The same thing is happening across all commodities right now. The shine is off, investments made during the boom are slowly being written off over the last 2-3 years. Look at iron ore, coal or even Glencore's purchase of Viterra.
These businesses are trying to figure out how to be mean and lean again after chasing gross revenue.
Nail on the head! They paid too much as a multiple of earnings when they purchased and now earnings are declining to make it look even worse.
I Guarentee you every major grain company in the us has a bit of this type of debt on their books right now. Over this cycle of high prices, there was pretty good returns in the grain industry too.... Plus, the global scarcity of commodities was putting pressure on these Asian companies to integrate themselves Into the grain supply chain in the us and South America.
Those two issues are largely why you saw assets in the grain business trade at such a high multiple of earnings.... there was a lot of pressure to both defend territory from new entrants, and also expand existing company foot print.
The turnover of grain business's is a lot like farm ground.... You don't get to buy the neighbors farm on your schedule... You get to buy it when they are ready to sell it... And most likely you only get 1 chance, if you pass on a purchase you need to be prepared to watch someone else operate it for the rest of your life. Same is true with independent grain businesses. So there is also some long term posturing taking place.
Gavillon will make money for marubeni long term, the problem is just they have way too much overhead in the short term. Could get complicated with marubenis global commodity investments taking it on the chin... But I'd guess they weather the storm either by themselves or through new partnerships.
the margin structure in the grain business is changing just like production Ag
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