Bunge Still on the Hunt

 

By Brad Zigler

The appetite for acquisitions exhibited by grain and oilseed processor Bunge Ltd (NYSE: BG) seems as voracious as the world’s hunger for some of the company’s products.

 Just two weeks ago, we reported (see “CPO Has Soured on Sweetening,” http://www.hardassetsinvestor.com/component/content/article/3/925-cpo-has-soured-on-sweetening.html?year=2008&month=06&Itemid=39) Bunge’s intention to buy out troubled Corn Products International (NYSE: CPO) in an all-stock deal. Now Bunge’s set to take over the international sugar trading and marketing division of Tate & Lyle plc (LSE: TATE).

 Terms of the deal aren’t yet known, but it’s a safe bet that there’s probably not much cash involved. Tate & Lyle's sugar trading operations and employees will move over to Bunge, while the responsibility for the unit’s working capital will remain with Tate & Lyle through March 31, 2009, at which point, Bunge takes over.

 Bunge, always an aggressive grain and oilseed trader, now is poised to flex its muscle in the sugar trading rings, as the market for softs heats up. World sugar prices bottomed a year ago near 8.5 U.S. cents per pound, then nearly doubled by March. Since then, prices have swung back and forth to volatility traders’ delight.

 Bunge’s fortunes to date have largely been told by soybean processing margins earned by crushing beans into oil and meal. The November/December crush spread stood at 74 cents a bushel on the CBOT on July 2, yielding a gross profit margin of 4.6%.  In April, when bean prices were only $11.70 a bushel, the crush was worth 98 cents, or 8.4% November beans have climbed 42% this year to $16.30 a bushel while December bean oil and meal have risen 44% and 34%, respectively.  

 Bunge Share Prices vs. Soybean Processing Margins