Top Food Trader Dreyfus Sees Low Agriculture Prices Into 2017

(Bloomberg) -- The head of Louis Dreyfus Co., one of the world’s top-four food-commodities traders, said that agricultural prices will remain low into 2017 as farmers around the world harvest bumper crops.

“Prices for wheat, corn, soybean will continue going down,” Dreyfus Chief Executive Officer Gonzalo Ramirez Martiarena said in an interview in Buenos Aires this week. “Corn yields are so good, productivity is so high in the U.S. that they keep planting despite low prices.”

Benchmark prices for wheat fell to a decade low last month, while corn is at levels last seen in 2009 as farmers in key growing regions, including the U.S. and Russia, reap bumper crops. Low grain prices have been a boon for consumers and companies such as Nestle SA and Kellogg Co. but are hurting farmers and agribusiness including Deere & Co., the world’s largest manufacturer of tractors and combine harvesters.

The views of Dreyfus, as the company is known, and its rivals, including Archer-Daniels-Midland Co., Bunge Ltd., Cargill Inc., are closely followed by commodity investors because their trading relationships give them insight into global supply, demand and inventories trends. The four are known as the ABCD of food commodities for their initials.

Profit Expected

Ramirez said that Dreyfus will post a profit for the first half of the year when it reports results later this month.

“We are doing fine,” he said.

Agriculture commodities traders including ADM, Cargill and Wilmar International Ltd. suffered in the first half on wrong-way bets in soybean markets.

Ramirez is trying to steady Dreyfus amid lower crop prices and reduced price volatility. He announced plans earlier this year to seek joint-venture partners for businesses including orange juice, dairy, metals and fertilizer. In March, the closely held firm said full-year profit dropped 67 percent to the lowest in a decade.

Louis Dreyfus “may issue a bond in the future,” Ramirez said. The potential issue, which would be in addition to existing debt securities, would aim to reduce the the company’s borrowing costs, he said.

Billionaire Margarita Louis-Dreyfus, the head of the 165-year-old firm, is considering selling a minority stake to finance the purchase of holding company shares from other family members. She controls 81 percent of the holding company that owns Louis Dreyfus Co. and is its chairwoman.

Joint Ventures

Ramirez said the company hopes to finalize a sale or joint-venture partner for its agrochemicals and fertilizer operations by year-end. Joint ventures in metals and juices won’t happen until 2018, he said.

Black Sea grain producers will continue increasing output, Ramirez predicted, and corn prices will continue falling until U.S. farmers cut planting, he said.

Chicago corn for December delivery fell to $3.1475 a bushel on Aug. 31, the lowest for a most-active contract since September 2009 and less than half the record high of $8.49 set in 2012. Wheat futures declined to a 10-year low of $3.8675 a bushel last month, more than 70 percent lower than the all-time high reached in 2008. Soybean futures dropped to a four-month low of $9.37 a bushel on Sept. 1 as the U.S. Department of Agriculture said the country’s farmers will reap a bigger crop than expected.

To contact the reporters on this story: Pablo Gonzalez in Buenos Aires at pgonzalez49@bloomberg.net, Andy Hoffman in Geneva at ahoffman31@bloomberg.net, Javier Blas in London at jblas3@bloomberg.net. To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net, Ana Monteiro, Nicholas Larkin