South America Calling

Mitsubishi Acquires Brazil's Los Grobo Ceagro

Japanese conglomerate Mitsubishi has acquired control of Brazilian grain supplier Ceagro from Argentine Corporate Farm Los Grobo in a deal reportedly worth approximately $500 million.

The purchase of 60% of Ceagro, taking its stake to 80%, will increase Mitsubishi's access to soybeans and improve Brazilian logistics to meet growing demand from Japan, southeast Asia and China over the next decade.

The interest in Brazil undoubtedly derives from the fact it is one of the few major farm producers with room to ramp soybean and corn production to meet surging demand from an ever-growing world population.

Ceagro produces and sources grain in Brazil's eastern Cerrado region, the newest grain frontier that is expected to grow very quickly over the next decade.

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Mitsubishi wants to help Ceagro double grain trading activity from the current level of 1 million metric tons, Japanese business daily Nikkei reported.

But while Mitsubishi's strategy is clear, more intriguing is Los Grobo's decision to sell. Ceagro officials were not available to discuss the deal.

Los Grobo plants nearly 700,000 acres, mainly soybeans, in Argentina, Brazil, Paraguay and Uruguay.

According to sources, the company has been reducing its operations in Argentina during the past year due to the political and economic risks. It had been growing quickly in Brazil and most assumed it would mirror Argentine corporate rival El Tejar in seeking to focus operations in the neighboring country. However, realizing assets, possibly to pay down debts, seems to be the order of the day.

Last year, Los Grobo said it would plant 220,000 acres in Brazil during the 2012-13 season on its own and rented land.

The Japanese have been investing heavily in guaranteeing grain supplies from the Americas over the last two years.

In 2011, Marubeni purchased Gavilon Group in the U.S. for $3.6 billion and then Mitsui invested around $460 million to buy Brazil's Multigrain.

From the start, Japan was involved in the development of soybean farming in Brazil's Cerrado. Indeed, the Japan government promoted and financed the establishment of grain production in Mato Grosso in the 1970s and 1980s.

Alastair Stewart can be reached at alastair.stewart@telventdtn.com

(AG)

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