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Bunge Earnings, Sales Rise as Trump Talk Hasn't Disrupted Trade -- Update

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02/15/2017 | 05:28pm CET
By Imani Moise 

The flow of basic foodstuffs from U.S. farms to overseas markets has yet to be disrupted by President Trump's talk of trade overhauls, according to the chief executive of commodity trading giant Bunge Ltd.

Price and supply remains the dominant factor for companies like Bunge and the governments and food companies purchasing U.S.-grown corn and other crops, he said. Grain traders are closely monitoring Washington for any signs of a shift arising from changes to U.S. trade policy.

"It is business as usual," said Soren Schroder, Bunge's chief executive, in an interview. "Undoubtedly, people are contemplating plan B if anything should happen."

Bunge and other top agricultural traders, including Archer Daniels Midland Co. and Cargill Inc., help direct the flow of corn, soybeans, wheat and other food commodities around the world, juggling factors like harvests, foreign exchange rates and transport costs. Executives watched warily as Mr. Trump ratcheted up criticism of trade policies that have underpinned growth in agricultural trade with key buyers like Mexico and China. Mexico is the biggest export destination for U.S. farmers' corn, and China the top buyer of their soybeans.

While shippers and importers have yet to alter grain dealings, the prospect of a 20% tax on imported Mexican goods floated by Mr. Trump last month spurred commodity traders to ponder the fallout if Mexico retaliated. Some grain traders scrambled to analyze their credit exposure in case buyers walked away from existing deals to purchase U.S. grain, and make sure new contracts included flexibility to replace U.S. grain with crops from other destinations to avoid potential losses.

ADM executives said last week they were prepared to adjust grain-processing operations in response to any trade waves, like supplying more high-fructose corn syrup to U.S. food and beverage companies to potentially replace Mexican-produced sugar.

Mr. Schroder said Bunge's Mexican flour mills have in the past shipped in wheat from Russia and Canada, and could do so again if trade policy shifts upend the southbound flow of U.S. grain. Replacing other U.S. agricultural products like soybean meal, largely shipped into Mexico by rail, would be more costly and could create logistical headaches for Mexican importers, he said.

"I really do believe that people will think through what all this means, " Mr. Schroder said. "Forcing [foreign buyers] to look elsewhere for procurement will set up a structural disadvantage for the U.S. farmer."

Bunge on Wednesday projected that large crops and rising profit margins in South America should boost its profits in the year ahead, despite a slow start to the year. The company reported fourth-quarter profits of $271 million, or $1.83 a share, up from $203 million, or $1.31, a year earlier.

The results topped analysts' expectations thanks to a surge in food ingredients sales, although profits from its core grain-trading division slipped due to tight soybean supplies in South America. Bunge shares jumped 9% to $74.36 in morning trade.

--Imani Moise contributed to this article.

Write to Imani Moise at imani.moise@wsj.com

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