CHICAGO – Earnings, debt volatility and other factors prompted Fitch Ratings to give a negative outlook for agribusiness in 2013.
Fitch said 75 percent of the companies in the rating agency's agribusiness outlook report have Negative Outlooks or are on Rating Watch Negative. Besides volatility in earnings and debt volatility, near-term earnings improvement could be constrained by several factors including challenges in the US beef market stemming from high feed costs, unprofitable ethanol processing and smaller crops to process and transport due to the drought, according to Fitch.
“Modest growth in developed markets as well as high GDP and population growth in emerging markets, particularly China, support agricultural product demand. However, commodity supplies remain tight, and Fitch expects ongoing agricultural commodity price volatility based on actual and perceived changes in supply and demand until stocks are replenished, which could take more than a year,” the ratings agency said.