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ADM profits plunge faster than expected, again

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Archer Daniels Midland, one of the top global agribusinesses, has released some disappointing financial results, thanks to the uncompetitive of US grain exports, and heavy supplies of soymeal from Argentina, which are pressuring processing margins.

"The first half of the year continues to present a challenging environment," said ADM chief executive Juan Luciano.

ADM's profits over the three months to March 31 fell by 53% year on year, to $230m, or 39 cents a share. Excluding analyst expectations, the company earned 42 cents per share, below analyst expectations of 45 cents a share.

The company's revenues fell by 23% year on year, to $14.38b, well short of analyst expectations of $16.9bn.

Weak export competitiveness

ADM agricultural services unit's operating profit fell by 61%, to $76m, as earnings from its grain handling business plummeted.

The company cited a "weak US export competitiveness, lower North American volumes and margins, and a quarterly loss for the global trade desk compared to positive results last year".

The relative strength of the dollar has curbed US grain export competitiveness in the global market.

Crush margins squeezed

The company's oilseed processing margins were down, thanks to weak global crush margins.

"Global soybean crush and origination results were down significantly due to lower global margins resulting from increased Argentine soymeal exports and significantly reduced US meal exports," ADM said.

But Mr Luciano said the company was "cautiously optimistic that reduced South American soybean and corn production could bring improved soybean crush margins and merchandising opportunities in the second half of the year".

Swing to sweetener

Still, the group's corn processing business saw rising profits, thanks to increased earnings from sweetener and starch production.

ADM has been going long on sweetener and starch production, as it rebalances its corn processing capacity toward wet milling, which allows production to switch from ethanol to other corn products, such as corn syrup.

ADM's ethanol is continuing to struggle, thanks to "high industry production levels" of the corn based biofuel, which are pressuring margins.

By Agrimoney.com

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