Soaring diesel prices and uneven agricultural exports are piling fresh uncertainty onto crop traders and farm equipment manufacturers that have been waiting for a long-anticipated recovery to take hold.

Crop merchant Bunge Global SA and tractor maker AGCO Corp. both described a difficult global landscape on Thursday after posting third-quarter earnings that topped Wall Street expectations.

“We're entering into next year with about as complicated an environment as we've seen in a long time,” Bunge Chief Financial Officer John Neppl told investors on an earnings call. “The environment remains highly dynamic with elevated uncertainty.”

Conflicts in the Middle East and the Black Sea region continue to disrupt the flow of agricultural commodities, from staple crops such as wheat to essential farming inputs like fuel and fertilizer. The Black Sea ranks among the world's most important export corridors for grain and fertilizer, which is why disruptions there carry weight across global agricultural trade. Bunge and AGCO offer a close view of those impacts as they ripple through the supply chain, touching everyone from farmers to end consumers and ultimately shaping what shoppers pay at the grocery store.

While Bunge maintained its full-year earnings guidance, AGCO lowered its annual sales outlook as higher costs, rising interest rates and persistent pressure on crop prices weigh on farmer sentiment and soften industry demand for equipment.

“Global demand is now at its weakest level in more than a decade,” AGCO Chief Executive Officer Eric Hansotia said on the company's earnings call. “We continue to believe the industry is at the trough of this cycle, with some recovery coming in 2027.”

AGCO, whose brands include Fendt, PTx and Massey Ferguson, drew a boost from stronger North American sales after crop prices spiked in August. Tractors and combines are among the most discretionary purchases on a farm, which is why equipment demand tends to track growers' budgets so closely. Demand for machinery was subdued elsewhere in the world, however, as record diesel costs arrived on top of already elevated fertilizer and seed prices.

The Trump administration has moved to ease the strain on farmers, most recently announcing $8 billion in fuel aid, as it seeks to court a key Republican voting bloc ahead of the approaching midterm elections.

AGCO shares climbed 5.6% in New York on Thursday, while Bunge fell 4.7%, with analysts interpreting the company's unchanged guidance as implying softer fourth-quarter earnings.

St. Louis-based Bunge said it expects slightly lower results from its soybean processing business as margins shrink in the US, Brazil and Europe. It anticipates stronger results in grain merchandising and milling on expectations of solid grain harvests in Australia and Canada, even as supplies from the Black Sea remain constrained.

“Geopolitical tensions, evolving government policies and global weather patterns continue to change agricultural flows,” Bunge CEO Greg Heckman said, highlighting the company's ability to pivot. “We can redirect crop flows, work around physical constraints and keep supply connected to demand across regions.”

The industry is also watching how China's commitments to purchase a broad range of US agricultural supplies play out. Beijing has pledged to buy at least $17 billion of US farm goods annually through 2028, on top of a separate pledge to secure 25 million tons of US soybeans per year over the same period. The multi-year horizon anchors purchase volumes beyond any single harvest.

Bunge said those commitments are likely to drive demand for US agricultural products even when they may not be the most competitive compared with supplies from Brazil or other origins.

“US-China trade, as we've seen, is driven by some commitments that sometimes are different than economics,” Heckman said. “Brazil has become an important supplier to China and when the economics work, that's where it will go.”

Soybean and corn futures each hit multi-month lows on Thursday before paring losses, as supply builds during the autumn harvest outpace demand for the crops. Wheat futures jumped after Bloomberg reported that China made its first inquiry about US wheat shipments following a presidential summit in September.

Biofuels stand out as a bright spot for the farm sector, with strong policies mandating the use of alternative fuels creating additional demand for feedstocks such as soybeans and corn. The Trump administration recently proposed requiring refiners to blend in more biofuels through next year as a way to make up for exemptions granted to some refiners from blending mandates. The final shape of those blending rules, together with China's purchase pledges, ranks among the most closely watched variables as the industry looks toward the recovery AGCO expects in 2027.

“Getting clarity around the biofuel policy is definitely going to be good for demand and good for the market overall,” Heckman said on Thursday.

— Bloomberg

Source: BusinessWorld