As soyoil prices are hit 19 year highs, poor soybean harvests and increased demand from China take their toll on the world's leading oilseed processor with Bunge North America announcing that from early this month it will idle production at a soybean processing facility in the US.
Citing decreased margins at the company's Destrehan plant, the North American arm of Bunge said today that it will temporarily suspend operations at the soybean processing facility while the export elevator at Destrehan will continue to operate.
"While it is always difficult to idle a facility, even temporarily, we believe this is the appropriate step to take until domestic supplies and adverse conditions in the export market improve," said Carl Hausmann, president and CEO of Bunge North America, at the same time assuring customers that they will be supplied 'by other Bunge facilities without interruption'.
Drought-impacted harvests in the US, coupled with disappointing forecasts in Argentina and Brazil due to bad weather have put pressure on already reduced global soy stocks.
Earlier this week the Chicago Board of Trade saw soybean futures hitting contract highs on renewed concerns about the South American harvest amid tight US stocks. The American Soybean Association reported this week that March bean futures closed down $2.11, finishing at $340.98, May was $1.10 lower, closing at $339.88 and July lost $1.10, ending at $333.81.
According to ASA imports of South American soybean and products into the United States are possible but the industry questions whether Brazil 'can execute in a timely manner and whether US consumers will buy Brazilian beans'. 'Since it is unlikely that imports can make up for the expected shortfalls in US soybean supplies much higher prices are expected as the markets ration,' said the industry body.
Last month Bunge reported a 3 per cent increase on net income for the fourth quarter 2003 ended 31 December, coming in at $100 million, from $97 million posted for the same period a year before. But in light of a more pressing market Bill Wells, the company's chief financial officer, warned "we would not expect that we would see the fourth quarter of this year replicating the fourth quarter that we saw in 2003,".
Bunge is not alone in feeling the impact of weaker supplies. In January private US agribusiness Cargill temporarily shut its Guntersville, Alabama, soy plant because of tight supplies and poor profits.