Ukraine’s agricultural recovery from its “horrible” war with Russia will be a long-term project, Bunge boss Greg Heckman said, as the ag giant discussed the demand response to high prices, and the outlook for crush margins.

The war will leave “a long tail” on Ukraine’s agriculture “whatever scenario you have in your resolution” because of the extent of damage to the country’s infrastructure, Mr Heckman, the group’s chief executive, told investors.

“There are seaborne logistics that have to be untangled. There are waters that need to be demined

“And all of that has a long tail on it and will be, in our view, a long period of time before you get back” to where Ukraine was before the invasion.

‘Bigger role’

The lag would affect “not only production but being able to move that production into the markets of demand that need it”, he said, echoing comments from rival Archer Daniels Midland over the importance of South America in picking up the slack in grain supplies.

“Especially South America has got to play… a bigger role in helping meet the need to help manage food security global,” Mr Heckman said.

Bunge itself – which has 1,000 employees in Ukraine, where its portfolio includes grain elevators, two oilseed processing facilities and a port, which has been damaged during the war – said that it had restarted last month some of its grain exports by rail and truck.

“However, these activities have been extremely limited,” John Neppl, the Bunge chief financial officer, told investors.

‘No demand destruction’

The executives, on a call to discuss Bunge’s first quarter results, viewed the conflict as only adding to factors boosting crop prices, many of which stand near multi-year highs, with the likes of palm oil, rapeseed and soyoil futures near record tops.

“We face the interrelated headwinds of continuing supply chain issues, challenging weather patterns that have reduced the production of palm, canola and soy and government policy reactions, now further complicated by the war in Ukraine,” Mr Heckman said.

As to how long the rallies will last, one factor that the group was focusing on were signs of elevated prices inducing rationing among consumers.

“We’re not seeing any demand destruction of any magnitude to date, but that’s one we continue to watch closely,” he said, stressing that the group continued “to watch the consumers’ reaction overall”.

‘Extremely tight’

In fact, “on the demand side, things are extremely tight on oil, meal and wheat, definitely less so for corn”, he said.

In the oilseeds and biofuels sector, he highlighted strength in North American refining premiums “on the back of renewable diesel demand”, underlining the Bunge had “not seen a drop-off”.

Indeed, “higher energy prices look like they are here for the foreseeable future for the next few years.

“And that also is supportive, of course, to what price the renewable feedstock of the vegetable oils can be. So we’re pretty constructive on the set-up right now for the next few years.”

Margin outlook

Mr Neppl added that “we’ve seen probably better-than-expected [oilseed] crush margins in North America versus our prior forecast”.

While margins have “come down a bit in Asia and South America, especially out in the [futures] curve… that’s where the most opportunity will lie as we go forward”.

Mr Heckman added that “we’re probably going to have to see some improvement” in South American and Asian crush margins “if demand stays where it is for oil and meal, which we believe it will”.