Fitch: U.S. Agribusiness Earnings Stabilize as Global Supplies Replenish

Fitch Ratings expects stable ratings for Fitch rated U.S.-based agribusiness entities in 2015, reflecting relatively steady cash flows and earnings in the second year of downward pressure on agricultural commodity pricing resulting from large harvests in key production areas. Fitch's rating and sector outlooks are both stable.

In 2015, Fitch expects support to credit profiles of agribusiness companies to stem from sustained moderation in commodity pricing as global stockpiles of important agricultural commodities, corn, soybeans, and wheat, have replenished by consecutive years of record crops. Fitch thinks pricing could remain persistently low in 2015 if another promising South American crop comes to market in the spring.

The stable rating and sector outlook also reflects the industry's global processing, marketing and logistics network that facilitates directing supply surpluses to deficit regions. Industry demand arises from slow, stable growth in developed countries and boosted by prospects in high-population emerging markets, notably China. Disruptions of China's agricultural commodity demand can lead to significant earnings volatility.

Fitch sees capital deployment in 2015 focused on acquisitions and share repurchasing with debt reduction a lower priority given modest long-term debt maturities in the coming year. Fitch's main concern is that aggressive activities lead to higher leverage potentially pressuring current ratings and outlooks.

The full '2015 Outlook: U.S. Agribusiness' is available at 'www.fitchratings.com.' Fitch's outlook reports for other sectors and regions are also available.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research: 2015 Outlook: U.S. Agribusiness (Record Crops Fatten Supplies; Earnings Stabilize)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=840768

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