Archer Daniels Midland raised its profits forecast as it reported a near-doubling in quarterly earnings, after a surge in profits at its core agricultural services business helped by Argentine farmers’ soybean-selling spree.
The US-based group – which with Bunge, Cargill and Louis Dreyfus is one of the ABCD group of agricultural trading giants –said that its earnings for 2022 would top $7 a share, an upgrade from a previous forecast of $6.50 a share.
The revision came as it reported a 96% surge to $1.03bn in earnings for the July-to-September quarter, on revenues up 21% at $24.68bn.
Underlying earnings per share rose to $1.83 from $0.93 a year before, exceeding the $1.44-per-share figure that Wall Street had expected, according to a Refinitiv poll.
‘Increased farmer selling’
The improvement was driven by an 74% jump to $1.08bn in underlying operating profits in the ag services and oilseeds division, which benefited from crop dynamics in the Americas.
ADM said that “short crops” in South America – where dryness undermined Argentine and Brazilian soybean production in particular in 2021-22 – supported the division’s US exports, “driving improved volumes and margins in North American origination”.
Meanwhile, “South American origination saw improved volumes and margins” nonetheless, thanks to “increased farmer selling”, in a quarter marked by a splurge of pricing by Argentine farmers after the government in September introduced a window for deals using a favourable currency exchange rate.
During the course of the programme, from September 5-30, Argentina’s farmers – who typically hoard crop as a hedge against inflation – sold 13.7m tonnes of soybeans, equivalent to about one-third of their latest harvest.
‘Strong crush margins’
The division also benefited from “significantly higher” crushing results, with margins boosted by “resilient global demand for both meal and oil”.
North American soybean processing margins – backed by the buoyant renewable diesel sector, which uses soyoil as a key feedstock – currently stand at $90-100 per tonne of crop, up from $70-80 per tonne three months ago.
ADM’s European rapeseed crushing also enjoyed “strong” crush margins, “driven by robust oil demand and continued market dislocations”, such as the knock-on effects of the Ukraine war.
Corn oil vs ethanol
The carbohydrate solutions division reported a rise in operating profits of 45% to $309m, “amid steady global demand for sweeteners and starches”.
The group singled out corn oil among the corn processing products as enjoying “continued robust demand”, helping offset a dent from “substantially lower” results in ethanol production.
“Ethanol margins were pressured by lower domestic demand and elevated corn costs.”
Profits in nutrition were flat at $177m, although incorporating “strong demand for plant-based proteins”, in contrast to the softness in the market for meat substitutes as reported by Beyond Meat last week.
‘Demand remains robust’
Juan Luciano, the ADM chairman and chief executive, added that “global demand remains robust”, and said that the group was “well positioned to end 2022 strong, and carry that momentum into 2023”.
ADM shares stood 1.7% higher at $90.78 in morning deals in New York.