The Australian | 15 January 2010
by Teresa Ooi
SOME of the world's biggest sugar players, including Brazil's Cosan, New York-listed Bunge and privately held US multinational Cargill, might join China in the race for CSR's sugar division.
As the CSR board met last night to discuss the progress of the planned demerger of its sugar and building products businesses, speculation surfaced that the $1.5 billion pitch by China's Bright Food Group could flush out other players in global sugar.
A court hearing on the planned demerger scheduled for today has been postponed until next week while CSR continues discussions with the regulator on its asbestos liabilities.
RBS analyst Simon Thackeray, in a note titled "Desperately Seeking Sugar", said competitive bids by rival world sugar players underlined global demand for sugar.
Australia, the third-biggest sugar exporter, offers international companies a "more stable political and economic environment and greater financial and legal transparency than Brazil, the largest producer," Mr Thackeray said.
CSR's sugar assets offer a diversification of production risks and a lucrative Asian customer base for other global players, including the New York-listed food and industrial conglomerate Arthur Daniels Midland, Germany's Sudzucker and Britain's Tate & Lyle.
"In our view, rising global energy prices, growing demand for ethanol in the US, Europe and Japan and expansion in the global food chain will put upward pressure on soft commodity prices," Mr Thackeray said. "Sugar stands as a probable beneficiary of these long-run trends and would provide diversification risk and scale for any of the multinationals."
Brazil's commodities have traditionally been attractive to large multinational sugar and agribusiness firms, he said. "We see this demand as a long-term play on a rising soft commodity cycle and the source of a potential rival bidder to Bright Food."
Bruce McLaughlin, founder and chief executive of research firm Sinogie Consulting, said that after mining, resources and energy, Chinese companies were now looking to invest in food, sugar, cereal and meat as China's economy expanded and its population became affluent.
"With the recent baby milk formula food scare, more Chinese companies are heeding the government's call to invest in Australia and New Zealand, which are renowned for their clean and green food industry," he said.
"With state-owned Chinese banks prepared to give low-interest, quickly approved loans, it has become attractive for Chinese companies to invest overseas. Meat and cereal will be the next big food investment sector for Chinese government-owned companies."
China Inc has to date largely focused its growth ambitions on the mining sector.
(Note: CSR is not only the largest sugar miller and refiner, but it also controls 2 harvesting groups and operates 7 of its own sugar cane farms on 1,894 ha)
