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South American soy crush margins under pressure, Bunge says

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Soybean crush margins in South America are coming under pressure, as farmers hold onto beans after smaller-than-expected harvests, Bunge said.

Crush margins, the amount of money to be made by processing oilseeds into meal and oil, are a key driver of demand.

But Bunge said that this shortfall in South America will boost soybean crush margins in North America and Europe, as it announced better-than-expected quarterly sales.

Big harvests, strong demand in northern h


Drew Burke, Bunge's chief financial officer, forecast saw diverging soybean crush environment.

"In agribusiness, forward oilseed processing and grain handling margins in North America and the Black Sea are solid, reflecting big harvests and strong demand," Mr Burke said.

But he noted that smaller than expected crops in Brazil and Argentina are slowing famer selling, which will damage processing margins.

Canadian canola, and European sunflower seed levels are also at "attractive margins," but European rapeseed crush margins are still depressed, "due to industry excess capacity and weak biodiesel pull," Bunge said.

Shares rally

Bunge shares rose, as the company reported net sales down 2.2% year on year in the April to June period, to $10.54bn.

This was better than the $10.08bn analysts were expected.

And net income attributable to Bunge rose 50% to $109m.

Rising earnings forecast

For the whole of 2016, The group forecast rising earnings and profits in its agribusiness segment, which it ascribed mainly to "improved performances in grains, which benefitted from strong growth in destination volumes and solid risk management".

The group's edible oil business also reported higher earnings, thanks to improved performances in Asia, Canada and Europe.

"Volumes in Brazil were strong and have returned to pre-economic crisis levels, but margins remained weak with excess supply of domestic soybean oil from the peak crushing period pressuring retail margins," Bunge said.

Bunge's milling business also increased its volumes and profit margins.


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