Expansion, innovation headline current and long-term strategies at ag giants
June 1, 2010
by L. Joshua Sosland
NEW YORK — Several of the nation’s largest agribusiness companies discussed global growth strategies and long-term challenges at the annual Agricultural, Protein and Fertilizer Conference sponsored by BMO Capital Markets Corp. The conference was held May 19-20 at The Grand Hyatt New York, Park Avenue at Grand Central in New York City.
As the global production of grains and oilseeds increases, Decatur, Ill.-based Archer Daniels Midland Co. is making progress on efforts to expand and improve its origination and transportation network, said Steve Mills, executive vice-president and chief financial officer.
To that end, Mr. Mills said ADM selectively has been adding elevators and improving throughput capabilities in North and South America, growing its origination footprint in Canada and Europe, and expanding its destination business in the Middle East, Asia and Africa.
“We’ve acquired seven ocean-going vessels, and we’ve been modernizing our North American barge fleet,” Mr. Mills said. “In South America, we’re expanding the barge fleet and we’ve added tugboats. We’ve also grown our origination footprint by adding silos in Brazil, Paraguay and Uruguay and in Argentina, where we already are the largest exporters of grains and oilseeds. We’re expanding our port operations to increase our presence in that very important soybean production region.”
ADM also is making headway in its efforts to diversify its product portfolio and optimize flexibility within its corn processing operations. Mr. Mills said the company is expanding the number of products in its industrial chemicals and advanced biofuels portfolio, as well as expanding its global carbohydrate processing capabilities.
Two of the company’s recent ethanol expansions — in Columbus, Neb., and Cedar Rapids, Iowa — are expected to provide a boost to ADM’s long-term strategy. The Columbus ethanol dry mill is fully operational while the Cedar Rapids facility will be on-line this summer.
“Each of these plants is built to produce 300 million gallons of ethanol, although our permits allow us to expand capacity up to 400 million gallons,” Mr. Mills said. “These plants are located next to existing wet corn mills to leverage our infrastructure and our extensive logistics network.”
Mr. Mills also used the forum as an opportunity to address the 32 billion-lb corn sweetener market, of which ADM is a major player. He indicated the recent shift of consumers away from high-fructose corn syrup to sugar “may be relatively short-lived.”
“It’s important to understand that nutritionally, high-fructose corn syrup is the same as sugar, honey and many other sweeteners,” he explained. “Remember that the human digestive system converts sucrose, or table sugar, into fructose and glucose molecules and fructose and glucose are naturally occurring sweeteners, present in varying proportions in the fruits and fruit juices that we enjoy.”
Bunge building its presence
Enhancing its position in the oilseed value chain, building a presence in grains, and increasing its sugar and bioenergy platforms are center stage at Bunge Ltd., said Jackie Fouse, chief financial officer.
Ms. Fouse provided an update on the construction of an export grain terminal in Washington state. The terminal elevator, the first for Bunge in the region, is expected to be a “nice addition” to the company’s North American asset base, she said.
“It’s there to serve flows from the Pacific Northwest in the U.S. to Asia,” Ms. Fouse said. “So, capitalizing on that expected demand for product in Asia and the development, continued development of those trade flows from North America to Asia. So this is an asset that we’re very excited about.”
Ms. Fouse said Bunge also continues to enhance its international reach through the construction of a soy crush facility at the port of Phu My, Vietnam.
“It will be a state-of-the-art facility,” she said. “Again, as Vietnam has developed as a country and the market demand there for both meal and oil, it now makes sense for us to have that crushing facility there in that country.”
Another area of Bunge’s business attracting attention is sugar and bioenergy operations. With the closing of the Moema acquisition in mid-February, Bunge now has eight mills in Brazil, and the company is counting on Brazil to be the anchor country for the segment.
“Brazil is uniquely positioned as the low-cost global producer for raw sugar and supplies about 50% of the global sugar trade,” Ms. Fouse said. “So we like Brazil as the anchor country within our sugar platform. In addition to raw sugar, when we look at the data for sugar-based ethanol, what you see here is just the domestic demand in Brazil for ethanol. It has been growing at a very rapid pace … expected to grow at an 8% average annual rate from 2009 to 2015.”
Ms. Fouse said part of the reason for the rapid growth of ethanol demand in Brazil is the growth in the flex fuel car fleet in the country.
“Something on the order of 90% of sales of vehicles now are flex fuel vehicles and … as the gasoline powered vehicle numbers are coming down, the flex fuel numbers are going up in Brazil,” she said. “And that is driving very strong domestic demand for ethanol.”
Corn Products makes ‘bucket’ list
As Corn Products International, Inc. forges ahead on its strategy to deliver double-digit earnings-per-share growth it will do so with a focus on the three “buckets” — organic growth, broadening the ingredient portfolio, and geographic acquisitions, said Cheryl Beebe, vice-president and chief financial officer of the Westchester, Ill.-based company.
Ms. Beebe said Corn Products will focus its investments during the next five years on global priority market segments, including brewing and specialty beverages, confectionery, processed foods, dairy and ice cream, and the pharma and personal care industries.
“What we see in those markets is they tend to have good growth — they can be 3%, 4%, 5%,” Ms. Beebe said. She noted that Corn Products is looking closely at modified starches, texturants and specialty polyols, as opposed to focusing solely on basic ingredients such as crystalline sorbitol or liquid sorbitol.
“We want to move into the higher-end polyols,” she said. “And we’re looking at sweetener blends and the next generation of sweeteners. And that specifically is stevia, or some people refer to it as Reb A.”
Through a joint marketing agreement
with a Japanese company, Ms. Beebe said Corn Products is growing stevia leaves with the intent of being able to control the supply of the raw material. She added that a manufacturing facility currently under construction is set to come on-line in the fourth quarter of 2010, paving the way for Corn Products to broaden its product portfolio for those customers who want a full line of products to include in beverages and fruit juices.
“Some people like high caloric intake, some people prefer a lower,” she said. “We want to have that portfolio that allows us to address those customer needs.”