Looking forward

Tan Si Yng | Laura Chiu | Jane Ng | Epili Sagar

KEY ISSUE

Issue Strategy Implementation

FOOD VERSUS FUEL

 In line with company’s mission- a food

business

 Demand for more food as population grows

 Increasing interest in biofuel cannot be

ignored

Issue Strategy Implementation

STRATEGY - STATUS QUO

Issue Strategy Implementation

STRATEGY – LOOKING FORWARD

Issue Strategy Implementation

STRATEGY

Issue Strategy Implementation

IMPLEMENTATION

 Build up Soy Production in Brazil/Argentina

 Food Products
 China, India, Europe and USA

 To meet demand created by diversion to

biofuels

 Biodiesel
 Plant in Brazil
 To meet some of Brazil’s growing demand
 Supply raw material to Biodiesel producers in
Europe/US

Issue Strategy Implementation

IMPLEMENTATION
 Geographical Expansion

 India – 2nd largest vegetable oil demand

 Increase presence in the vegetable oil
market
 Import oilseeds to be processed in India-

based plants

 China
 Expand presence dependent on evolution of
regulations

Issue Strategy Implementation

IMPLEMENTATION

 Agricultural R&D

 Improve quality of seeds

 Increase crop yield to cater to

 Food
 Biofuel

 Better utilization of crop waste

 Drought management

Issue Strategy Implementation

STRATEGY
 HOW AGRIBUSINESS AFFECTED BY
OIL PRICES
Transportation
Costs

Farmer Soy Oilseed Consumer

s Origination Processing s

Oil used in
Oil used for machines
farm machinery processing
oilseeds

Increased
costs!

Build up Soy Geographical Expansion Agricultural R&D

 HOW AGRIBUSINESS AFFECTED BY
OIL PRICES

Oilseed Consumer
Processing s
Farmer Grain
s Origination

Biofuels Consumer
Processing s

Build up Soy Geographical Expansion Agricultural R&D

BUILD UP SOY PRODUCTION

Build up Soy Geographical Expansion Agricultural R&D

BUILD UP SOY PRODUCTION

 Brazil and Argentina

 Idle fertile land

Build up Soy Geographical Expansion Agricultural R&D

BUILD UP SOY PRODUCTION

 Meet global food supply crunch from

diversion of crops to biofuels

 Increase of ethanol in US met from increase in

corn crops

 US soy crop reduced

 Meet gap in supply for soy

Build up Soy Geographical Expansion Agricultural R&D

BUILD UP SOY PRODUCTION

 Build biodiesel processing facilities in Brazil

 Offset high oil price

 High demand for biodiesel within Brazil

 Benefits farmers and Bunge by lowering energy

costs
 Used in farm machinery, processing plants etc

 Pro-Biodiesel Brazilian government policies

Build up Soy Geographical Expansion Agricultural R&D

BUILD UP SOY PRODUCTION

Build up Soy Geographical Expansion Agricultural R&D

GEOGRAPHICAL EXPANSION

Build up Soy Geographical Expansion Agricultural R&D

GEOGRAPHICAL EXPANSION IN INDIA

 Purchase of “Dalda” brand from Hindustan

Lever
 Access to brand and distribution networks

 Import excess oil seeds

 From other BGA supply-side regions into India
 Import tariffs – lesser on raw materials
 Use processors in India to produce vegetable oil

 Acquire other Indian-based processors in

future to increase capacity and presence

Build up Soy Geographical Expansion Agricultural R&D

GEOGRAPHIC EXPANSION IN CHINA

 Large consumption growth and limited production

 Match supply-demand for vegetable oil

 Organic growth within China depends on

regulations

 If Pro-Bunge
 Expand processing presence within China

 If Uncertain
 Leverage Cereol’s capability and proximity to import
vegetable oil

Build up Soy Geographical Expansion Agricultural R&D

AGRICULTURAL R&D

 Research in region-appropriate soybean

varieties

 Improve quality and crop yield for food and

biodiesel production

 Look into 2nd generation biofuel - Utilization

of oil crop waste

 Drought management

 Keep BGA ahead of growth opportunities

Build up Soy Geographical Expansion Agricultural R&D
STRATEGY
STRATEGY
THANKS
EXTRA
Intro
FOOD VERSUS FUEL

 Volatility in crude oil prices will affect

commodity prices directly

 Demand side: demand for food-based biofuel

increases, increasing the demand for crops,
increasing prices

 Supply side: transportation prices increases,

production cost increases.

 Supply crunch as rivals enter into biodiesel

$ 100 $ 100

1960s 1980
EXTRA
Soy
 HOW AGRIBUSINESS AFFECTED BY
OIL PRICES

 Oil important input in agribusiness

 Diesel powered machinery such as engines and
boilers
 Increase in oil prices lead to direct increase in
costs
 HOW AGRIBUSINESS AFFECTED BY
OIL PRICES

 Increase in oil prices fuel interest in biofuels

 Biofuels: made from rapeseed, corn, sugarcane,
soy
 Competing use for oilseeds crop
 Drive up demand for oilseeds for biofuels
production
 Lead to food vs fuel argument
 Drastic increase in price of final consumer food
products
 Take away business from agribusiness to invest
in biofuels?
COMPETITIVE ADVANTAGE OF BUNGE

 Able to provide assistance to farmers

 Financing
 Crop management
 Integration and Decentralization
 Flexibility
to respond quickly to changes in
market demands
 Leeway to structure local business to maximize
profits
 Insights and customer relationships born of local
knowledge
 Leader in Brazil
BUNGE’S COMPETITORS
EXTRA
Expansion
WHY FOCUS ON FOOD

 Essentially a food company

 Key expertise in:

 Fertilizer
 Food products
 Agribusiness

 Need to feed growing world population

 Utilize integrated but decentralized structure

 Biofuels perceived as emerging opportunity
WHY NOT PALM OIL

 No presence in palm oil-rich countries

 Disadvantaged position
 Lack of value chain
 Strong entrenched competitors
 Unfamiliar plantation-farming environments

 Inexperience in asset purchases and business

models in Asia

 Enter biodiesel market with competitive

advantage in soybean oil
WHY NOT SUGAR/CORN FOR BIOFUEL

 Corn more expensive to produce and less

environmentally friendly than sugarcane

 Sugarcane production highly competitive due

to big players

 Overpriced assets and late entrance into

segment

 Biodiesel allows BGA’s initial entrance into

fuel segment to capitalize on opportunity
WHY BIODIESEL

 Advocacy for environmentally friendly fuel at

historic high

 Alternative for farmers to offset raising oil costs

 Large demand in trucking, farming and

machinery industries, Europe especially, and
other countries

 Brazil has more than 200 million acres of

currently idle irrigated land

 Emerging opportunities such as train operations

in Brazil
BUNGE

 Food vs. Fuel

 Oil Prices effect on Agribusiness

 Bunge’s Advantage in Brazil

 Competitors

 Why focus on Food?

 Why NOT
 Palm Oil?
 Ethanol (Sugarcane or Corn-based)?
 Why Biodiesel?