UPDATE 3-Bunge warns of lingering tightness in grain supply

Thu Apr 25, 2013 2:22pm EDT

* Shares soar 7.2 percent after earnings top estimates
    * Delays at Brazil ports improving but will persist -CEO
    * U.S. farmers hold back on crop sales after 2012 drought


    By Tom Polansek
    April 25 (Reuters) - 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
grain prices, which have pulled back from all-time highs reached
last year because of the drought.
    However, the flow of key farm products to the world from
growers in North and South America remains constrained,
according to Bunge, one of the world's top agricultural trading
houses.
    Earlier Thursday, Bunge reported earnings of $170 million
for the first quarter ended March 31, up from $84 million a year
earlier, led by a jump in sales of sugar and bioenergy products.
Results in the agribusiness were down from a year ago.
    "The challenge continues," said Soren Schroder, who will
take over as Bunge's chief executive on June 1, about logistical
problems slowing exports from South America. "It's not over."
    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, selling, transporting and
processing crops and faces challenges from a Brazilian soy crop
that's almost one-quarter larger than last year's. 
    The crop 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 canceled some loads to buy
from the United States instead.   
    Some ships stayed in congested Brazilian ports, rather than
sailing away to export soybeans from the United States, because
U.S. supplies are scarce. That exacerbated the logjam, Schroder
said in an interview. 
    Delays in Brazil will persist until the U.S. harvest this
autumn, outgoing CEO Alberto Weisser said after Bunge reported
higher-than-expected quarterly earnings.
    Increasing investment in Brazil's infrastructure should
improve logistics for next year's harvest, he said.
    
    EARNINGS BEAT STREET
    Excluding items, Bunge 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.
    Revenue totaled $14.79 billion, above Wall Street's
expectations of $13.99 billion and $12.91 billion a year
earlier.
    Shares soared 7.2 percent on the New York Stock Exchange as
investors cheered the results after Bunge swung to a surprising
loss in the quarter ended Dec. 31. The move pushed Bunge 0.8
percent higher for the year.
    "Things look markedly better," Citi analyst David Driscoll
said about the company's outlook.
    Shares of rival ADM, which is due to report quarterly
earnings on Tuesday, rose 2.3 percent and are up 21 percent so
far this year.

    TIGHT-FISTED FARMERS
    In the United States, grain and soybean supplies are tight
as farmers are hesitant to sell any crops they have in storage
after the savage drought caught them by surprise last summer.
    Cold, wet weather has slowed spring planting in the U.S.
Midwest, raising uncertainty about prospects for the harvest
this year.
    "We have a long way to go" before the next U.S. harvest,
Drew Burke, Bunge's chief financial officer, said on a call with
analysts. "Exactly how the year plays out depends a lot on how
the Northern Hemisphere crops are." 
    Bunge said earlier this month that it planned to idle a soy
processing plant in Kansas from May 1 until the autumn harvest
due to low supplies of the oilseed. 
    Many U.S. soy processors shut down for a week or two
beginning in April to prepare machinery ahead of the fall
harvest. However, seasonal downtime could run longer this year
because of tight supplies after the worst U.S. drought since
1934.
    Bunge said it does not plan to shut down other processing
plants for extended periods of time but may have interruptions
at other facilities.
    "Somehow the industry will find it's way through the summer
and into new crop," Schroder told Reuters. "It will be tight but
it will be manageable."
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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