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Dreyfus blames market volatility on 'unexpected capital inflows'

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Revenues and underlying profits at the agribusiness giant Louis Dreyfus tumbled over the last six months, though the company managed a slight uptick in net-profits thanks to lower tax and costs.

The privately owned trader and food processor saw a shortage of arbitrage opportunities, amid "challenging conditions" in the agricultural commodity sector.

The company blamed volatility in agricultural commodities on "unexpected capital inflows," referring to an influx of hedge fund money over the period.

Falling revenues

Louis Dreyfus' revenues tumbled 11.0%, to $23.5bn over the first half of 2016, despite rising volumes.

Louis Dreyfus saw the falling revenues "reflecting a weak price environment for most agri commodities and a significant decrease in metals prices, despite a 1% rise in shipped volumes year-on-year".

The group ascribed the higher shipments to "robust grains and oilseeds export volumes from South America".

Uptick in net income

Operating profit for the company's business segments fell 14.4%, to $546m

But the company reported a net income of $135m, up 3.8% from the same period last year.

The increase in profits was achieved through lower costs and tax, the company said.

No room for arbitrage

Despite increasing volatility, Louis Dreyfus found little room for price arbitrage in the global commodity market this year.

"While the first quarter saw weak market price volatility continue form 2015 for most commodities, the second quarter witnessed irrational volatility moves on certain markets, echoing unexpected strong capital inflows," said Gonzalo Ramirez Martiarena, the group chief executive.

"However, fundamentals prevailed with few commercial arbitrage opportunities arising due to the absence of any significant logistic and geographical physical disruptions."

Mr Ramirez took the helm at Louis Dreyfus last year, in an internal promotion, after a 17-month search for a new boss.

"While agricultural markets experienced a mix of challenging and changing conditions, the global economic outlook proved not especially bright either," Mr Ramirez said.

By William Clarke

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