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Company update: Bunge Q3 2012

Bunge shares jumped last week as the agribusiness giant doubled quarterly profits by mobilising its global grain network to supply customers hit by the worst US drought in more than half a century.

Quarterly net earnings rose to $297 million from $140 million a year earlier. Net sales rose 10% to $17.29 billion. Analysts expected $17.80 billion.

Investors cheered Bunge's results as the latest sign the four "ABCD" companies that dominate the global agricultural business - Archer Daniel Midlands, Bunge, Cargill and Louis Dreyfus are emerging from a period of dismal earnings in which new competitors and volatile markets pressured profits.

There are signs the scramble for grains after the US drought may be helping their recovery, as companies with geographically diverse resources can acquire and deliver grain where it is needed.

Cargill earlier this month said its broad global reach helped quarterly earnings quadruple from a year ago but warned the full impact of bad weather had not yet been seen.

Bunge managed 15 percent volume growth in its agribusiness segment during the third quarter, helped by new grain-handling and port facilities.

Unusual trade flows
US farmers harvested much less corn and soy than expected this year, and Ukraine's agriculture minister said his country, one of the top 10 wheat exporting countries, will ban such exports starting November 15 due to a weather-damaged harvest.

Yet, reduced wheat exports were expected from Ukraine, and a significant volume has already been shipped, Bunge Chairman and Chief Executive Officer Alberto Weisser said in an interview.

Bunge has taken advantage of the unusual trading patterns caused by poor global weather, shipping corn to the United States from Brazil and exporting the grain from Ukraine.

Exports of corn from Brazil, which brought in a record harvest this year, are ongoing and a "very important component" of Bunge's business, Weisser said.

He noted that demand for feed for livestock had been surprisingly strong, despite high corn and soy prices.

"The current market environment, shaped most notably by the severe US drought, has been and will continue to be volatile and complex for everyone who participates in our industry," he said.

US export dominance threatened
Some long-time importers of US corn have forged ties with alternative suppliers like Brazil, casting a shadow over continued US dominance in the export markets, according to foreign grain buyers.

US corn exports are projected to shrink this season to the lowest point since the mid-1970s, while rival exporters such as Brazil and Argentina have seen export volumes soar to record or near-record levels.

Weisser does not expect a permanent reordering of the global grain trade due to the US drought. "The US is really the best in terms of corn," he said. "This is a unique situation we are having at the moment."


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