Global grains merchant Bunge Ltd reported a surprise quarterly loss after being caught wrong-footed in the soybean futures market with bets that a trade war between the United States and China would be averted. The result was in stark contrast to trading rivals Archer Daniels Midland Co (ADM) and Cargill Inc, which reported strong profits in their most recent quarters. Agribusiness giant ADM reported a surge in profit on higher global demand for U.S. grains. The Chicago-based company saw profit more than double to $566 million. Adjusted earnings of $1.02 per share far exceeded Wall Street expectations of 78 cents per share. Revenue jumped 14 percent to $17.07 billion, topping Wall Street forecasts for $15.8 billion.
Bunge said net loss available to shareholders was $21 million, or 15 cents per share, in the quarter, compared with a profit $72 million, or 51 cents per share, a year earlier. Bunge largely blamed a bet that soybean prices would rise as U.S.-China trade tensions eased during the period. However, the trade war escalated and soybeans fell sharply. Bunge reported a $125 million mark-to-market loss tied to soybean crush contracts in the April-to-June quarter and a $24 million hit from currency hedges in Brazil, but said it expects to recover the losses in the second half of the year. The loss was particularly surprising because international grain traders had been expected to benefit from market volatility and shifts in global grain flows resulting from a trade war between the world’s two largest economies.
The United States imposed tariffs on $34 billion of Chinese goods on July 6, prompting Beijing to levy taxes on the same value of U.S. products, including soybeans. Bunge bought large volumes of Brazilian soybeans in the quarter and took on long positions in soybean futures to protect crush margins in the event that China’s threatened tariffs would not be implemented, Bunge CEO Soren Schroder said. “We thought that (resolution) would have been very bullish, positive to futures, which, in turn, would have put pressure on the basis long that we had accumulated in Brazil,” he said. “As it turned out, the trade talks have not resulted in any resolution and futures subsequently drifted lower, which led to a loss.”