Bunge latest casualty of slow sobyean selling in Brazil

04.05.2017

Shares in agribusiness giant Bunge tumbled, as it become the latest big food group to suffer from squeezed margins, due to farmer hoarding in Brazil.

The US-based company trimmed its forecast for full year earnings, as its processing arm in Brazil struggled with a shortage of beans despite the big harvest, as farmers are unwilling to sell.

Bunge is the second of the big four agribusiness companies to cite slow farmer sales as a pressure on processing margins, after ADM reported similar problems this week.

Bunge shares in New York were down 10.0% in mid-day deals, at $68.00.

Slow farmer selling

Earnings before interest and tax in Bunge's agribusiness segment fell more than 61% to $109 million.

Soren Schroder, Bunge's chief executive officer, said "the slow pace of farmer selling in South America compressed margins in agribusiness and led to a lower than expected first quarter".

"Farmers in South America are in the process of harvesting record soybean crops and are on track for record corn production, over 70% of which has yet to be commercialized," he said.

As a result of this delay between the South American harvest and crops reaching the market, Bunge trimmed its forecast for 2017 earnings before interest and taxation to $800-925m, "weighted to the second half of the year".

Hopes for baggier margins later in the year

Thomas Boehlert, Bunge's chief financial officer, forecast rising results through 2017, as the massive South American crop filters through to markets.

"On-farm storage has increased in parts of Brazil over the years, but capacity is well below current production estimates," said Mr Boehlert.

"We expect margins to improve as farmer selling picks up in the coming months and customers' replenish pipelines," he added.

Bunge's net income attributable to shareholders over the first three months of 2017 fell by 82% year-on-year, to $39m. Net sales rose 25% over the same period, to $11.12bn.


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