Bloomberg News

U.S. Farmer Group CHS Seeks Brazil Port to Boost Exports

April 17, 2012

CHS Inc., the largest U.S. grain- marketing cooperative, plans to invest about $250 million in the next three years to expand in regions including Brazil and the U.S. Northwest to meet rising demand overseas.

CHS, owned by 1,100 farmer cooperatives and 60,000 growers, plans to buy a port terminal in northern Brazil and build out assets inland in the next couple of years, CHS Chief Executive Officer Carl Casale said. The Inver Grove Heights, Minnesota- based company plans to expand capacity at the Kalama, Washington, port terminal, which is part of a joint venture with Cargill Inc., to increase shipments to Asia.

“Our customers have expectations that you have to have global sourcing so we can be in the market 365 days,” Casale said yesterday in a telephone interview. “Increasingly, our business is going to become more export-oriented.”

CHS is mirroring the strategy of U.S. competitors Archer Daniels Midland Co. and Bunge Ltd. (BG:US) by trying to expand sales in developing nations. ADM has partnered with Singapore-based Wilmar International Ltd. (WIL) in China and Bunge has bought an edible oils and fats business in India.

U.S. grain exports made up 24 percent of CHS’s sales of $36.9 billion in fiscal 2011. Global growth is a key to ensure that its farmers can keep pace with larger rivals as demand increases faster overseas than in the U.S., Casale said.

“Our job is to make sure we create the infrastructure that adds value to our owners’ products and allows them to compete globally,” said Casale, who traveled to Africa last week and is heading to Brazil this week.

Global Operations

CHS buys and exports grains and oilseeds from the U.S., Brazil and countries in the Black Sea region such as Russia, Ukraine and Romania. It has grain offices in Hong Kong and Shanghai to serve Pacific Rim clients and refines petroleum and supplies renewable fuels.

Recent consolidation among commodity processors is “validation” of growth in the agricultural industry, Casale said. Glencore International Plc (GLEN), the largest publicly traded commodity supplier, said on March 20 it agreed to buy Regina, Saskatchewan-based grain handler Viterra Inc. (VT) for C$6.1 billion ($6.16 billion) to add elevators and port terminals in Canada and Australia.

Gavilon Group LLC, based in Omaha, Nebraska, has drawn interest from suitors including Bunge and Glencore as the closely held grain handler weighs a sale that could fetch as much as $5 billion, people familiar with the matter said last month.

Casale declined to comment on whether it’s interested in acquiring Gavilon or if CHS has been approached by overseas suitors. In February, CHS completed the purchase of Ashdod, Israel-based Solbar Industries Ltd., a maker of soy ingredients, for about $150 million including equity and debt.

To contact the reporter on this story: Simon Casey in New York at scasey4@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net


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