Syngenta and Longping line up to buy Brazilian companies, Why is Brazil/Latin America important?

Outside the United States, Brazil is one of the most promising agricultural markets in the world. Since February, Syngenta and Longping have disclosed their acquisition plans in the Brazilian market. Longping will acquire a 90% stake in Cereal Ouro, a soybean seed processing plant located in Rioverdi, Goias state, Brazil. Syngenta announced the completion of the acquisition of Feltrin Sementes, a Brazilian vegetable seed company.

As the breadbasket of the world, Latin America is second only to North America and Asia, accounting for 20.1% of total seed market transactions in 2021. In that year, Brazil alone accounted for nearly 63% of the seed market turnover, making it the largest seed market in the region.

Currently, Brazil is the second most valuable soybean seed market after the United States, the third most valuable corn seed market after the United States and China, and the third most valuable cottonseed market after the United States and India.

This is also the reason why Syngenta and Longping have announced the acquisition of Brazilian companies. In recent years, Chinese agricultural enterprises have successively enhanced their business layout of soybeans in South America, and finally realized the business model of "Chinese technology - South American production - domestic consumption" of domestic autonomous genetically modified soybeans.

Syngenta and Longping Advanced strengthen their presence in Latin America through acquisitions

In February 2018, Syngenta paid $1.45 billion to acquire CoFCO International's Nidera, which has a significant position in the Latin American seed market. Speaking about the deal in 2018, Syngenta CEO Erik Fyrwald also said that Syngenta was also looking for new acquisition targets in the Latin American market for seed businesses.

In addition to Nidera, in recent years Syngenta has acquired Brazilian agribusinesses such as Agro Jangada, Vipagro, Nidera, Dipagro and Strider.

Syngenta's listing plan also plans to use 20.8 billion yuan for global mergers and acquisitions. Syngenta said that the competitive landscape of the global agricultural market in which the company operates has initially taken shape, and market concentration continues to increase. The company will continue to consolidate ownership of the existing assets of its four global business units to further enhance its innovation and research and development capabilities and cutting-edge technologies.

In the seed market, Syngenta plans to acquire seeders of field crops, vegetables and flowers on a global scale, seeders of all crops in China and seed companies with patented traits and germplasm resources. Syngenta said in its prospectus that such acquisitions would help increase seed product abundance.

For example, Syngenta's acquisition of Feltrin has more than 500 varieties of more than 50 crops, and the Feltrin Sementes brand will continue to be retained after the acquisition. With the acquisition of Feltrin, Syngenta will expand its presence in Brazil and South America.

Similar to Syngenta's development path, Longping has also opened up the South American market through a number of acquisitions. Longping and Citic had jointly acquired Dow's specific corn seed business in Brazil in 2017, with a total consideration of about $1.1 billion at the time, on which the current LongPing Agriscience was formed. As of 2022, LongPing Agriscience’s  operating income is 3.843 billion yuan, its net profit is 520 million yuan, and its corn seed operating income ranks third in the Brazilian market.

In 2023, Longping acquired 13.6759% shares of LongPing Agriscience by way of cash payment, and now holds 49.42% shares of LongPing Agriscience, which is included in the scope of consolidated statements of the company. By combining the development of LongPing Agriscience, Longping achieved substantial revenue growth in 2023. According to the announcement of Longping on January 12, 2024, the company is expected to achieve an operating income of 8.8 billion yuan to 9.5 billion yuan, an increase of 138.56%-157.54% on the basis of adjusted operating income, mainly due to the inclusion of LongPing Agriscience in the scope of the company's consolidated statements.

Data show that in South America, LongPing Agriscience has established a research and development and scientific and technological innovation platform for corn, soybeans, sorghum and other crop seeds. In 2023, Lonping has opened research and development centers in Balsas, Maranhao, Formosa, Goias, and Rioverdi, while the research and development center in Rolandia, Parana, is expected to be completed in 2024.

At present, Longping does not sell soybean seeds in Brazil, but the company has been investing in the field of genetically modified soybeans, and plans to sell related products in 2026, the acquisition of soybean seed processing plant Longping marks its business in Brazil to enter a new market segment.