with the criteria is enforceable in practice, without generating high additional costs: Issues of cost and who pays are critical to the success of a certification programme, 5. Avoid leakage effects: when crop production activities are expanded, leakage could occur disturbing natural habitats, increasing CO2 emissions from soil or other environmental impacts, and 6. Establish a system for monitoring and reporting : System for measuring and reporting on energy efficiency and on the carbon and energy balances of the resulting fuels
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