• Unconventional Ag

Grain and Oilseed Earnings Offset Declines in Oil and Metals for Glencore

Glencore announced that earnings for its grain and oilseed businesses climbed more than 300% in 2014, offsetting declines in other divisions. In 2012 Glencore integrated Canada-based grain trader, Viterra in a $6 billion deal that transformed the company into a leading wheat, barley and canola trader, and added oilseed handling assets in Canada and Australia to the company’s portfolio.

After record global grain and oilseed crops, it was these processing, storage, and logistic assets that drove earnings for Glencore’s agriculture arm. Of its $856 million in earnings before interest and tax, between 60% and 70% was generated by ‘grain movement, handling and semi-logistics’, and additional earnings came from oilseed processing in Argentina and Europe.

Although handling and storage assets are only profitable if there are good crops, Glencore sees the fundamentals of food agriculture as sound, as rising incomes in emerging markets and developing countries lead to changing diets which include a higher demand for meat.

Glencore’s global gap in its portfolio lies in the U.S, - a leader in grain production, exportation, and consumption, and Glencore chief, Ivan Glasenberg states that if the right assets with the right hurdle rates become available for acquisition, Glencore will “have the money to do it.”

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