Archer Daniels Midland Hurt by Weak Exports
May 03 2016 - 1:59PM
Dow Jones News
By Jacob Bunge
The top executive at Archer Daniels Midland Co. on Tuesday said
the weakening U.S. dollar should help domestic grain exports,
though China could still add to a global glut of some key
crops.
ADM reported a 53% drop in quarterly profit after U.S. exports
declined in the face of cheaper overseas alternatives, as the
Chicago-based company and other big traders and handlers of
agricultural commodities grappled with an oversupply of crops such
as corn, soybeans and wheat.
"With the dollar stabilizing or weakening a little bit with
regards to the other currencies, the U.S. is becoming a little bit
more competitive, " ADM Chief Executive Juan Luciano said on an
investor call, cautioning the business remained challenged.
Weather-driven damage to South American crops is also poised to
lift ADM's trading and processing businesses later this year.
Mr. Luciano's comments echo those at rivals such as Bunge Ltd.,
which last week forecast tighter supplies that could lift
markets.
Volatile grain markets in late March took a toll on ADM, leaving
its global crop-trading desk with a quarterly loss after prices
moved against the company, executives said.
ADM's profit fell to $230 million for the quarter to Mar. 31,
with per-share earnings of 39 cents, falling short of analyst
expectations of 45 cents. Sales dropped 18% to $14.38 billion.
Profit dropped sharply in ADM's agricultural services division,
which includes grain shipping and its oilseeds division that
processes soybeans into vegetable oil and animal feed ingredients.
ADM attributed both declines to the flow of South American crops,
which gained strength in December after Argentina eliminated some
taxes on grain exports, cutting into U.S. exports and reducing
profit margins for ADM's soybean processing operations.
"Given the tough start of the year and probably a similar
[second quarter], we are less optimistic about ag services' overall
results for 2016," Mr. Luciano said.
He said the impact of China's late-March decision to remove
price supports for corn remained uncertain. The move could make
Chinese corn cheaper and depress prices for that grain as well as
for other crops such as sorghum and barley.
"Over the next year they're going to start having these auctions
and bringing some of that product to the market," Mr. Luciano said.
"It's difficult to gauge how much, to be honest, at this point in
time."
ADM reported slightly higher earnings from corn processing and
its new flavorings division. Executives said the company is
conducting a strategic review of its ethanol dry mills, which ADM
may sell after low gasoline prices cut profit.
--Austen Hufford contributed to this article
Write to Austen Hufford at austen.hufford@wsj.com
(END) Dow Jones Newswires
May 03, 2016 13:44 ET (17:44 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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