A Game-Changer in Global Agriculture Trading
A potential mega-merger is on the horizon in the world of international agricultural trade. Bunge Ltd, a leading U.S. grains merchant, is reportedly in talks with Viterra, owned by Glencore Plc, for a deal that could significantly reshape the landscape of global agricultural trading1.
The Implications of a Potential Merger
The prospective merger would expand the combined entity’s businesses in the U.S., Brazil, and Australia, marking a milestone in the consolidation of global agriculture trading1. However, it could also raise competition concerns in regions like Canada and Argentina, where both companies have significant oilseed processing assets1.
The merger would bring Bunge closer on a global scale to leading rivals such as Archer-Daniels-Midland Co (ADM). Analysts estimate that the combined company’s market cap would be around $25 billion, compared to ADM’s $38.9 billion1.
Potential Benefits of the Merger
In the United States, a merger could enhance Bunge’s grain exporting and oilseed processing businesses, areas where it currently has a smaller presence than competitors like ADM and Cargill1. It would also expand Bunge’s physical grain storage and handling capacity in Australia, where Viterra has an extensive network of storage sites and grain export terminals1.
The merger would also create a dominant exporter in Brazil and a market-leading soybean crusher in Argentina1. In 2022, Bunge and Viterra combined accounted for about 23.7% of Brazil’s corn exports and 20.9% of its soybean exports1.
Regulatory Hurdles and Competition Concerns
Despite the potential benefits, the merger could face regulatory challenges. In Canada and Argentina, where both companies have significant oilseed processing operations, antitrust authorities may require some assets to be offloaded before approving the merger1.
In Brazil, the antitrust agency CADE would likely focus on the potential merger’s effects on the domestic market. However, some experts believe that the deal would not be blocked due to the presence of other competitors in the market1.
The Wider Context: Global Trade Slowdown
The potential merger comes amidst a broader slowdown in global trade. After a rapid post-pandemic recovery in 2021 and 2022, international trade is expected to grow by only 1.9% in 2023, down from 5.5% in 20222.
This slowdown is due to factors such as tighter monetary policy, declining fiscal support, and a resurgence in the services sector, which contributes less to trade than the goods sector2. Moreover, the demand for goods has fallen, leading to a rapid cooling of industrial production, as evidenced by falling commodity prices and manufacturing output, particularly in China2.
In conclusion, the potential merger between Bunge and Viterra could have far-reaching implications for global agricultural trading. It promises significant benefits but also raises competition concerns that could pose regulatory challenges. These developments are unfolding against a backdrop of a broader slowdown in global trade, adding an extra layer of complexity to the situation.