May 22, 2006

Bunge soybean supply disrupted in Brazil
 

Almost one in four of Bunge's soy processing plants in Brazil have been affected by farmers' protests in recent weeks, but the situation may be returning to normal as the government is expected to announce a financial assistance package next week, said the company's chief financial officer William Wells.

Major roads and railway routes to ports have been blocked for the fourth week by farmers who are protesting rising production costs and a strong Brazilian real.

The problem, said the leading oilseed processor's, is actually getting the products to port for export, as major transportation routes have been blocked.

The group's operating profits were nearly halved in 2005 to US$456 million due to higher transport and energy costs, the strong currency and large soy stocks globally.

Wells said these difficulties are expected to continue this year, but the company has already taken cost cutting measures such as the closure of five of its oilseed processing plants and cutting down 10 percent of its workforce.

At the same time, Bunge is increasing capacity globally. The company has two facilities in Eastern Europe under construction, a third in Russia and a fourth in Ukraine. It has also acquired a new facility in China and increased capacity in Argentina.

The company expects Argentina to be the largest soy export platform in future as it is favourably located to provide low costs. However, current difficulties in the country is expected to affect profits in the first-half of the year.