Cargill Acquires First Animal Feed Company in Brazil

Only days after Cargill announced its agreement to acquire Iowa-based Diamond V - a leading global producer of natural animal feed additives, the company has announced its entrance into the Brazilian animal feed space with the acquisition of cattle feed producer, Integral Animal Nutrition.

The acquisition, which is scheduled to close within the coming months depending on regulatory approval from Brazil’s Administrative Council for Economic Defense (CADE), is expected to drive growth for Cargill’s free-choice mineral and premix business to better serve customers in Brazil’s mid-west region.

Under the terms of the deal, Cargill will acquire 100 percent of the assets owned by Integral including a production plant located in Goianira Goiás, a product portfolio that includes Free Choice Minerals and premixes, and a team of 100 employees. Upon the integration of Integral, Cargill states that it plans to synergize complementary capabilities, expand access to innovation platforms, align nutrition capabilities, and bring trading and risk management to the table.

"Integral is enthused about joining Cargill to further develop capabilities and grow the feed business in our market," said Paulo Mendonca Del'Acqua, CEO of Integral. "It is important to us that we continue to build upon our commitments to achieve high sustainable products and services quality for our customers."

South American Protein

This is the second recent move for Cargill in the South American animal protein space. In June of this year the company announced its agreement to acquire Pollos El Bucanero SA - one of the leading chicken producers and meat processors in Colombia, for an undisclosed amount.

This deal was another first for Cargill, being its initial foray into Colombia’s protein production sector. Pollos de Bucanero, which works with more than 170 Colombian farms, will operate as part of Cargill Protein Latin America, which include businesses in Costa Rica, Guatemala, Honduras, and Nicaragua. The business will be headed by general manager Jorge Ivan Duque, who has spent the past 12 years working in the poultry sector in Colombia and across Central America. The deal also will add another 5,000 employees to Cargill’s workforce – bringing the number of its employees in Latin America to 35,000 across 200 sites in 14 countries.

These acquisitions and geographic expansion of Cargill’s protein business are reflective of the company’s ongoing strategic transformation and repositioning of its protein business more upstream and into emerging markets.

In July 2015, Cargill announced the building of a $30 million shrimp feed facility in Ecuador through a joint venture with Naturisa. One month later, the company signed an agreement with Altor Fund III and Bain Capital Europe III to acquire global salmon feed leader, EWOS for €1.35 billion.

And in May of last year, the company announced it was expanding its presence in the Philippines through a joint venture between Cargill Philippines Inc. and Jollibee Foods Corp, the largest foodservice company in Asia to build and operate a poultry processing facility in Santo Tomas, Batangas.

In Brazil, through the deal to acquire Integral, Cargill will be better positioning itself to supply the country’s vibrant cattle industry with much needed nutritional products.

"As we expand into this market, we bring Cargill's rich history in innovative animal feed products," said Celso Mello, managing director, Cargill Premix and Nutrition. "Our extensive work combined with Integral will be a catalyst for developing new products and solutions that continue to meet the needs of our customers.”

A Different Course

However, in the U.S.market, Cargill is taking an opposite course - pulling back from animal protein production to re-focus its energies toward plant-based proteins and higher margin assets.

Last year the company announced its decision to sell its feed yards in Bovina and Dalhart, Texas, to Friona Industries, and in May of this year announced the sale of its two remaining feed yards located in Leoti, Kansas, and Yuma, Colorado, to Green Plains Inc., a vertically integrated ethanol producer with feedlot operations in Kismet, Kansas, and Hereford, Texas, for $36.7 million.

Together with a string of other divestments of lower-margin assets that included the sale of its ag-retail unit to Calgary-based Agrium; the sale of its condiments business to Ventura Foods; its exit from the crop inputs business in Central and Eastern Europe; and the sale of its U.S. pork business to JBS USA in 2015 for $1.45 billion, Cargill was able to build a war chest of capital that the company stated was to be earmarked for investments that will strengthen its North American protein business through the expansion into plant-based proteins, insect proteins, and aquaculture.