U.S. farm co-op CHS eyes expansion as industry consolidates

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CHS Inc, the largest U.S. farm co-operative, is seeking to expand its grain buying, storing and shipping assets to meet rising demand from Asia and tap increasing grain output in South America and eastern Europe, President and CEO Carl Casale said on Tuesday.

The Inver Grove Heights, Minnesota-based company has expanded its export facilities in the U.S. Pacific Northwest and Gulf Coast, South America and eastern Europe over the past two years, tapping several producing regions to help blunt the impact of weather-related crop shortfalls.

It has also opened offices in western Canada, Asia and Latin America amid intense competition between grains traders to feed fast-developing countries seeking food security.

"It's a continued balance of origination, storage and export to meet the continued growing demand that you're going to see in Asia," Casale told Reuters on the sidelines of the Export Exchange industry gathering.

"We'll continue to build out our Latin American footprint. We have a very strong position in the U.S. and where the opportunity and need arises we'll put in interior origination and use that to feed our export facilities."

The investments by CHS and other deals are part of a broader wave of consolidation in the global grains trade.

Last week, U.S. agribusiness Archer Daniels Midland bid $2.8 billion for Australian grain handler GrainCorp, which the company was reviewing.

GrainCorp was also believed to be weighing bids from other agribusiness heavyweights including Bunge, Cargill CARG.UL and Louis Dreyfus LOUDR.UL, which along with ADM comprise the dominant group known as the ABCDs of the global grain trade.

CHS has not been mentioned as a bidder in for GrainCorp.

"GrainCorp is probably not a high priority for us at this point," Casale said.

"We feel pretty good about our footprint right now with what we're expanding in the U.S., with what we're building in Latin America, and what we've built and bought in Eastern Europe," he said.

CHS supplies energy, crop nutrients, grain, livestock feed, food and food ingredients, as well as business services including insurance, financial and risk-management services.

It owns a grain export terminal at the Louisiana Gulf Coast and has a shipping agreement with an export facility in Houston, Texas. CHS also owns a 50-percent stake in a Kalama, Washington, export terminal via a joint venture with Cargill, offering more geographically direct access to the lucrative Asian market.

Outside of the United States, CHS bought a 25 percent stake in Brazilian logistics company TCN in May, securing access to an export terminal in the major grain and oilseed producer.

CHS has also recently added export facilities in the Black Sea region and trading offices in Canada, South Korea, Singapore and Uruguay.

While the recent acquisitions and investments in existing businesses do not put CHS in the realm of the ABCDs, the company's expanding global footprint allows it to remain competitive, Casale said.

"The more the industry consolidates, the more valuable we become for our owners because we can compete with those guys on a daily basis and do it in a way that's beneficial to our ownership," he added.

Casale said CHS is more an investor in, and buyer of, assets rather than an acquisition target, citing the company's cooperative ownership structure.

CHS is owned by around 350,000 farmers and ranchers either directly or indirectly via about 1,100 smaller co-ops. Owners of CHS stock, traded on Nasdaq, are non-voting shareholders.

(Editing by Miral Fahmy)


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