The “B” in the ABCD of Agriculture Behemoths
Bunge is one of the leaders in world grain trade, world food production and has been a key player in the grain markets for over 200 years.
Being the largest grain trader in South America is no small task and the fact that it was done by a company that few people have heard of is even more impressive. Bunge is the largest grain trader in South America as well as the largest producer of fertilizers on the continent; all while being the largest Soybean Oil producer; while transporting grains, soy, edible oils and ingredients in North America and globally.
Bunge is one of the ABCD (ADM, Bunge, Cargill, Louis-Dreyfus) companies that dominates the grain trade- Starting out as Bunge & Co. in Amsterdam, Netherlands- it was founded in 1818 by Johann Bunge. Nowadays it is known as Bunge everywhere in the world. Bunge only recently moved their corporate headquarters to the United State to facilitate their IPO in 2001. Like the other ABCD companies, Bunge is expanding its operations into India and China while maintaining its other global operations. The expansions in China include the acquisition of a Soybean processor back in 2008; that Soy plant is now operational and sending its goods to the livestock markets around the world. Bunge first got into the Chinese markets in 1998 with a trading office but it didn’t make any serious investment until 2005 when it acquired a soybean crushing plant; it has since continued that expansion in familiar commodities.
Those familiar commodities are Soybean, which it trades in tremendous amounts. It seems that Bunge is going to stick with familiar processes and products; it makes sense to stay with what you know while you expand into a new market. They gained the experience in Soybean trading in Brazil and Argentina where they have dominated the markets since the 1800s. That’s 200 years of experience!
When Bunge was formed, they focused simply on import/exports and not on the processing of commodities. Bunge would eventually become a key player in the grain markets, both imports/exports and processing, from the mid 1800s onward. To get into commodity processing, they relocated to Antwerp in 1859 so that they could focus on expanding. From there, the Bunge name expanded to Argentina and then to Brazil; it is in Brazil that the company first experimented with the production chain by starting its wheat milling operations. They have since consistently expanded down the food production chain to the point where they are the biggest fertilizer manufacturer in South America as well as being the biggest grain trader on the continent.
During the 1900s Bunge expanded into the North American continent. It began this expansion with the construction of a grain handling facility in Midway, Minnesota. From there it continued to expand with the strategic acquisition of grain elevators in the upper Midwest of the country. They now own a vast network of grain elevators and logistical stepping stones needed to transport and produce commodities.
While managing operations on 3 different continents, Bunge realized that logistics could make or break the company; they founded a Brazilian company called Fertimport S.A., which specialized in raw material shipments. Nowadays, Fertimport S.A. has a sophisticated logistical system that helps transport Bunges various goods and materials globally on top of operating as a separate company that offers their services worldwide.
Bunge has recently been focusing on maintaining its dominance in Brazil and South America in general, while also jostling for dominance within China and India. To gain the advantage in India, Bunge operates as a conglomerate that owns several other companies who sell products; those companies include Dalda and Amrit Banaspati. Dalda is a vegetable oil brand that has been around since the 1930s and has become synonymous with the product; much like Kleenex is synonymous with facial tissues. Dalda was imported by a Dutch company called Dada & co until the 1930s when Hindustan Unilever Ltd wanted to produce it locally. Dada wanted their name to be a part of the product and so Dalda was invented. Now the vegetable oil is produced in India and came to be under Bunge ownership when they bought the Dalda brand from Unilever.
Bunge has fueled their growth through a consistent strategy of being an originator of bulk commodities, using high volume bulk trade, focusing on “input” and an extensive transportation, storage and logistics system. These strategies are what powered their continuous growth through acquisitions, mergers and private family funding models.
Being an originator of bulk commodities is a strategy that all 4 ABCD companies utilize; Bunge has perfected it. In Brazil they are so important that they can dictate what farmers grow, how much, and for what markets; all because Bunge trades in high volume bulk and buys so much of what the producer has to offer, that producers/farmers have little options to sell elsewhere. Because Bunge deals largely in Soy and Palm oil, both of which are input commodities, they can use those commodities to produce other goods such as fertilizer or food additives, allowing them to make the commodities an inside operating cost. All of this depends on some of the largest and most complicated logistical chains in the world as they must move massive amount of goods in a timely fashion for them to be able to make a profit.
While the ABCD companies pay attention to grain prices and the margins therein, they make a profit whether the market is going up or down.
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