Bunge cuts Brazil take-or-pay bean contracts as it misses results goals

US agribusiness giant Bunge has minimised the volume of soybeans it buys from farmers through take-or-pay contracts following a poor couple of years that saw them crush at zero margin and miss key finance goals, Bunge’s CEO said on Wednesday.

Announcing Q4 results, Soren Schroder said tthe company would increasingly look towards buying on a spot basis as it reduces forward logistics and sales commitments.

“We have reduced take or pay in Brazil, which has given us increased flexibility,” he said, noting that hedging patterns had changed over the past two years as South American farmers become more flexible in selling forward produce.

“The big thing that has changed in Brazil is that so little of the farmer selling is done in advance. That is the biggest change. We used to walk into a harvest with 50% to 60% of the crop bought in advance,” he said, adding that Chicago futures contracts and volatile currency had led to greater farmer hedging.

In its global grain trading and distribution business, results were similar to 2016, although margins remained under pressure, the company said.

The statement came as Bunge announced disappointing financial results, missing key targets by posting a fourth quarter loss and revenue of $7.9 billion for its agribusiness segment – around 10% lower than analyst expectations.

The losses were down to delayed farmer pricing of 2018 crops and weak crush margins that were driven by a result of feed wheat and DDGs eating into soymeal market share in the feed sector.

The company said that dynamic should reverse from Q2 2018 onwards.

The poor results will do nothing to quell rumours that the company will now be purchased by one of its peers.

Over the past eight months, Bunge has been rumoured to be a take-over target for both Glencore Agriculture and Archer Daniels Midland, although Schroder refused to take questions on the possibility of a sale.

Last week, ADM fuelled rumours that it was looking at Bunge by refusing to comment on a potential Bunge acquisition while stating it was looking to expand in Latin America – where Bunge says it has an “elaborate network”.