CHS says Viterra intriguing at right price

(CHS Inc.)

Chicago | Reuters — U.S. farm co-operative and grains trader CHS Inc. would be interested in the Canadian grain handling assets of embattled commodities trader Glencore, but only if they came at a discounted price, CHS CEO Carl Casale said in an exclusive interview.

As part of a debt-reduction plan, Swiss-based Glencore has said it could sell a minority stake in its agricultural business, which includes assets from its 2012 purchase of Canada’s largest grain handler Viterra. Analysts say all of Glencore’s agricultural assets could be on the trading block.

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While Casale said CHS isn’t actively looking for such assets right now, CHS would “certainly take a look and see if there’s an opportunity” to fill gaps in its Canadian portfolio if Glencore were to sell off its stake.

However, he said, “It also has to meet our return hurdles or we won’t be a buyer.”

A presence in one of the world’s top spring wheat producers and major exporter of crops such as barley and canola has been high on the wish lists of multinational grain traders since the disbanding of the world’s last major crop marketing monopoly in 2012.

Minnesota-based CHS has been actively bolstering its core agriculture and energy businesses over the past three to four years with the purchase of two Illinois ethanol plants, grain elevators, a Kansas oil refinery and a Minnesota canola crush plant just south of the Manitoba border.

CHS also holds a 12 per cent stake in processor Ardent Mills, whose Canadian holdings include flour mills in Saskatoon, Montreal and Mississauga.

A recent US$2.8 billion deal for a stake in CF Industries’ nitrogen fertilizer business was the largest-ever acquisition for CHS.

Glencore’s Canadian assets include grain elevators, mills, processing plants and port facilities acquired as part of a more than US$6 billion deal for Viterra in 2012, near the height of a commodities price boom.

Crop prices have since fallen by nearly half, with benchmark corn, soybean and wheat prices all hitting multi-year lows this summer.

As a result, CHS would not be willing to pay peak-market prices for processing plants, elevators and other grain handling assets due to smaller projected returns on those investments.

“It’s just really difficult to earn the returns on some of these things right now,” Casale said.

“They’re going to have to be realistic in terms of what the real value of those assets are in today’s market.”

Karl Plume reports on agriculture and ag commodity markets for Reuters from Chicago. Includes files from Network staff.

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