Bunge sees further volatility in 2020 on US-China tensions, disease outbreaks, Argentina taxes

Agricultural commodities trader Bunge sees the main challenges and drivers of volatility for its business in 2020 coming from US-China trade relations, Argentinian taxation issues, African swine fever and the coronavirus outbreak, the company said in its Q4 earnings report Thursday.

"We're still faced with uncertainty in 2020," said Bunge's chief executive officer Gregory Heckman. "We expect markets to remain volatile as long as the US-China trade tensions and ASF continue to create uncertainty."

Beijing and Washington signed a phase one trade deal on January 15, under which China has committed to purchase around $80 billion worth of US-origin agro products over two years. However, a lack of details only exactly what commodities will be purchased has made the market very skeptical about the deal, a trade source said.

The ongoing African swine fever outbreak is another factor that could pose challenges to agribusiness in 2020, Bunge said. The ASF outbreak in China has led to a steep decline in soy feed demand in the country as millions of pigs have been culled since August 2018.

"I think in China on ASF, we do think that about 40% of the herd was liquidated," said Heckman.

Meanwhile, the new government in Argentina, which took charge in December 2019, increased export taxes on agro products, including soybeans. The export tax is now 30% on soy exports. The South American nation is world's largest soybean meal and oil exporter and third largest soybeans seller.

CORONAVIRUS THREAT

Bunge said the impact on agribusiness demand from the coronavirus outbreak is still unclear.

"It's too early to tell what if any impact the coronavirus situation will have on our markets," Heckman said.

The novel coronavirus outbreak in China since January -- which has killed over 1,350 people -- could negatively impact the country's soybean demand forecast in the coming months.

Bunge's agribusiness reported traded volumes of 34.9 million mt in Q4 2019, down 1% on the year, while net sales were 9% lower year on year to $7.41 billion.

The Q4 adjusted EBIT for agribusiness rose more than three times on the year to $177 million, as oil demand lifted sales of softseeds and drove higher results in South America, Bunge said.

Brazilian farmer selling increased as local prices improved, Bunge said. In Argentina, farmers accelerated sales in anticipation of a change in export taxes, it added.