ADM uses nutrition business to lessen trade war; ASF impact

02:27PM Nov 01, 2019
Soybeans 05
Soybean photos from MI Soybean College 2014.
( Aimee Cope )

Grain trader Archer Daniels Midland Co (ADM) shared its quarterly profits, and posted higher-than-expected numbers, as increased returns in its nutrition business and improved U.S. grain marketing campaigns helped lessen the impact of sluggish commodity prices, ethanol industry troubles and trade war woes, according to a report by Reuters

ADM, and its competition, has been restructuring its business after a prolonged period of crop oversupply thinned margins and drained profits. The U.S.-China trade war and African swine fever (ASF) have also lowered demand for soymeal in China. 

That lowered demand from China led to a tightening of ADM’s oilseed processing margins in the U.S. and South America and turned its focus to other export markets such as Vietnam.

ADM chief executive Juan Luciano told Reuters that ASF has affected what crops some plants are processing. While some U.S. customers are planning to increase soymeal production, he said, “We’ve seen some of the plants that are dedicated to export in Brazil taking some of that capacity down. We’re seeing some shift in Europe, also, from soybean to rape(seed) just because there is more profitability there.”

ADM earned 77 cents per share in the 3rd quarter, not including special items, beating analyst estimates by 8 cents, according to IBES Refinitiv data. Its shares rose almost 3% to $41.67. 

Adjusted earnings from ADM’s carbohydrate solutions segment fell 36.8% to $182 million because of lower margins for its ethanol business.

The nutrition business, however, was a high point for the company, experiencing a 76% jump in adjusted operating profit as the company pushes for growth by investing in specialty items such as pea protein and other plant-based ingredients, Reuters reports.

Weather trouble, which caused late planning in much of the Midwest and caused a delayed and wet harvest this fall, has impacted ADM and other grain merchants’ supply chains, the company said, but how much those delays could impact their bottom line is unclear. But as U.S. farmers deliver wet grain that will need drying, the company does expect to see an increase in its drying revenue.