Bunge warns of lingering tightness in grain supply
Congestion at Brazilian ports and limited selling of crops by U.S. farmers are keeping global grain supplies tight despite expectations for massive harvests later this year, agribusiness company Bunge Ltd said on Thursday.
Inventories of crops like corn and soybeans dwindled following a historic drought in the United States last year and because of strong demand from buyers like China.
Food makers hope large harvests in the United States this autumn will replenish inventories and put further pressure on prices, which have pulled back from all-time highs reached last year because of the drought.
However, the flow of crops to the world from growers in North and South America remains constrained, according to Bunge, one of the world's top agricultural trading houses.
"Agribusiness markets are transitioning from ones of tightness to more comfortable supplies," Chief Executive Alberto Weisser said in a statement. "Customer inventory pipelines are lean and in need of restocking, so demand should remain strong."
Bunge is among the four large players known as the "ABCD" companies that dominate the flow of agricultural goods around the world. The others are Archer Daniels Midland Co, Cargill Inc and Louis Dreyfus Corp.
Bunge profits by buying, transporting and processing crops but is facing logistical challenges in Brazil, where farmers are expected to harvest record corn and soybean crops.
A Brazilian soy crop that's almost one-quarter larger than last year's has strained infrastructure at ports to the breaking point, with long queues of ships waiting to berth and hundreds of trucks sitting idle for days waiting to offload.
The delays have cost Brazil, with top soy importer China reported to have lost patience and cancelled some loads to buy from the United States instead.
Weisser, in reporting Bunge's quarterly earnings, said the company's agribusiness team "performed well, managing risk in a volatile market environment characterized by tight global supplies and challenging Brazilian logistics."
"The logistics congestion in Brazil is improving, but delays will persist until the U.S. harvest later this year," he said.
Earnings Beat Street
Bunge's quarterly results beat expectations, helped by a jump in sales of sugar and bioenergy products. The company earned $170 million in the first quarter ended March 31, up from $84 million a year earlier.
Excluding items, the company earned $1.15 per share, topping the average analyst estimate of 92 cents per share, according to Thomson Reuters I/B/E/S. A year ago, it earned 57 cents per share.