RSS
Twitter
Linked In
News In
News
Linked In
RSS
https://twitter.com/Agrimoney
http://www.newsnow.co.uk/h/Industry+Sectors/Agriculture

You are viewing 1 of your 2 complimentary articles.

Register now to receive full access.

Already registered?

Login | Join us now

US 'lack of competitiveness' in corn, soybeans takes toll on ADM

Twitter Linkedin

The slower pace of US grain exports, and “compressed” oilseed crushing margins, drove a bigger-than-expected drop in profits at Archer Daniels Midland, which revealed a global workforce “restructuring”.

 

Shares in ADM – one of the big four “ABCD group” of agricultural trading houses, with Bunge, Cargill and Louis Dreyfus –tumbled nearly 7% in early deals in New York, before recovering some ground to stand at $40.57 in late morning deals, a drop of 5.2% on the day.

 

The group unveiled a drop of 44% to $192m in earnings for the July-to-September quarter, a result which Juan Luciano, the ADM chairman and chief executive, said "was below our expectations".

 

While the extent of the decline was in part down to one-off factors, such as writedowns on asset values, the group fell short of market expectations too in reporting underlying earnings per share of $0.45.

 

Wall Street had expected a $0.55-per-share result.

 

“The operating environment in our ag services and oilseeds businesses was more challenging than anticipated,” Mr Luciano said, adding that ADM had over the quarter taken “several actions” to boost its competitiveness.

 

These included “reconfiguring” its Peoria ethanol complex, asset sales and “restructuring our global workforce”, a move which follows a series of reports of departures and shake-ups at a range of agricultural commodity houses, in the face of weak volatility, which undermines potential for trading profits.

 

‘Low exports’

 

In fact, ADM blamed the “lack of competitiveness of US corn and soybeans in global markets” largely for the weakened performance of its agricultural services division, which reported a 55% drop to $87m in operating profits.

 

Profits at the division’s merchandising and handling unit slumped 78% to $20m, while transportation results dropped 67% to $14m “due to low exports of grain”, besides a slow start to the US autumn harvest.

 

US corn exports for 2017-18 are for corn, at 5.07m tonnes, running 45% below year-ago levels, undermined by enhanced competition from Brazil, which enjoyed a stronger safrinha harvest this year.

 

Soybean shipments are running 9.5% lower at 12.3m tones, despite raised purchases by China, the top importer, which has also been turning to Brazil to meet most of its needs.

 

Customs data for September show Chinese soybean imports from Brazil up 58% year on year, at 5.94m tonnes, and priced at $406.50 a tonne, while buy-ins from the US dropped 31% to 937,262 tonnes, and with an average price of $407.91 a tonne.

 

‘Good margins’

 

ADM also reported a 17.9% drop to $119m in operating profits at its oilseeds processing division, saying that results from crushing and origination “were impacted by compressed global crush margins and weak South America origination margins”.

 

The results left ADM’s corn processing division, which turns the grain into the likes of ethanol and high fructose corn syrup, as its major earner by a margin, with operating profits up 18.2% at $253m.

 

The group flagged “good margins” in corn-based sweeteners and starches in North America, and “better margins” in ethanol.

 

The ingredients division, including Wild Flavors, reported a 16.4% drop to $61m in operating profits, reflecting higher costs incurred in start-up operations.

Twitter Linkedin
Related Stories

Evening markets: Ags poop party lifting other commodities, shares

Wheat futures set another contract low, while arabica coffee hits its weakest close but one in 19 months, despite buying in other asset classes

Hedge funds turn net bullish on ags - ahead of price drop to historic low

Speculators are wrong-footed in soymeal, in which they hike bullish bets just before a price tumble. But they fare better in cotton and cocoa

Morning markets: Wheat futures set fresh contract low

... dragging on the corn market, amid selling ahead of a key US report. The Argentine weather outlook depresses soybean prices

Soft commodities better bets than grains for 2018, says Commerzbank

Indeed, investors are overrating prospects for corn and wheat futures. But cocoa futures have scope for gains, and coffee could see a "price surge"
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© Agrimoney.com 2017

Agrimoney.com and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of the Briefing Media group
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069