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Reviving Bunge warns over Brazil soy export delays

Bunge cautioned over the "significant logistical challenges" ahead as Brazil grapples with a record soybean harvest, which US officials said was showing "extraordinarily good" yields, and was poised to prompt a "sudden" fall in US exports.

Bunge, unveiling a return to fourth quarter profit, highlighted the role of recovering global harvests in boosting its fortunes, both by raising volumes for its transport operations and leading to lower prices for its processing businesses.

"Our agribusiness team effectively managed risks as markets transitioned from extreme tightness to emerging surpluses," Soren Schroder, the Bunge chief executive, said, adding that the group had exploited "strong oilseed processing margins in the northern hemisphere".

"Higher results in our merchandising operations were driven by large export programmes to Asia, the Middle East and Europe. Lower commodity prices are spurring growth in demand and trade."

'Premium on expertise'

Attention is now turning to the South American soybean harvest, which has started in Brazil and is imminent in Argentina, and is expected to produce a record result.

"Similar to last year, this will put a premium on logistics expertise and assets," said Mr Schroder, viewing the situation as an opportunity for Bunge, one of the ABCD group of agricultural trading houses with Archer Daniels Midland, Cargill and Louis Dreyfus, and which is particularly strong in South America.

Drew Burke, the Bunge finance director, said that "handling and transporting [South America's] record crop will pose significant logistical challenges, particularly in Brazil", which has a history of road, rail and port bottlenecks.

The difficulties of overcoming Brazil's transportation hurdles "should provide us with attractive market opportunities considering our network of assets and experience in the region".

'Exports to ramp up quickly'

The comments came hours after the US Department of Agriculture, which on Monday raised by 1.0m tonnes to a record 90.0m tonnes its forecast for Brazil's soybean crop, underlined the strong start to the harvest, saying that yields were proving "extraordinarily good".

However, demands on Brazilian ports would be swollen by a switch in demand from Argentina, where farmers are withholding crops as a hedge against inflation, besides the seasonal transition from the US, where prices are higher.

"Starting this month, an imminent decline in US soybean exports, and a sluggish pick-up in Argentine shipments, will likely accelerate the shipments from Brazil," the USDA said.

"A growing number of vessels are lining up at Brazilian ports, ready to transport new-crop supplies.

"Given the difficulty of acquiring more soybeans out of Argentina, Brazil's soybean exports in 2013-14 are seen ramping up quickly to a record 45m tonnes."

'Sudden and steep'

The USDA added that the fall-off in US soybean exports, while currently "indiscernible", could prove "sudden and steep", and prompt a "sharp break" in prices of soybeans in the Gulf of Mexico cash export market.

"Its timing will be strongly correlated with an acceleration of soybean exports from Brazil."

The situation surrounding US soybean exports is also being clouded by talk that officials in China, the top importer, are examining cargos for traces of a genetically modified corn variety, not yet approved by Beijing, which has prompted rejections of some imports of the grain.

Pent-up demand

Bunge's comments came as it unveiled earnings of $115m for the October-to-December quarter, compared with a loss of $610m a year before, on revenues down 3.1% at $16.38bn, a decline reflecting lower crop prices.

Besides a 51% jump in gross profits at the agribusiness division, a reflection largely of the higher crop trading volumes, the group achieved a 24% rise to $160m in profits in edible oils, boosted by lower raw material costs, which also helped the milling division lift profits by 83% to $77m.

"Corn milling results benefited from improved margins and higher volumes, which were due in part to the arrival of the US corn crop and strong demand from customers who had delayed purchases in anticipation of record corn production," the US-based group said.

Underlying earnings per share rose to $1.35 from $0.50 a year before.

Bunge shares stood 0.1% higher at $75.73 in morning deals in New York.

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