OREANDA-NEWS. The U.S. agribusiness rating and sector outlooks are stable in 2016, reflecting Fitch Ratings' expectation of steady leverage and sustained cash flow generation within another benign commodity pricing environment. Agricultural commodity pricing vacillation has been virtually non-existent over the past three years, as ample supplies have replaced tight conditions from abundant harvests across the world of key crops.

Fitch does not expect significant fluctuation in commodity pricing in 2016, as the resulting large global inventories of important agricultural commodities, corn, soybeans, and wheat, provide sufficient cushion from unpredictable external factors such as climate variability, and geopolitical issues. For this reason, Fitch does not expect any revision of the sector outlook in 2016. However, successive crop issues during 2017 may create enough pressure on cash flows and leverage to warrant negative action if companies cannot offset the headwinds via cost savings or debt reduction.

Fitch is concerned about a secular slowdown in emerging markets stressing growth prospects of the agricultural supply chain that directs movement from areas in supply to deficit regions, typically developing countries. Significant disruption of agricultural product flows, especially from weakened demand in high-population countries such as China, may heighten earnings volatility for agribusiness firms.

Fitch anticipates balanced capital deployment supported by sustained improvement in cash flow generation. Fitch sees solid cash flow satisfying a light debt maturity schedule in 2016 and allowing flexibility for midsized acquisitions and increased shareholder returns. Agribusiness firms focus on enhancing geographic positioning and solidifying portfolios with value-added products and services.