Ags industry could benefit from more consolidation: Glencore

15 Nov 2017 | Andy Allan, Tom Houghton

The global grains and oilseeds industry is likely to face more consolidation, according to Glencore Agri's CEO Chris Mahoney, who was speaking just months after the company's failed attempt to buy US agribusiness giant Bunge.

Speaking at the Global Grain conference in Geneva, Mahoney said that following the recent purchase by Chinese state-owned agribusiness Cofco of trading houses Noble and Nidera, acquisitions had been thin on the ground but that was likely to change.

"Will the market in future be more consolidated? Perhaps, but... there hasn't been much so far. We have looked at 3 or 4 possibilities in our area alone and I think the industry could benefit from more consolidation," he said in an on-stage interview.

"I think at the moment (Cofco) is still digesting those two companies, but will they be more aggressive in the next couple of years, I think so... especially when you think how important Brazil is to China."

Glencore Agri earlier this year was reported to have had discussions to buy Bunge in a bid to expand into the US, although no deal emerged and Mahoney would not answer questions about whether the company was still pursuing the US firm.

He did, however, state that times were not as good now as they were perhaps 18 months ago and companies "have to accept that. Perhaps there needs to be more pain."

Glencore is looking to expand its business, but Mahoney said that in the US they would only do that through acquisition as part of a broader strategy of focusing on FOB locations due to their economy of scale.

That is a strategy that effectively rules out investment in sub-Saharan Africa.

As a company with a large asset base focused on origination, Mahoney also sees little upside to investing in new grains technology.

“We are not going to see a new way to crush oilseeds or store grains any time soon,” he said.

The arrival of algorithmic traders in the exchange space had in fact had some upside for physical traders, with “illogical market movements and fund-driven volatility” opening up new arbitrage opportunities.