May 19, 2013
Bunge stricken by US drought
CEO Alberto Weisser to retire after 14 years after transforming company
Agribusiness giant Bunge yesterday admitted the historic US drought had tripped up its well-connected risk management team and also said its chief executive will step down.
The disclosures came as Bunge, one of the world’s top agricultural trading houses, reported it swung to an unexpected loss in the quarter ended December 31. Excluding one-time charges, the resulting profit was still well below that of a year ago and the average Wall Street forecast.
Bunge’s risk management team contributed to the weak results by rushing to buy soybeans and corn in the United States last year amid concerns that harvests would be slashed by the worst drought in 56 years, outgoing CEO Alberto Weisser said in an interview.
The team ended up overpaying in October, as crop prices declined later in the autumn and winter as supply fears eased.
Bunge is among the four large players, known as the ABCD, that dominate the flow of agricultural commodities around the world. The others are Archer Daniels Midland, Cargill and Louis Dreyfus.
Bunge’s miscalculation on crop buying was a surprise due to its vast network of grain merchants and showed how the widespread drought caught traders off guard.
The company still recorded a record profit of more than US$1 billion for its agribusiness sector for the year.
Bunge’s strong presence in South America could give it an advantage over US-focused ADM this year because farmers in Brazil and Argentina are expected to harvest large crops of soybeans and sugar cane.
Weisser downplayed concerns about drought hurting grain and soy output in Argentina, which drove soybean futures to a seven-week high at the Chicago Board of Trade earlier this week.
With nearly ideal weather in Brazil, South America will still harvest a massive crop, he said.
The US Department of Agriculture will update its global supply and demand forecasts on Friday.
Weisser will retire June 1 after transforming Bunge into one of the world’s largest agricultural trading houses from a regional operator over 14 years as CEO.
Soren Schroder, CEO of Bunge North America, will replace Weisser.
Schroder, a former employee of rival Cargill, has led Bunge’s North America operations since 2012 and developed its agribusiness franchise in Europe and the Middle East. He said he planned no major changes to the company’s strategies.