Bunge fears long delays in Black Sea trade recovery

Global commodities trader Bunge fears Russia's invasion of Ukraine has caused widespread damage to the Black Sea trading infrastructure which will take a long time recover, the company said in its quarterly earnings call, likely stoking supply fears for corn, wheat and sunflower oil supply, among others.

"Even after a resolution [to the war in Ukraine], there will be a long tail on this [post-war restoration] because there is infrastructure that has been damaged," Bunge CEO Greg Heckman said.

"There are seaborne logistics that have to be untangled," he said. "There are waters that need to be demined."

Taking a grim view of the overall situation in Ukraine, Bunge expects a long road ahead for the country, which is a major supplier of corn, wheat and sunflower oil.

Heckman said the company expects production to take a considerable amount to return to pre-war levels, and to "being able to move that production into the markets of demand that need it."

Bunge confirmed earlier reports that it had suffered damage to its port facility in Ukraine, which is stalling logistical operations for the company.

"As has been previously reported, our port facility sustained damage," said CFO John Neppl.

Bunge conceded that its Black Sea operations incurred losses because of the war in Ukraine. However, as industry margins spiked globally due to the combination of continued strong demand and an even tighter supply outlook, the company remained profitable.

"Agribusiness started the year strong," Neppl said. "In processing, the US, Europe, and Brazil reported higher soy crush results, benefiting from improved margins due to strong demand," he said.

Climate commitment

Bunge has also focused on taking pro-environment business steps.

"We continue to make progress in simultaneously advancing our commercial and sustainability approach in South America," Heckman said. "We've expanded our soy origination network through minority investments in resellers that purchase from smaller farms."

"This business strategy has also allowed Bunge to accelerate traceability efforts to support our progress toward our commitment to be deforestation-free in 2025," he said.

Challenges ahead

Bunge is bracing itself for uncertainties in the coming months on multiple fronts.

"Last year at this time, we were talking about a different shock to the markets, the impact of COVID," Heckman said. "And here we are a year later, and the lingering effects of COVID are still with us."

"And now we face the interrelated headwinds of continuing supply chain issues, challenging weather patterns that have reduced the production of palm, canola and soy and government policy reactions, while now further complicated by the Ward in Ukraine."

These market disruptions are rerouting many traditional trade flows and contributing to crop price inflation, he said.