Reuters blog archive

from Breakingviews:

ADM goes M&A wild – sort of

By Kevin Allison

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Archer Daniels Midland is going merger wild – sort of. The $30 billion U.S. grain processor will pay about $3 billion for Wild Flavors, a Switzerland-based natural food flavoring and coloring specialist. Illinois-based ADM’s biggest-ever deal is a departure from its core milling and trading operation. Picking up a small add-on business with similar customers in a sexier part of the food chain makes sense, but it’s unlikely to change how investors see the firm any time soon.

ADM says it is valuing the privately held Wild Flavors enterprise at roughly 14 times expected 2015 EBITDA. That’s expensive but not egregious for a company that bills itself as a kind of think tank for the food industry. Rival flavor and fragrance producers Frutarom and Givaudan trade on about 11 and 14 times expected EBITDA, respectively.

The anticipated $140 million of annual synergies help take the sting out of the deal price. Taxed and capitalized they’re worth nearly $1 billion – although only a third of them come from potential cost cuts, with the rest relying on more elusive boosts to revenue.

from Breakingviews:

Chinese hiccup temporarily deflates dairy bubble

By Ethan Bilby 

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The world’s biggest milk importer is taking a break from its dairy diet. The price of milk-related products tracked by auction platform GlobalDairyTrade has fallen 25 percent since January. Though the decline is partly due to improving supply, demand from voracious buyer China has also fallen. That lull is unlikely to last.

from Breakingviews:

Rival’s split makes it harder for Dow to resist

By Kevin Allison
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Andrew Liveris may find it harder to keep Dow Chemical together now that a smaller rival is planning to break up. The Dow boss has resisted activist hedge fund manager Dan Loeb’s campaign to split the $60 billion company into separate petro- and specialty chemicals groups. Competitor FMC’s decision to hive off its agriculture and pharma businesses from stodgier commodity minerals should create a more valuable company. The voluntary split makes it harder for Liveris to argue why he’s resisting activist pressure to do the same.

from Expert Zone:

Slow pick-up in India’s GDP growth

(Any opinions expressed here are those of the author and not of Thomson Reuters)

GDP estimates by the Central Statistics Office for the 2013-14 fiscal year show an improvement over the previous year. But the extent of improvement is too small for comfort. Possibly, in the final revision, that small margin may disappear or even turn negative.

This year, India’s GDP is expected to be up 4.9 percent from 4.5 percent the previous year. This additional growth has come mainly from agriculture, due to a favourable monsoon. Agricultural growth was three times the previous year. Production of non-food grains (like vegetables and fruits), and animal products (like meat and eggs), did not increase adequately in spite of the inflated demand and will continue to be the main source of inflation.

from Breakingviews:

Merck woes show animal drugs are no panacea

By Kevin Allison

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Animal medicine, whether for livestock or pets, is a booming business. Pfizer's recent spin-off, Zoetis, trades at a fat valuation premium to traditional drug makers. But the recent controversy over Zilmax, Merck's feed additive, shows that an increasingly complicated global food chain carries its own investment risks.

from Photographers' Blog:

‘Till the cows come home

Gruyeres, western Switzerland

By Denis Balibouse

In summer, some go to the seaside or countryside, visit a new city or country, but some choose to live a different way. The Murith family will not have a day off: they will work 15 hours a day, seven days a week from mid-May to mid-October.

I've known the Muriths for more than 10 years. Last December I called them to discuss the idea that I would photograph them over the 2013 summer. We met for lunch and over a meal I found out that Jacques, who is turning 65 (the official retirement age in Switzerland) was in the process of handing down his farm and its cheese-making business to the sixth generation: his 23-year-old son Alexandre. I was intrigued by this news, as I've been thinking a lot about agriculture in Switzerland, and how it faces a somewhat uncertain future, partly because the country is surrounded by EU nations with lower production and land costs, making it a tough way to earn a living. Despite this, exports have grown over the last 10 years and production has focused on quality.

from Expert Zone:

A bumper crop may energize Indian industry

(Any opinions expressed here are those of the author and not of Thomson Reuters)

Industrial growth in India in 2012 was less than a percent and data from April and May this year doesn’t show a lot of promise. The reluctance of industry to grow has been the reason for GDP growth dropping to a disappointing 5 percent, raising doubts about whether the India story has come to an end. That may be an extreme view considering that even the best performers, such as China, are having problems.

But there is a glimmer of hope. Monsoon rains have been above average this year and a bumper crop is expected. Agriculture contributes to around 20 percent of India’s GDP and even an 8 percent increase in agricultural production will at best improve GDP growth by a percent. But agriculture does have an impact on industry and both together can make a perceptible difference.

from Lipper Columns:

CTRL:ALT:INVEST: Corn could add “pop” to your portfolio

Teucrium Trading's Sal Gilbertie says that, while agricultural commodity prices will always be volatile, he sees investor interest in corn outpacing that in wheat or soybeans.


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from Global Investing:

Russia’s starting blocs – the EEU

The course is more than 20 million square kilometers, and covers 15 percent of the world's land surface. It's not a new event in next month's IAAF World Championships in Moscow but a long-term project to better integrate emerging Eurasian economies.

The eventual aim of a new economic union for post-Soviet states, known as the Eurasian Economic Union (EEU), is to "substitute previously existing ones," according to Tatiana Valovaya, Russia's minister in charge of development of integration and macroeconomics, at a media briefing in London last week.

from Reihan Salam:

Republicans back agribusiness with the farm bill

This week, House Republicans passed a farm bill that reauthorizes and expands a wide range of federal subsidies for the agricultural sector. The bill, which is expected to cost $195 billion over the next decade, is far smaller than an earlier $939 billion version that went down to defeat last month, in what was widely seen as yet another blow to House Speaker John Boehner. Conservatives and libertarians are outraged. Heritage Action for America, the advocacy wing of the Heritage Foundation, has issued a scathing denunciation, as has policy expert Sallie James of the Cato Institute, who warns that even the modest savings promised in the farm bill are likely to prove illusory.

And liberals are also furious, as the House GOP, in an effort to paper over internal disagreements, decided to separate out the nutrition programs that had been in an earlier version of the bill, to be dealt with at a later date. Under the earlier version of the farm bill, nutrition programs -- which include SNAP, the food stamp program that currently enrolls 47.6 million people -- were expected to cost $743 billion over the next decade, $20.5 billion less than under the status quo. Congressional Democrats opposed the cuts on the grounds that they were too steep, while conservative GOP rebels insisted that they were too small.