bunge compiled v8
TRANSCRIPT
Looking forward
Tan Si Yng | Laura Chiu | Jane Ng | Epili Sagar
KEY ISSUE
Issue Strategy Implementation
FOOD VERSUS FUEL
In line with company’s mission- a food business
Demand for more food as population grows
Increasing interest in biofuel cannot be ignored
Issue Strategy Implementation
STRATEGY - STATUS QUO
Issue Strategy Implementation
STRATEGY – LOOKING FORWARD
Issue Strategy Implementation
STRATEGY
Issue Strategy Implementation
Build up Soy Production in Brazil/Argentina
Food ProductsChina, India, Europe and USA
To meet demand created by diversion to biofuels
BiodieselPlant in Brazil
To meet some of Brazil’s growing demandSupply raw material to Biodiesel producers in
Europe/US
IMPLEMENTATION
Issue Strategy Implementation
Geographical Expansion
India – 2nd largest vegetable oil demand Increase presence in the vegetable oil
market Import oilseeds to be processed in India-
based plants
ChinaExpand presence dependent on evolution of
regulations
IMPLEMENTATION
Issue Strategy Implementation
Agricultural R&D
Improve quality of seeds
Increase crop yield to cater toFoodBiofuel
Better utilization of crop waste Drought management
IMPLEMENTATION
Issue Strategy Implementation
STRATEGY
HOW AGRIBUSINESS AFFECTED BY OIL PRICES
Farmers
Farmers
Soy Origination
Soy Origination
Oilseed Processing
Oilseed Processing
Consumers
Consumers
Oil used for farm machinery
Oil used in machines processing
oilseeds
Increased costs!
Build up Soy Geographical Expansion Agricultural R&D
Transportation Costs
HOW AGRIBUSINESS AFFECTED BY OIL PRICES
Farmers
Farmers
Grain Origination
Grain Origination
Oilseed Processing
Oilseed Processing
Consumers
Consumers
Biofuels Processing
Biofuels Processing
Consumers
Consumers
Build up Soy Geographical Expansion Agricultural R&D
BUILD UP SOY PRODUCTION
Build up Soy Geographical Expansion Agricultural R&D
BUILD UP SOY PRODUCTION
Brazil and Argentina Idle fertile land
Build up Soy Geographical Expansion Agricultural R&D
BUILD UP SOY PRODUCTION
Meet global food supply crunch from diversion of crops to biofuels
Increase of ethanol in US met from increase in corn crops
US soy crop reduced
Meet gap in supply for soy
Build up Soy Geographical Expansion Agricultural R&D
BUILD UP SOY PRODUCTION
Build biodiesel processing facilities in Brazil
Offset high oil price
High demand for biodiesel within Brazil
Benefits farmers and Bunge by lowering energy costs Used in farm machinery, processing plants etc
Pro-Biodiesel Brazilian government policies
Build up Soy Geographical Expansion Agricultural R&D
BUILD UP SOY PRODUCTION
Build up Soy Geographical Expansion Agricultural R&D
GEOGRAPHICAL EXPANSION
Build up Soy Geographical Expansion Agricultural R&D
GEOGRAPHICAL EXPANSION IN INDIA
Purchase of “Dalda” brand from Hindustan Lever Access to brand and distribution networks
Import excess oil seeds From other BGA supply-side regions into India
Import tariffs – lesser on raw materials Use processors in India to produce vegetable oil
Acquire other Indian-based processors in future to increase capacity and presence
Build up Soy Geographical Expansion Agricultural R&D
GEOGRAPHIC EXPANSION IN CHINA
Large consumption growth and limited production Match supply-demand for vegetable oil
Organic growth within China depends on regulations
If Pro-Bunge Expand processing presence within China
If Uncertain Leverage Cereol’s capability and proximity to import
vegetable oil
Build up Soy Geographical Expansion Agricultural R&D
AGRICULTURAL R&D
Research in region-appropriate soybean varieties
Improve quality and crop yield for food and biodiesel production
Look into 2nd generation biofuel - Utilization of oil crop waste
Drought management
Keep BGA ahead of growth opportunitiesBuild up Soy Geographical Expansion Agricultural R&D
STRATEGY
STRATEGY
THANKS
EXTRAIntro
FOOD VERSUS FUEL
Volatility in crude oil prices will affect commodity prices directly
Demand side: demand for food-based biofuel increases, increasing the demand for crops, increasing prices
Supply side: transportation prices increases, production cost increases.
Supply crunch as rivals enter into biodiesel
$ 100 $ 100
19801960s
EXTRASoy
HOW AGRIBUSINESS AFFECTED BY OIL PRICES
Oil important input in agribusiness Diesel powered machinery such as engines and
boilers Increase in oil prices lead to direct increase in
costs
HOW AGRIBUSINESS AFFECTED BY OIL PRICES
Increase in oil prices fuel interest in biofuels Biofuels: made from rapeseed, corn, sugarcane,
soy Competing use for oilseeds crop Drive up demand for oilseeds for biofuels
production Lead to food vs fuel argument Drastic increase in price of final consumer food
products Take away business from agribusiness to invest
in biofuels?
COMPETITIVE ADVANTAGE OF BUNGE
Able to provide assistance to farmers Financing Crop management
Integration and Decentralization Flexibility to respond quickly to changes in
market demands Leeway to structure local business to maximize
profits Insights and customer relationships born of local
knowledge Leader in Brazil
BUNGE’S COMPETITORS
EXTRAExpansion
WHY FOCUS ON FOOD
Essentially a food company
Key expertise in: Fertilizer Food products Agribusiness
Need to feed growing world population
Utilize integrated but decentralized structure Biofuels perceived as emerging opportunity
WHY NOT PALM OIL
No presence in palm oil-rich countries
Disadvantaged position Lack of value chain Strong entrenched competitors Unfamiliar plantation-farming environments
Inexperience in asset purchases and business models in Asia
Enter biodiesel market with competitive advantage in soybean oil
WHY NOT SUGAR/CORN FOR BIOFUEL
Corn more expensive to produce and less environmentally friendly than sugarcane
Sugarcane production highly competitive due to big players
Overpriced assets and late entrance into segment
Biodiesel allows BGA’s initial entrance into fuel segment to capitalize on opportunity
WHY BIODIESEL
Advocacy for environmentally friendly fuel at historic high
Alternative for farmers to offset raising oil costs
Large demand in trucking, farming and machinery industries, Europe especially, and other countries
Brazil has more than 200 million acres of currently idle irrigated land
Emerging opportunities such as train operations in Brazil
BUNGE
Food vs. Fuel Oil Prices effect on Agribusiness Bunge’s Advantage in Brazil Competitors Why focus on Food? Why NOT
Palm Oil? Ethanol (Sugarcane or Corn-based)?
Why Biodiesel?