Agribusiness · Ag Processing & Trading
Ag Processing & Trading Sector Primer
A 40-page primer plus Excel valuation model on ag processors and grain merchants: board crush, working capital, ROIC against WACC and a ten-year DCF.
2026 Edition · data as of June 2026
- pages
- 40
- sections
- 15
- model sheets
- 11
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The full primer
£25 / ~$32
- 40 pages, 15 sections
- Worked examples and applied cases
- 2026 Edition, data as of June 2026
Excel model
Valuation template
£45 / ~$58
- 11 sheets (.xlsx)
- Runs the primer's worked valuations live
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£59 / ~$76
- The 40-page primer
- The 11-sheet Excel model
- £70 bought separately · £11 less
Complete Agribusiness Library
All three Agribusiness industries: three primers, three Excel models (Fertilisers, Ag Processing & Trading, and Aquaculture).
Inside the primer
The 15-section contents, a worked valuation page, and the Excel dashboard.
Contents
- 01 How Ag Processors Make Money
- 02 Listed Company Types and Scale
- 03 Value Chain Stages: Origination to Ingredients
- 04 Segments and Sub-Markets
- 05 Revenue Drivers: Crush Spread and Throughput
- 06 Cost Structure: Board Crush and Working Capital
- 07 Valuation Frameworks: ROIC and Through-Cycle EBITDA
- 08 Worked Examples: Ten-Year DCF Valuation
- 09 Applied Cases: Five Public Company Case Studies
- 10 Basis Risk and Merchant Discipline
- 11 Key Metrics and Screening
- 12 Risk Factors and Red Flags
- 13 Real-World Benchmarks
- 14 Comparative Case Study: Ingredients vs Commodity Crush
- 15 Glossary and Quick Reference
Worked examples and applied cases · 40 pages · 15 sections · 2 company engines
The Excel model
Educational material for professional use. This primer and its model are not investment advice or a recommendation to buy or sell any security, and they are not personalised. Worked valuations use illustrative calibrations, not fair-value estimates for any company.
An ag processor makes money on volume and spread, not on the price of grain. A merchant buys crops from farmers, moves them to where they are needed and crushes oilseeds into meal and oil; it earns the crush spread and a handling margin per tonne, and both swing with harvests and trade flows. Ingredients processors earn a steadier margin on starches, sweeteners and proteins. Valuing a strong crush year values a point in the cycle, so the work is to rebuild earnings at a long-run crush and check whether the returns cover the cost of the capital the business ties up, much of it in inventory.
Ag processing valuation benchmarks by return on capital
What a processor earns on its capital, against a 9% cost of capital, decides where it sits in the 6-10x through-cycle EV/EBITDA band. These are the primer's screens, applied to EBITDA normalised at a $3.10 a bushel board crush.
| Return on capital less 9% WACC | Typical business | What it shows | Position in the 6-10x band |
|---|---|---|---|
| Above +3 points | Ingredients processor | Returns of about 14-16% and EBITDA margins of 17-26%, on contract pricing | Upper half |
| 0 to +3 points | Integrated merchant at a mid-cycle crush | Returns cover the capital, inventory included | Fair in the band |
| Below zero | Crush and trading that do not earn their capital | Growth destroys value, so a multiple overpays | De-rated toward commodity-trading multiples |
| Any, with over 80% of inventory readily marketable | Inventory-heavy merchant | Working capital absorbing cash as the business grows | 0.5-1.0x discount to peers at the same crush |
The 9% WACC rests on a 4.5% Treasury yield and a 150 basis point credit spread for merchants whose debt funds inventory. A crusher's normalised EBITDA is bushels times the margin it keeps per bushel after conversion cost, and the primer's illustrative band for large crushers runs $0.15-0.60 a bushel. Normalise before reading any multiple. The primer's worked crusher, at a single enterprise value, reads 10.6x on trough-crush EBITDA, 7.5x at mid-cycle and 5.1x at the peak.
Worked example: an ag processing DCF on a merchant crusher
Take a hypothetical crusher with 40 million tonnes a year of oilseed capacity, about 1,470 million bushels. It keeps 45% of the board crush and spends $0.95 a bushel on conversion, so at the $3.10 mid-cycle board it nets $0.445 a bushel. Origination and its other businesses add a flat $900 million of EBITDA. The primer starts the crush at a $2.40 trough and walks it back over four years, funding working capital at 10% of revenue and $550 million of sustaining capex a year.
| Step | Amount |
|---|---|
| Net crush margin (45% of $3.10, less $0.95) | $0.445/bu |
| Mid-cycle EBITDA (crush $589M at 90% utilisation, plus $900M origination) | $1,489M |
| PV of free cash flow, years 1-10, at 9% | $3,717M |
| PV of terminal value (7.5x mid-cycle EBITDA) | $4,716M |
| DCF enterprise value | $8,433M |
| Less net debt | -$6,000M |
| Equity value | $2,433M |
| Value per share (500M shares) | $4.87 |
A straight 7.5x on mid-cycle EBITDA gives $10.33 per share, more than double. Only $1.44 of the $5.46 gap is the climb out of the trough. The other $4.02 is the multiple itself, which at a 9% WACC implies 2.6% growth for ever, and growth destroys value in a business earning 4.6% on its capital. A hypothetical ingredients processor earning 14.4% shows the reverse: its DCF and its 9.5x cross-check agree within 1%.
