New | Bunge cuts soyabean shipments to China
Bunge, a top soyabean processor, has reduced the size of its pipeline of the oilseed flowing to China, the world's top importer, after overestimating demand late last year, chief executive Soren Schroder said.
The decision to scale back shipments illustrates the impact of China's slowing economy on one of the largest agricultural trading houses.
Bunge typically had supplies headed to China from producers such as Brazil to keep crushing plants supplied, "like a floating conveyor belt", Schroder said on Thursday.
However, in late December the company suffered a US$30 million loss as the value of soyabeans being delivered to China in its inventory pipeline dropped below what it had paid, he said.
Bunge mistakenly had expected an increase in demand, Schroder added after the company reported weaker-than-expected fourth-quarter earnings.
We misjudged demand and the timing of it by a couple of percentage points
"We're scaling back on the size of the pipeline that we have flowing into China to reduce the risk of it, so we don't have things like what just happened happen again," he said.
The slowing economy in China has weighed on global markets as it is the world's biggest buyer of iron ore, coal, copper and soyabean and the second-largest crude oil importer after the United States.
It imported 6.88 million tonnes of soyabean last month, below a record set in December but above the 5.9 million tonnes imported in January last year. High imports coupled with weaker demand have hurt crushing margins.
"We misjudged demand and the timing of it by a couple of percentage points," Schroder said.
Bunge expects market conditions to improve in China, which is home to about 10 to 15 per cent of the company's crushing business, but remain challenged.
Quarterly earnings fell US$30 million to US$50 million short of internal expectations, and "a big part of that relates to how we managed the pipeline to China", Schroder said.
Chinese buyers snapped up US soyabeans early in the crop year that began on September 1, only to watch prices tumble on expectations for huge crops from South America.
They cancelled at least 579,000 tonnes of soyabean purchases from the US during the second half of last month, according to the US Department of Agriculture. They subsequently rebooked at least 407,000 tonnes as futures sank.
