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Slow Brazil soy sales offset trading boost to ADM profits

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Archer Daniels Midland's earnings fell - although not by as much as investors had expected - as a slump in soybean crushing margins, and South American crop hoarding, offset a boost to profits from improved performances in crop trading and ethanol.

The US-based group – with Bunge, Cargill and Louis Dreyfus one of the "ABCD" group of agricultural trading giants – unveiled earnings of $276m for the April-to-June quarter, down 2.8% year on year.

The decline, on revenues down 4.4% at $14.94bn, reflected a 97% tumble to $38m in profits from oilseeds crushing and origination.

"Weak margins in both global soybean crush and South American origination impacted" the division's results, ADM said, in comments which follow a high-profile reluctance by Brazilian farmers to sell crop at prices hurt by a revival in the real besides softness in international values.

While farmers in the key Brazilian soybean-growing state of Mato Grosso have now sold 83.1% of their latest soybean harvest, according to a report on Monday from research group Imea, that remains 8.3 points behind the year-ago pace.

Forward sales for the 2017-18 crop are, at 9.5%, lagging even further – behind the 21.1% pace a year before.

'Strong carries'

The reduced oilseeds performance left ADM's operating profits down 5.6% at $642m, despite a return to profit of $40m in merchandising and handling, from a $14m loss a year before.

"North America grain results increased significantly over the prior year with strong carries in wheat, corn and soybeans," allowing the group to exploit higher values for forward sales over spot rates.

The unit, in trading, also achieved "solid results", ahead of those a year before, "benefiting from improved margins, favourable timing effects and actions to improve performance".

The so-called bioproducts segment, also returned to the black, by $26m, after reporting a $19m loss a year before, thanks to an "improvement" in ethanol production margins.

'Aggressively managing costs'

Juan Luciano, the ADM chief executive, said that ADM "continued to deliver on our strategic plan and capitalise on improving conditions in some markets", during the quarter, noting that underlying earnings per share grew by 39% year on year to $0.57.

This figure, which was ahead of market expectations of $0.52 per share, excluded one-off factors such as losses on as asset sales, which curtailed the as-reported earnings per share to $0.48, in line with the year-before result.

Mr Luciano also noted that ADM was "diversifying our capabilities and geographic reach through acquisitions and organic expansions".

Furthermore, the group is "aggressively managing costs and capital, and taking additional portfolio actions, and we are ahead of pace to meet our 2017 target of $225m in run-rate savings".

ADM shares stood 3.4% higher at $43.60 in lunchtime deals in New York.

By Mike Verdin

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