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Bunge sells part of its network of warehouses in Brazil
15 Dec 09

Valor Econômico

Author: Alexandre Inacio, São Paulo

 

One of the largest global agribusiness, Bunge is considering a radical change in its logistics structure in Brazil. Renowned for pioneering the installation of silos for grain receiving areas of agricultural frontiers, the company is reviewing its strategy for the storage service after having suffered from the devaluation of commodities due to the deepening global crisis, from September of the year past. Partly because of this, many silos of the company have been sold and others are being negotiated.

Bunge once had in Brazil more than 200 storage systems in virtually all States that produced soybeans and corn. Of this total, more than 50 have been sold and in Mato Grosso another 30 are up for sale, according to sources consulted by Valor. According to these sources, the company abandoned its aim of being present in all frontier regions. With sales, it is estimated that the company may raise about R$ 100 million

Considered strategic, the total storage capacity and the number of silos have not disclosed by the company; however, only in Mato Grosso State -  representing almost 30% of soybeans and 14% of the corn produced in Brazil - its facilities are capable of storing 1.4 million tons of grain.

Sources know that the multinational is reviewing its position in the storage sector, but they say there is also need for raising cash after losses from the crisis. Even before the financial crisis, Bunge was studying a  re-structure to make its business more efficient.

"In the last harvest, Bunge caught the purchase price of soybean producers, but left a significant amount of product in the open market", said one expert. When prices began to fall, the company found itself unprotected from market swings. Remember that part of the exchange  Bunge and other trading houses were consumed by the daily adjustments of the stock due to the appreciation of grain between 2007 and 2008.

Officially, Bunge confirms the sale of some stores, but advises that it is an optimization of its logistics infrastructure. The company says it is directing its attention in this activity to areas where there is a greater demand for storage facilities. According to a spokesperson, the idea is to redesign and organize the storage service to gain more flexibility in this segment and create a better flow between the origination of grain to export and processing.

Survey of the National Supply Company (Conab) indicate that Brazil has a deficit of 4% in storage capacity. The situation is more critical in the northern region, which lack silos for 35.8% of the total harvest of grain, followed by the Northeast (15.8%), South (7.2%) and Midwest (5.1 %).

In addition to financial need, another reason that led Bunge to review your business is connected to storage management. According major producers of Mato Grosso, the company has never excelled for efficiency in this segment and has struggled to manage the origination of many lots with small volumes. For this reason, they say, the company will give preference this season for buying large volumes at wholesale, thereby providing direct financing to producers and also its risks.

"In Mato Grosso, we feel that Bunge decreased its funding for farmers and gave credit only to those who were able to deliver large volumes and with those with whom it had had long relationships," said one producer in the State.

 

 

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