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Slowing global demand and mixed earnings expectations for U.S. Agribusiness Industry, According to Fitch Report (12.14.2011)
by Chicago Business Wire

 Business Wire -- December 9, 2011 -- CHICAGO-- U.S. agribusiness industry outlook is stable in 2012, supported by long-term growth for agricultural commodities balanced with near-term challenges, according to a new report published today by Fitch Ratings.

The global, diversified agribusiness companies have relatively balanced capital structures and strong liquidity that Fitch expects will support the ratings through periods of moderate earnings volatility. Previously surging commodity prices are on a downward trend, resulting in less usage of working capital and improvement in free cash flow. Accordingly, agribusiness companies should also have less use of short-term debt.

Fitch notes that capital expenditures and acquisitions are high industry priorities, given the robust long-term growth prospects for the sector. However, Fitch remains concerned about the effectiveness of heightened spending on capital expenditures and acquisitions. Agribusiness companies are mainly targeting capital expenditures outside the U.S. or those serving export markets. Acquisitions are also likely to be in faster-growing markets outside the U.S.

The recent retreat in commodity prices reflects improving global supplies from tight levels and slowing global demand. Nonetheless, commodity prices remain well above historical long-term averages and volatility is likely to continue.

Fitch expects mixed earnings results for agribusiness companies during 2012. Overcapacity in North American soybean processing and competition from large South American crops will restrain soybean crush margins. Corn processors will benefit from higher sweetener pricing and strong demand from Mexico, but earnings from corn-based ethanol processing could fall with the anticipated end of incentives. Fitch notes that debt maturities across the industry are manageable in 2012.

The full '2012 Outlook: U.S. Agribusiness' report is available at www.fitchratings.com.

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