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ADM 'preparing already' for bumper US harvest

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Juan Luciano, the Archer Daniels Midland chief executive, said that the agribusiness giant was already preparing for the prospect of strong North American harvests this year, in areas from transport to crush margins.

Mr Luciano said that strong progress in spring plantings, coupled with benign long-term weather forecasts suggested "a good likelihood for US growth", in crop development terms, and "opportunities for very good" inventories at the close of 2015-16.

These large supplies "combined with expected solid global demand, point to very high utilisation of our storage, transportation, and processing assets in North America and Europe later this year", he told investors.

Indeed, ADM was foreseeing a "good transition" to the 2015-16 crop, with "plentiful of inventories that will provide carriage opportunity", Mr Luciano said, adding that "there is a lot of business to do ahead of us.

"So the oilseed, the ag services team, the grain team is preparing for all that. It's preparing our assets. It's preparing commercially to do this.

"And we expect the second half to be very strong for them."

'Tight capacity'

Mr Luciano pointed out that the ag services division, which undertakes functions such as grain marketing and transport, had already achieved a 37% rise in operating profits in the January-to-March quarter.

However, in oilseeds too, the combination of ample supplies, strong demand for processing products and limited crush capacity boded well for margins.

"I think that there is a tight capacity," Mr Luciano said.

"So you will continue to see those dynamics in which… we get to export a lot and we have very robust domestic demand.

"That presents very good crush margins," a factor which "will continue over the year.

"This is a global demand story," concerning consumption of vegetable proteins.

Ethanol prospects

He also forecast bright times ahead of ethanol, in part because of its status as the cheapest octane enhancer for gasoline, besides demand stipulated by blending mandates.

"Ethanol continues to be, clearly by a big margin, the lowest octane enhancer around the world and that continues to bring export markets to the US.

"If you think of ethanol in the range of $1.60-1.70 [a gallon], then next oxygenator is about $2.50."

US exports this year will hit at least 800m gallons this year, in addition to the 13.8bn-14bn gallons of domestic demand.

The comments followed the release by ADM of results which beat market expectations, although shares in the ag trading giant gained just 3 cents to close at $50.35 on a negative day for New York stocks.

By Agrimoney.com

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