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Complementing our portfolio of grain conferences, this blog provides year round comment on the global grain and oilseeds markets, its participants and future.

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August 2017 blogger: Mike Jeapes

Mike Jeapes is the Portfolio Director for the Global Grain series of conferences.  He is responsible for the strategic direction, production and performance of the series. Mike has worked in the conference industry for nearly ten years, in areas such as mutual fund distribution, corporate governance, financial reporting, HR, consumer credit, energy production and grain & oilseeds trading.

Informally acquiring the global grain industry

News outlets have been reporting that following the latest financial round of results, Bunge is on the ropes. While it’s likely that they’ll bounce back, especially if they’re Bunge ropes, that hasn’t thrown Glencore off of the M&A scent.

Back in May, Glencore made an “informal” takeover approach for Bunge. I’ve yet to witness an informal takeover approach; presumably Glencore CEO Ivan Glasenberg found himself in a Geneva pub, leaned backwards against the bar, idly pushed a paper napkin around the counter with his finger, ordered two Kronenbourgs and slid one across to his Bunge counterpart Soren Schroder with a casual suggestion of a $15bn (£11.6bn) takeover from Glencore Agriculture Limited.

Analysts are now expecting the informal offer to become slightly more formal (would a semi-formal takeover follow an invitation to “walk to the kitchen with me”?) as it has become apparent that Bunge’s restructuring plans won’t bring the immediate financial results that had been hoped for.

Bunge have today (2nd August 2017) posted a 34pc fall in quarterly profit, with the bulk of the explanation attributed to slow farmer selling in South America.

Glencore have yet to elaborate further on their press release about May’s approach to Bunge “regarding a possible consensual business combination” – phrased like that you’d hope it wasn’t conducted in a pub – although the market didn’t exactly leap for joy when the news first broke. 

The early trading vote of confidence resulted in shares falling 1pc.

Aside from the M&A machinations, what would this mean for the global grain industry? How would the Glencore/Bunge multi-multi-national leave the commodity market, and how will this affect production, trading and storage from the farmer to the consumer? 

This deal has the potential to impact one of the most fundamental human needs of most people on this planet and could be considered beyond the normal financial and antitrust regulatory framework. 

This shouldn’t take regulators by surprise. Glencore have long been agitating to increase their presence in the grains market through acquisition, and indeed the major grain traders have been discussing consolidation with relative openness. 

Yet with control of a key industry in the hands of a decreasing circle of individuals, an advanced level of scrutiny can surely be expected, dashing hopes of a quick acquisition. 

Will we witness a higher level of state or supranational regulatory intervention in the organisation and thus wider industry following completion of any deal?

And let’s not forget the real issue here. Surely the biggest shame would be the potential disappearance of the Bunge name and the break-up of the neat ABCD acronym, even if Louis Dreyfus doesn’t really begin with D. 

AGCD doesn’t quite have the same ring to it – GAC’D?