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Bayer CropScience eyes rebound in 2011 qrcode

Sep. 13, 2010

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Sep. 13, 2010
Bayers pesticides unit expects higher grAIn prices to feed through to profits next year, after bad weather spoiled first-half earnings.

"High commodity prices result in more investments by farmers in high-value seeds and crop protection products. We benefit from these expenditures," the outgoing head of Bayers CropScience division, Friedrich Berschauer, told Reuters in an interview on Thursday.

"The rise in (wheat) prices could have a moderate impact on the grAIn herbicides business in Europe. But the mAIn part of that wont be felt before 2011."

Berschauer, who oversaw the integration of Aventis CropScience after Bayers takeover of the business in 2002, will retire on Oct. 1 and hand over to Sandra Peterson, previously a top executive at Bayers healthcare division.

Bayer CropScience typically makes about 70 percent of its annual core earnings in the first half, when European and North American farmers buy most of their pesticides.

Severe drought in Russia and UkrAIne this summer substantially diminished the wheat harvest there, leading to a surge in global prices.

Within eight weeks of this years low in wheat prices in early June, prices shot up 84 percent and are currently trading 24 percent higher year-to-date, Bayer sAId.

Products for wheat farmers account for more than a quarter of crop protection sales at the division.

Core earnings at CropScience dropped 22.6 percent in the first six month of the year, as farmers in the northern hemisphere, the units mAIn customer group, suffered a particularly cold winter followed by an unusually dry summer, dragging demand for pesticides lower.

The unit, which vies with Swiss rival Syngenta for the No.1 spot in the market for conventional crop chemicals, accounted for 22 percent of Bayers group sales in the first half.

Rival Syngenta reported a 13 percent drop in operating profit in the first half but sAId strong demand in Latin America and Asia should keep full-year operating profit at about last years level.

Bayers Berschauer reiterated an earlier outlook for the division to see a significant decline in underlying core earnings this year.

An expected improvement in the second half would not sway the full-year outlook, he sAId.

"Overall, the business environment for the second half is normal. We expect second-half sales above the year-earlier level," he sAId, adding that current weather trends and prices for grAIns and crops in Latin America were helping the business.

Still, the crop chemicals business was becoming increasingly volatile in the long term because both the weather and currency rates were getting more fickle.

In addition, traders were increasingly speculating on soft commodities, while farmers decided only at short notice which crop to sow.

Source: Reuters

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