CHICAGO (Reuters) - Shares of Bunge Ltd scaled to a 22-month peak on Wednesday after merger overtures by Glencore Plc’s agriculture unit whetted investors’ appetite for consolidation in the commodities sector.

FILE PHOTO - The logo of commodities trader Glencore is pictured in front of the company's headquarters in Baar, Switzerland, September 30, 2015. REUTERS/Arnd Wiegmann/File Photo

But Bunge’s lukewarm response to a “possible consensual business combination” suggests a two-pronged M&A approach for agribusinesses may be in the offing, analysts said on Wednesday.

Grain trading veterans like Bunge, Archer Daniels Midland Co and Cargill Inc [CARG.UL], which already have a sizable U.S. presence, are aiming up the supply chain with specialty, higher-margin products. The companies, along with Louis Dreyfus Co [LOUDR.UL], are known in the business as “the ABCDs” of global grains trading.

Meanwhile, foreign players like Glencore and China’s Cofco Group [CNCOF.UL] are eager to gain a foothold in the United States - the world’s top agricultural products exporter - and other key production areas in South America, where Bunge dominates.

“If you want to be an ABCD, you have to buy one,” said Kansas State University agricultural economist Jay O’Neil. “You cannot go out and recreate these kinds of international trading operations organically.”

Merger expectations have swirled around large grain traders for months following a string of poor earnings results as low crop prices and a global glut of grains have squeezed core commodity trading operations.

News that Glencore Agriculture Ltd, jointly owned by Glencore and two Canadian pension funds, approached Bunge sparked the U.S. agribusiness’ sharpest rally in more than eight years on Tuesday.

Bunge, the world’s largest oilseed processor, later said it was not in talks with Glencore and remained committed to its growth strategy of expanding into higher-margin products, such as natural food ingredients and specialty edible oils.

Bunge shares closed at $82.54 on Wednesday after earlier touching a peak of $82.96 - their highest since July 2015. Glencore shares slipped 0.1 percent to 291.972 pence.

SUPPLY CHAIN EYED

JPMorgan analyst Ann Duignan said she was surprised that Bunge struck a “relatively dismissive tone” on the Glencore deal as its “core businesses remain under pressure, with agribusiness margins weighed down by burdensome supplies of crops in all producer regions.”

Glencore CEO Ivan Glasenberg said on Wednesday the company wants to expand its agriculture business, but has no plans to move into any commodities it does not already trade.

“There is a push to get more into the supply chain without going all the way to being branded food products,” Chris Johnson, lead agribusiness credit analyst at Standard & Poor’s.

Bunge, with a nearly $11.5 billion market cap, could sell for a 10-times multiple, which would imply a transaction value of about $90 per share, said Morningstar analyst Seth Goldstein.

Glencore Agri is one of the world’s largest suppliers of sugar, wheat and pulses such as peas and lentils. It also trades cotton, corn, barley, soybeans and other crops.

A deal with Bunge could transform Glencore into a major force in the U.S. agriculture sector and would make the Swiss company’s Canadian joint venture the latest foreign entity to own of a piece of the U.S. food chain.

In 2015, Brazil-based JBS SA bought Cargill’s U.S. hogs business. Two years earlier, Shuanghui International Holdings Ltd struck a deal for Virginia-based Smithfield Foods, the world’s largest pork producer. Hong Kong-based WH Group now owns Smithfield.

Germany’s Bayer AG plans to acquire U.S.-based Monsanto Co, the world’s biggest seed maker, as part of a wave of consolidation in the seed and agrochemical industry that could shrink six large companies into four.

The shakeup among grains traders, however, may look entirely different.

“It’s a large, disparate industry and it took economies of scale to get these companies to where they are. But how much further can it go? I don’t see it working like it has in ag chemicals,” said Gary Blumenthal, president of World Perspectives Inc.