Bayer sees an upside if US-China trade war leads to more maize output
Monheim — Bayer said on Tuesday it would be difficult to predict 2019 earnings at its agriculture business, which now includes Monsanto, because a US-Chinese trade dispute could reroute trade flows in farming commodities.
The head of Bayer’s crop science division told Reuters his company could even benefit if US farmers switched to grow more maize to avoid barriers to the soya bean trade imposed by China in response to US tariffs on Chinese products.
The combination of Bayer-Monsanto has a much bigger market share in maize seeds and related crop protection products than in the soya market, so it could capture more of that growth.
"The big unknown next year will be how US farmers react to the Chinese-US trade war," Liam Condon said on the sidelines of a news conference at the division’s headquarters in Monheim, Germany.
"There could even be a positive development, when US farmers for instance grow less soy and more corn," he said, adding China mainly relied on the US for soya imports and less for maize.
The Monsanto deal made Bayer the world’s largest maker of seeds and pesticides, ahead of DowDuPont’s Corteva Agriscience, Syngenta and BASF.
China said on Tuesday it had no choice but to retaliate against new US trade tariffs, raising the risk that US President Donald Trump could soon impose duties on virtually all the Chinese goods that the US buys.
US soya beans farmers have seen prices fall and exports shrink after Trump’s tariffs triggered retaliation from buyers.
"What’s safe to assume, other things being equal, is that more Brazilian soy will go to China, and much less from the US to China," Condon said, adding that US soya might head to Europe if Brazilian trade focused on its new Chinese market.
"The total sum of produce will not change significantly but the trade flow might shift," Condon said.
The US and Brazil are major international markets for Bayer Crop Science, with the former generating profits mainly in the first half of the year and the latter in the second.
Bayer earlier in September cut its earnings forecast due to delays to its $63bn takeover of Monsanto and said sales of its consumer care products fell, hitting its shares, already reeling from a legal battle over the weed killer Roundup.