Bunge steers steady course through soybean volatility

Smart risk management moves guided the world's leading oilseed processor Bunge to a massive 75 per cent rise in income for the first quarter as the price of soybeans reached 15 year highs on poor crop harvests last year.

Net income for the quarter to March 2004 rose to £70 million on sales of $5.7 billion, up from $40 million in net income for the same period in 2003.

"Our business model is positioned to deliver results when soybean prices are high, as they are now, and when they are low, as they were as recently as last year," said Alberto Weisser, CEO of Bunge.

While ingredients suppliers using soy as a raw material have seen margins, and profits, squeezed by the high soybean prices, the results from Bunge suggest risk management helped the spread between the price for buying the soybeans and the price at which the derived products of soybean meal and oil were sold on.

"Bunge's soy crush profitability is not determined by whether soybean prices are high or low," said the CEO.

The US firm, principally involved in agribusiness, fertiliser and food products, reported that edible oil sales gained slightly from improved profit margins in Eastern Europe, which helped the impact of increases in raw material costs, primarily soybean oil.

The edible oils segment saw sales rising marginally to $542m from $536m, but tighter margins reduced profit to the same figures as in 2003, $17m.

Looking ahead to the soy harvest situation for the rest of the year, Bill Wells, chief financial officer, said: "We are still anticipating large harvests in South America, despite weather complications in Brazil and Argentina. We are effectively managing the tight supply situation in North America. We expect continued good performance in our food products division."