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Dryness testing Canada, EU crops curbs BASF ag sales too

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The dryness testing Canadian and European crops proved a setback for BASF's agrichemicals division, in cutting demand for fungicides, and contributing to a "challenging market environment".

While the German group achieved a small rise in sales, of 0.7% to E1.67bn, at its agriculture business in the April-to-June quarter, the increase reflected softness in the euro, which boosted the value of takings made in other currencies.

"The devaluation of the euro against major currencies positively impacted BASF's top line by 9%" in agriculture, Kurt Bock, the BASF chief executive, said.

Divisional sales volumes fell by 8%, although the impact of the decline was in part offset by a 3% rise in prices.

'Challenging market environment'

The performance, -which saw BASF's operating profits for the quarter in agriculture fall by 16% to E433m - reflected a "challenging market environment" spurred by "sharply fallen prices" for grains, which has reduced farmers' willingness to spend on crop inputs.

"In agricultural solutions, we experienced a more difficult market environment after a strong start into 2015," Mr Bock said.

The group highlighted in particular lower sales of fungicides, thanks to stocks already built up, but also a lack of rain in many geographies which has curtailed the spread of many fungal diseases this season.

"Dry weather conditions" in Canada and California, and "ongoing drought" in western Europe, fuelled the drop in fungicide volumes, BASF said.

Dryness concerns

The comments come as dry weather in Canada is in particular focus this week, with a crop tour organised by CWB, the former grain export monopoly for the Prairies.

In fact, "much of" Saskatchewan, Canada's top grain producing province, "received rain last week that has helped alleviate [crop] moisture stress in some areas", ag officials said in a report overnight.

"Topsoil moisture conditions have slightly improved in many areas," the officials added, saying moisture was "short" of "very short" in 46% of Saskatchewan cropland as of Monday, compared with 55% a week before.

Meanwhile, in Europe, official data showed a further decline in the dryness-tested French corn crop, the EU's biggest, which was rated 62% "good" or "excellent", down 5 points week on week, and 22 points lower year on year.

"Questions persist in France about corn production due to crop condition and lower acreage," consultancy Agritel said.

Losses grow

BASF report group earnings before interest, taxation, depreciation and amortisation (ebitda) before special items of E2.04bn in the three months to June, below analysts' estimates of a E2.12bn result.

Ebitda before special items was up 2% from the E2.01bn reported for the same period last year.

Group earnings came in at E1.27bn, in line with the E1.26bn for the same quarter last year.

The group backed its 2015 forecast for flat operating profit and slightly rising sales compared to 2014.

Nonetheless, BASF shares were trading down 2.8% at E80.06 following the release.

By Agrimoney.com

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