Bunge Earnings, Sales Rise as Trump Talk Hasn't Disrupted Trade -- Update
February 15 2017 - 11:42AM
Dow Jones News
By Imani Moise
The flow of basic foodstuffs from U.S. farms to overseas markets
has yet to be disrupted by President Trump's talk of trade
overhauls, according to the chief executive of commodity trading
giant Bunge Ltd.
Price and supply remains the dominant factor for companies like
Bunge and the governments and food companies purchasing U.S.-grown
corn and other crops, he said. Grain traders are closely monitoring
Washington for any signs of a shift arising from changes to U.S.
trade policy.
"It is business as usual," said Soren Schroder, Bunge's chief
executive, in an interview. "Undoubtedly, people are contemplating
plan B if anything should happen."
Bunge and other top agricultural traders, including Archer
Daniels Midland Co. and Cargill Inc., help direct the flow of corn,
soybeans, wheat and other food commodities around the world,
juggling factors like harvests, foreign exchange rates and
transport costs. Executives watched warily as Mr. Trump ratcheted
up criticism of trade policies that have underpinned growth in
agricultural trade with key buyers like Mexico and China. Mexico is
the biggest export destination for U.S. farmers' corn, and China
the top buyer of their soybeans.
While shippers and importers have yet to alter grain dealings,
the prospect of a 20% tax on imported Mexican goods floated by Mr.
Trump last month spurred commodity traders to ponder the fallout if
Mexico retaliated. Some grain traders scrambled to analyze their
credit exposure in case buyers walked away from existing deals to
purchase U.S. grain, and make sure new contracts included
flexibility to replace U.S. grain with crops from other
destinations to avoid potential losses.
ADM executives said last week they were prepared to adjust
grain-processing operations in response to any trade waves, like
supplying more high-fructose corn syrup to U.S. food and beverage
companies to potentially replace Mexican-produced sugar.
Mr. Schroder said Bunge's Mexican flour mills have in the past
shipped in wheat from Russia and Canada, and could do so again if
trade policy shifts upend the southbound flow of U.S. grain.
Replacing other U.S. agricultural products like soybean meal,
largely shipped into Mexico by rail, would be more costly and could
create logistical headaches for Mexican importers, he said.
"I really do believe that people will think through what all
this means, " Mr. Schroder said. "Forcing [foreign buyers] to look
elsewhere for procurement will set up a structural disadvantage for
the U.S. farmer."
Bunge on Wednesday projected that large crops and rising profit
margins in South America should boost its profits in the year
ahead, despite a slow start to the year. The company reported
fourth-quarter profits of $271 million, or $1.83 a share, up from
$203 million, or $1.31, a year earlier.
The results topped analysts' expectations thanks to a surge in
food ingredients sales, although profits from its core
grain-trading division slipped due to tight soybean supplies in
South America. Bunge shares jumped 9% to $74.36 in morning
trade.
--Imani Moise contributed to this article.
Write to Imani Moise at imani.moise@wsj.com
(END) Dow Jones Newswires
February 15, 2017 11:27 ET (16:27 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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