BOSTON — As 2017 comes to an end and 2018 approaches, global grain companies like Bunge Ltd. are left to consider some difficult questions in regard to the commodities markets.
In a Nov. 14 presentation at the Morgan Stanley Global Chemicals and Agriculture Conference in Boston, Soren W. Schroder, chief executive officer of White Plains, N.Y.-based Bunge, said he believes the grains industry is mostly caught up in a cyclical period.
Mr. Schroder said it is “highly unusual” for industry to go through three or four years of global glut, a scenario that has played out across the entire spectrum of commodities.
|Soren Schroder, c.e.o. of Bunge|
“Many of these things do self-correct,” he explained. “Economics at the farm level, wind, weather usually bring these things into balance. And I’m convinced that will happen again this time. In which form that adjustment will take place, only time will tell. But it will happen, and we will get back into a market eventually where tension in the supply chain and shifts in trade will bring about the value in our global footprint that we have built exactly for that reason.”
Despite his mostly optimistic outlook, Mr. Schroder indicated that some pieces of the agricultural chain may be experiencing a permanent shift. One such piece is the U.S. grain handling industry, he said.
“If there is one place in the world where we do see that there’s a shift and there is a structural amount of overcapacity that somehow has to be rationalized, it’s in the U.S. grain origination and export industry,” he said.
In blunt terms, Mr. Schroder said the U.S. grains part “needs fixing.”
“We can’t do that alone, of course, but we’ve done what we can, having shut down, I think, 10 or 12 facilities over the last two or three years,” he said. “Handling the same volume through upgraded facilities is one way of going about this, but that’s just a small piece that needs to play out here over the next couple of years to get the U.S. business back into a healthier spot. But I really think the structural issue is limited to that.”
Beyond the U.S. grain handling industry Mr. Schroder said he sees a situation where dynamics and fundamentals are favorable. The rest of Bunge’s agribusiness network, including its grain origination in South America, global crush in soy, soft seed crush of sun and canola, are in a good position.“I think the vast majority of our agribusiness franchise has its earnings power intact,” he said.