The primer shows the ten-year schedule, the leverage test with and without readily marketable inventory, and sensitivity grids for the crush against WACC and against the multiple. The Excel model does the same with your own inputs.
Which ag processing valuation method fits which company
| Company type | Primary method | Check with | Why |
|---|---|---|---|
| Global origination-and-crush merchant | Ten-year DCF at a mid-cycle crush | Normalised EV/EBITDA; return on capital; working-capital intensity | Earnings track crush times bushels, and inventory absorbs cash a multiple never sees |
| Ingredients processor | Return on capital against WACC, then DCF | EBITDA margin band of 17-26% | Contract pricing supports returns above the cost of capital |
| Rendering and renewable fuel | EV/EBITDA plus segment mix | Covenant leverage | Return on capital is not disclosed, and fuel earnings follow policy credits |
| Regional grain merchant | EV/EBITDA plus segment EBITDA | Share of inventory readily marketable; debt to adjusted EBITDA | Renewables can dominate earnings in a weak grain year |
What the full primer adds
The primer builds the tools in order: how processors make money, the listed company types, the chain from origination to ingredients and the segments, then revenue drivers and the cost structure, from the board crush to working capital. Valuation frameworks set ROIC against WACC beside through-cycle EBITDA, and worked chapters value a hypothetical merchant crusher and a hypothetical ingredients processor from first input to equity value. Applied cases on five listed companies follow, then basis risk and merchant discipline, screening, the red flags and a comparison of the ingredients and commodity-crush models.
Free guides cover the individual pieces: soybean crush margins, the ABCD traders, origination, processing and ingredients, working capital in commodity trading, margin per tonne by segment, ROIC against adjusted ROIC and valuing ag processors. Research profiles for ADM, Bunge, Ingredion, Darling Ingredients and The Andersons apply the same method to filed results. The companion Excel model spans eleven sheets: an illustrative merchant crusher and a fictional ingredients processor, each valued on a ten-year DCF; a valuation summary that headlines the DCF, cross-checks it against a through-cycle multiple and splits the gap between the two; cycle scenarios; a crush-margin and ROIC view with and without readily marketable inventory; a leverage screen; and two sensitivity grids.
Sheets: Quick Start, Instructions, Assumptions, ABCD Crusher, Ingredients, Valuation Summary, Cycle Scenarios, Crush Margin & ROIC, Leverage Screen, Sensitivity, Dashboard.
Ag processing valuation: free guides
Ag processing valuation FAQ
- How do you value an ag processor or grain merchant?
- Normalise first. Set the soybean board crush at a mid-cycle level ($3.10 a bushel in the primer), apply the share of it the plant keeps less its conversion cost, multiply by bushels, then add origination earnings. The primer's headline is a ten-year DCF that funds working capital and sustaining capex year by year, discounted at 9%. A 6-10x through-cycle EV/EBITDA band is the cross-check, and return on capital decides where in the band a company sits.
- What EV/EBITDA multiple do ag processors trade on?
- The primer uses a 6-10x band on EBITDA normalised to a mid-cycle crush. A return on invested capital more than 3 points above the 9% cost of capital supports the upper half, typical of ingredients businesses; zero to 3 points is fair for an integrated processor; below zero de-rates toward commodity-trading multiples. A merchant with over 80% of its inventory readily marketable and rising working-capital drag takes a further 0.5-1.0x off.
- What is the soybean board crush?
- The gross processing spread from futures prices: meal in dollars per short ton times 0.022, plus oil in cents per pound times 0.11, less soybeans in dollars per bushel. At the primer's marks, $300 meal and 70 cent oil against $11.20 beans, that is $6.60 plus $7.70 less $11.20, or $3.10 a bushel. No plant earns the board: basis, timing and product mix set the margin it actually captures.
- Why do ingredients companies trade at a premium to grain merchants?
- Returns. Contract pricing and product specification let an ingredients processor earn well above its cost of capital, 14.4% against 9% in the primer's worked example, with little inventory to fund. A crusher's margin swings with the crush and its inventory absorbs cash, so its return can sit below the cost of capital even at a mid-cycle crush. Pricing a crusher off an ingredients peer set overpays for it.
See this methodology applied to a real company:
Archer-Daniels-Midland (ADM) →