Dreyfus sees weakness in agricultural prices extending into 2017


The head of Louis Dreyfus Co, one of the world's top-four food-commodities traders, said that agricultural prices will remain low into 2017 as farmers around the world harvest bumper crops.

"Prices for wheat, corn, soybean will continue going down," Dreyfus CEO Gonzalo Ramirez Martiarena said in an interview in Buenos Aires this week. "Corn yields are so good, productivity is so high in the US that they keep planting despite low prices."

Benchmark prices for wheat fell to a decade low last month, while corn is at levels last seen in 2009 as farmers in key growing regions, including the US and Russia, reap bumper crops. Low grain prices have been a boon for consumers and companies such as Nestle and Kellogg but are hurting farmers and agribusiness including Deere & Co, the world's largest manufacturer of tractors and combine harvesters.

The views of Dreyfus, as the company is known, and its rivals, including Archer-Daniels-Midland, Bunge, Cargill, are closely followed by commodity investors because their trading relationships give them insight into global supply, demand and inventories trends. The four are known as the ABCD of food commodities for their initials.

Ramirez said that Dreyfus will post a profit for the first half of the year when it reports results later this month.

"We are doing fine," he said.

Agriculture commodities traders including ADM, Cargill and Wilmar International suffered in the first half on wrong-way bets in soybean markets.

Ramirez is trying to steady Dreyfus amid lower crop prices and reduced price volatility. He announced plans earlier this year to seek joint-venture partners for businesses including orange juice, dairy, metals and fertiliser. In March, the closely held firm said full-year profit dropped 67 per cent to the lowest in a decade.

Louis Dreyfus "may issue a bond in the future", Ramirez said. The potential issue, which would be in addition to existing debt securities, would aim to reduce the the company's borrowing costs, he said.

Billionaire Margarita Louis-Dreyfus, the head of the 165-year-old firm, is considering selling a minority stake to finance the purchase of holding company shares from other family members. She controls 81 per cent of the holding company that owns Louis Dreyfus Co. and is its chairwoman.

Ramirez said the company hopes to finalise a sale or joint-venture partner for its agrochemicals and fertiliser operations by year-end. Joint ventures in metals and juices won't happen until 2018, he said.

Black Sea grain producers will continue increasing output, Ramirez predicted, and corn prices will continue falling until US farmers cut planting, he said.

Chicago corn for December delivery fell to $US3.1475 a bushel on August 31, the lowest for a most-active contract since September 2009 and less than half the record high of $US8.49 set in 2012.

Wheat futures declined to a 10-year low of $US3.8675 a bushel last month, more than 70 per cent lower than the all-time high reached in 2008.

Soybean futures dropped to a four-month low of $US9.37 a bushel on September 1 as the U.S. Department of Agriculture said the country's farmers will reap a bigger crop than expected.



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