RSS
Twitter
Linked In
News In
Features
Linked In
RSS
https://twitter.com/Agrimoney
http://www.newsnow.co.uk/h/Industry+Sectors/Agriculture

You are viewing 1 of your 2 complimentary articles.

Register now to receive full access.

Already registered?

Login | Join us now

Opinion: Shell casts vote in farming's favour

Twitter Linkedin

Shell has given another huge vote of confidence to the agribusiness story.

The week after mining giant BHP Billiton, round about the world's 60th biggest company, unveiled a $39bn bid for PotashCorp, Shell, a member of the top 10, has signed a deal to share control of the world's biggest sugar group.

Sure, the sum involved is far smaller. Shell has termed its 50:50 sugar ethanol joint venture with Cosan a $12bn concern, implying that its interest is only half of that.

But there is also reputation at stake. The fact that Shell is doing the deal at all looks a huge fillip to the sector's supporters.

Sugar icon

Joint ventures, like any relationship with divided loyalties, are often fraught with risk.

Especially those with foreign partners, which add a layer of cultural differences on top. Just ask Shell's sparring partner, BP, whose Russian joint venture, TMK-BP, was causing headaches long before the Gulf of Mexico distaster.

Sure, Brazil looks a better place to do business than Russia. But the Cosan chairman that Shell is joining forces with, Rubens Ometto Silveira Mello, is no pussycat.

Mr Mello spent a decade fighting other members of his family, through Brazil's courts, to win control of the sugar giant. Three years ago, he tightened his grip by setting up Cosan Ltd, a company with a dual share structure which allowed his shares 10 times the voting weight of ordinary ones.

Prize asset

The fact that Shell is prepared to do business on a 50:50 basis with such a determined character looks a measure of the rewards to be gained � especially, in Brazil, with Mr Mello onside.

And it's not difficult to see why. Sugar cane is generally seen as the "greenest" of the major biofuel feedstocks. It is efficient at capturing calories, and has suffered less bad press than corn, so far at least, for displacing food crops, and putting thirsty engines before hungry mouths.

In sugar, Brazil, as the world's biggest producer and exporter (by a distance), is the place to invest. Cosan, as Brazil's top sugar group, gives extra distance to Shell's head start.

More deals ahead?

Still, the question investors should now be asking themselves is "who's next"?

BHP and Shell are not the first giants to add an agricultural twist to their corporate story. Auto group Fiat, for instance, was making tractors long before it even bought New Holland, which was to become CNH Group.

But they will have got other non-farm groups thinking about tapping into the upheaval promised by an expanding population at a time of limited arable frontiers.

Investors would be justified injecting a bid premium into likely-looking targets.

By Mike Verdin

Twitter Linkedin
Related Stories

Abares lifts hopes for sugar futures, but cuts its cotton price forecast

A downgrade to Australia curtails an upgrade in world sugar output expectations. But for cotton, Abares ditches ideas of a global production deficit

Evening markets: Ags poop party lifting other commodities, shares

Wheat futures set another contract low, while arabica coffee hits its weakest close but one in 19 months, despite buying in other asset classes

Australia cuts wheat export hopes, pegs canola shipments at 7-year low

The country’s Abares bureau sees a dent to wheat shipment prospects from a smaller harvest, but lifts expectations for coarse grain exports

Hedge funds turn net bullish on ags - ahead of price drop to historic low

Speculators are wrong-footed in soymeal, in which they hike bullish bets just before a price tumble. But they fare better in cotton and cocoa
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© Agrimoney.com 2017

Agrimoney.com and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of the Briefing Media group
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069