IS GLENCORE GOING TO SWALLOW UP GRAINCORP AT AROUND $5 B?

GRAINCORP shares jumped on speculation it may become the next takeover target after weekend reports that commodities giant Glencore is bidding about $5.2 billion for Canadian rival Viterra.

Shares of Graincorp rose as much as 70 cents, or 8.6 per cent, to $8.80 before easing back to $8.49 in recent trading.

RBS Morgans agribusiness analyst Belinda Moore said continuing consolidation in the global grains sector “should focus investor’s minds around what Graincorp is worth under a takeover scenario.

“Given the scale and strategic nature of GNC’s assets and the fact that it is the last remaining significant grain company capable of being taken over in Australia, we expect a number of parties could also be interested in Graincorp at some point in the future.”

London’s Sunday Telegraph reported that Glencore, currently pursuing a $US90 billion merger with diversified miner Xstrata plc, was bidding for Viterra, which on Friday (Canadian time) confirmed it had received an expression of interest from a third party.

Viterra bought Australia’s ABB Grain in 2009 for about $1.6 billion.

Viterra’s Australian-listed shares shot up $2.67, or 26 per cent today, to $13.02. Viterra’s Canadian-listed shares rose 24 per cent on Friday to close at $C13.58, giving the company a market cap of $C5.05 billion.

The Wall Street Journal is reporting that Cargill may also make a tilt at Viterra, according to Bloomberg.

RBS’s Ms Moore said past North American agribusiness takeover deals were priced on average at a 1o times earnings multiple – the enterprise value over the earnings before interest tax depreciation and amortisation – while previous takeover multiples for Australian agribusinesses were about nine times earnings.

On those multiples, Ms Moore estimated Graincorp could be worth between $14.75 – $16.56 a share, using forecast earnings for 2011-12.

The move on Viterra comes as Canada prepares to deregulate grain marketing in August, with the Canadian Wheat Board set to lose its monopoly.

Sourced & published by Henry Sapiecha

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If rising oil prices were not enough, investors now have to contend with a bigger risk: a repeat of the 2007-08 spike in food prices.

Prices of commodities ranging from soyabeans and corn to rapeseed and feeder cattle are soaring as bad weather and strong demand in China combine to tighten supplies and trigger food inflation fears.

The rise in prices of these crops could be sustained, warn industry experts. The market is “not going to see food inflation abating in the next 18 months, to two years,” says Richard Feltes, vice-president at broker RJ O’Brien in Chicago.

Yet the surge is unlikely to mirror that of the 2007-08 spike. The cost of wheat and rice, the two most important agricultural commodities for global food security because of their status as a staple for billions of people in southern Asia and sub-Saharan Africa, remains stable thanks in large part to bumper crops over the past few years.

The cost of sugar, an important source of calories in India and other emerging countries, is also down from previous highs.

Instead, the main concern centres on the price of oilseeds, such as soyabeans, rapeseed and canola, and corn.

Oilseeds are not only a source of edible oil for coking and processed food but also the main source of protein-rich feed meal used to fatten cows, sheep, pigs and poultry. Corn is also a crucial source of feed meal. The rise in feed is already pushing up meat costs worldwide, analysts say.

Soyabean prices have risen more than 20 per cent since the start of the year and hit a peak of $15.09 a bushel on Friday, the highest in four years. Commodities traders say they are likely to rise to $16-$17 a bushel, targeting the all-time high of $16.63 set in the summer of 2008. “I am very bullish,” says a senior executive with a leading commodities trading house.

Canola prices hit C$665.90 a tonne last week, their highest since July 2008 and only a fraction below the all-time high set during the 2007-08 food crisis. And rapeseed prices in Europe, at €514 per tonne, are less than 2 per cent below the 2008 peak.

Soya production is sharply down in the Latin American agricultural belt of Brazil, Argentina, Uruguay and Paraguay after the La Niña weather phenomenon exposed fields to hot, dry weather, hurting yields. The output drop in the region, which accounts for more than half the world’s exports of the commodity, comes as Chinese imports have increased more than 20 per cent in the first quarter.

Chris Gadd, analyst at Macquarie, says Chinese buyers could afford high dollar-denominated prices thanks to a fall in freight rates and a stronger renminbi.

Moreover, Chinese soya production has dropped as farmers have opted to sow more acres with corn, which is fetching record prices in China.

Commodities traders are more restrained about the outlook for corn prices, but they warn that costs are likely to remain at historically high levels in spite of an expected surge in US production due to unusually high Chinese demand.

Beijing has only been an occasional importer of corn over the past 50 years, with significant overseas purchases over three short periods: 1973-75, 1978-83 and 1994-96. Those sporadic imports have become more common and traders expect China in the 2011-12 and 2012-13 crop season to make its biggest purchases of corn over a two-year period since records began in the 1960s.

Abdolreza Abbassian, senior grains economist at the UN’s Food and Agriculture Organisation in Rome, anticipates Beijing will buy between 8m and 10m tonnes over the two seasons.

In China, the cost of corn hit an all-time high in March of Rmb2,497 per tonne, up roughly 10 per cent from the beginning of the year, after Beijing said that its inventories were lower than thought. Since then, agricultural traders say Sinograin, the state-owned trading house which manages the state grain reserves, has been in the market buying corn to replenish its strategic stockpile.

Corn prices rose on Monday to $6.58¾ a bushel yesterday after the US government last week said traders had concluded their biggest single-day corn deals since 1991. The market is assuming that the corn is heading to China. During the 2007-08 food crisis, corn rose to $7.65 a bushel.

Sourced & published by Henry Sapiecha

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Brazilian group sues over shark killings

BRASILIA, Brazil (UPI) — Asia’s insatiable demand for shark fin soup has led to the illegal killing of nearly 300,000 sharks off Brazil, an environmental group alleges.

The Environmental Justice Institute in Brazil has accused a seafood exporter, Siglo do Brasil Comercio, of illegally killing sharks and is suing for what it calls massive damage to the marine ecosystem, the BBC reported Tuesday.

The group is suing the company for $790 million in damages for its alleged sale of 290,000 sharks since 2009.

Many of the sharks were thrown back into the sea after their fins were taken for clandestine export, the group charges.

“As we can’t put a value on life, we have calculated the impact on the ecosystem,” group director Cristiano Pacheco said.

“We think the shark fins were exported clandestinely, in containers, likely from the ports of Rio Grande do Sul to the Asian market,” he said.

It is illegal to separate shark fins from carcasses in Brazil, but the high value placed by Asian diners on the fins has encouraged the illicit practice, the BBC said.

Copyright 2010 by United Press International

Note-The pic above is not from Brazil but of a legitimate shark hunter in Australia

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Danella Bevis / Danella Bevis ©

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WA News / Robert Duncan ©

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A WORLD HUNGRY FOR TRADE

The commodity market activity  throughout the world has to keep moving between countries to ensure that all have a share of the global wealth and resources.

There are some who are not ‘pulling their weight whilst others are producing abundantly. These things are like that for different reasons.

Here we will bring them and others, together at a common market place where all can exchange goods and or services or sell for cash to the highest bidder or ready buyer.

MORE TO COME SO WATCH THIS SPACE

Henry Sapiecha

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