Agricultural and food company Bunge Ltd. (NYSE:BG) began production on a new $100 million soybean processing plant in southern Vietnam. Bunge continues to aggressively expand its business, so investors want to know if this strategy will pay off.

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Bunge Expands Its Reach
Bunge's soybean operation in southern Vietnam is designed to reduce costs and risks for local feed traders, according to the company. Time will be saved by local soy meal traders, as there will no longer be a wait from South America or India for shipments. Currently, freshness at delivery, cargo loss, as well as foreign exchange issues can be problems for the Vietnam market. While Bunge has been the largest importer to the Vietnam markets of feed ingredients for nearly a decade, this will expand the company's Asian reach.

Ag Activity
The Vietnam Bunge initiative is just another in a series of moves for the seed and grain company. Earlier it entered into a joint venture with Seacor Holdings' (NYSE:CKH) subsidiary SCF Marine, to build a grain terminal in Illinois. The terminal on the Mississippi River will allow for greater transport of Bunge's products both domestically and internationally. Bunge's aggressive global expansion makes the company worth watching for investors.

Ag Opportunity
Bunge, along with several other agricultural stocks, appear poised to really take off. Another grain and seed company, the Andersons (NYSE:ANDE), trades at a forward multiple of only 10, while its earnings estimates have risen. So, too, have Bunge's estimates; its first quarter profits nearly tripled in the last quarter, while its revenues soared nearly 20%.

Archer Daniels Midland (NYSE:ADM) saw its first quarter revenue rise a staggering 33%. The flush times in agriculture are not limited to seed companies, as fertilizer company CF Industries (NYSE:CF) may have a relatively high stock price, yet its forward multiple of around 10 may signal a bargain. It's not just grains and fertilizers, as Tractor Supply (Nasdaq:TSCO) is growing as well.

What Are the Negatives?
Grain prices are high, so as both a buyer and seller, this presses down on Bunge's net income margin, which was only 2% in the first quarter compared to its year-ago margin of 1%. There's also the matter of negative cash flow, as cash flow from operations was nearly a negative $2.5 billion in 2010. Capital expenditures additionally ran roughly a billion dollars last year. While these figures are due to the aggressive expansion of Bunge's business, cash flow and debt should always be noted by fundamental investors.

More Positives
Bunge has a thriving sugar business in Brazil, with the possibility for revenue growth there. With analyst estimates for full year EPS now raised to $6.31 and the stock recently selling at roughly 13% off its 52-week high, Bunge presents an attractive opportunity, though you might want to wait for an even greater price pullback. The boom in agriculture is real, long term and lasting, with significant demographic and economic shifts that are only now beginning to be felt through the compression of supply and demand. There will be great opportunity in agriculture, and though it won't be without bumps, Bunge will be one of these opportunities. (For more, see Foods With The Biggest Price Increases.)

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Tickers in this Article: BG, CKH, ADM, ANDE, TSCO

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