UPDATE 3-Bunge shares slide as China trade war, pig disease upset exports

(Adds stock decline, CEO comments on U.S.-China trade war)

By Arundhati Sarkar and Tom Polansek

Oct 30 (Reuters) - Agricultural merchant Bunge Ltd warned on Wednesday of a drop in annual profits due to mounting challenges to its grain trading and processing business from the U.S.-China trade war and a fatal pig disease in Asia, sending shares down more than 4%.

The company reported better-than-expected third-quarter profits, driven by higher margins on its edible oil products in North America and Brazil. However, Chief Executive Greg Heckman projected annual earnings would fall 15 cents to 20 cents a share below 2018, excluding certain items.

The U.S. farm sector has suffered for more than a year from tit-for-tat trade tariffs with Beijing, which have cut agricultural exports from North America. An outbreak of the disease African swine fever in China has also reduced the need for soy imports used for livestock feed. China is the world's biggest hog producer and soybean importer.

"Typical trade flows and producer marketing patterns have been and continue to be distorted," Heckman told analysts on a conference call.

Uncertainty about the outcome of the trade war has discouraged U.S. farmers from selling harvests to processors like Bunge and rival Archer Daniels Midland Co, hurting soy crush margins. Instead, growers are keeping crops in storage.

Washington and Beijing said this month that they reached an interim trade agreement, although it has not been completed.

"The kind of on-again, off-again trade war has kind of been the worst of both worlds with the market starting to adjust as if the trade war is over when it's not over," Heckman said. "It's been about as confusing an environment as we could see."

Bunge's agribusiness earnings before interest and taxes fell 68% to $153 million from a year earlier.

Excluding items, the company earned $1.41 per share, beating analysts' expectation of 48 cents, according to Refinitiv IBES data. Net sales fell 9.5% to $10.32 billion, missing analysts' estimate of $11.31 billion.

"The results on the quarter represented a solid, albeit noisy beat," Stephens analyst Ben Bienvenu said.

Bunge's operations in Brazil and Argentina help it offset the impact of the trade war on its U.S. business. But the company took a $1.7 billion charge related to its Brazilian sugar and bioenergy business joint venture with British energy company BP Plc.

The joint venture, BP Bunge Bioenergia, will merge the two companies' Brazilian sugar and ethanol operations to create the world's third-largest sugarcane processor. Bunge has previously tried to sell its Brazilian sugar operation with no success. (Reporting by Arundhati Sarkar in Bengaluru and Tom Polansek in Chicago; Editing by Vinay Dwivedi and Tom Brown)