Bunge Ltd (BG), Cresud S.A.C.I.F. y A. (ADR) (CRESY): Agri-Stocks Galore

The agricultural segment brought positive results for the company, mainly due to the increase in crop prices observed during the period, and the larger areas planted with sugarcane. Crop area was increased 8% year-to-year to 221,000 acres, of which 57% of these are dedicated to soybeans.

EBITDA during the first six months of this fiscal year reached $128 million, 45.5% higher than in the first six months of 2012. The sale of the “Horizontina” farm for a total amount of $38 million (book value was $23 million) contributed to the result.

Cresud S.A.C.I.F. y A. (ADR) (NASDAQ:CRESY) is a well-managed company with a good balance sheet. However, the pending ex-dividend payment of $0.504 since November 2012 is generating concerns. This is due to Argentine government authorities not allowing payments of dividends to ADR holders. I believe this a bad sign for investing in the stock, as these restrictions are very likely to continue in the near future.

Bottom line

Very promising soybean sales have just started in South America. USDA projections of 81 million tons of soybean production in Brazil and 55 million tons in Argentina will guarantee good levels of profitability for Cresud S.A.C.I.F. y A. (ADR) (NASDAQ:CRESY) and Bunge Ltd (NYSE:BG). Archer Daniels relies on its North American output, which will be realized by Q4. Until then, despite better financials, the company’s results will not impress.

The main foreseeable threat is an unlikely, massive drop in commodity prices. Although large crops are expected in the Northern Hemisphere, I do not see it as a serious threat. On the other hand, logistics could increase costs, but Bunge Ltd (NYSE:BG) will be prepared to affront them, as it already has. In the case of Cresud S.A.C.I.F. y A. (ADR) (NASDAQ:CRESY), despite its good management and diversification in Latin America, its exposure to Argentina’s currency instability and increasing restrictions could become a serious threat.

The article Agribusiness Companies: 3 Options originally appeared on Fool.com and is written by Damian Illia.

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