& Reuters News Agency
The gloomy agricultural horizon appears to be getting brighter for some multinational grain companies based south of the border.
Speaking at the first meeting of Agricore United, the director of corporate marketing of Archer Daniels Midland said things are getting better for American grain companies.
“ADM is used to making pretty respectable earnings but it has been extremely tough the last three to five years,” Martin Andreas told delegates.
“I’m happy to say that in the United States in general and with ADM in particular, earnings are beginning to come back, volumes are starting to come back and maybe as importantly the attitudes of businesspeople and our customers seems to be improving.”
Read Also
Land crash warning rejected
A technical analyst believes that Saskatchewan land values could be due for a correction, but land owners and FCC say supply/demand fundamentals drive land prices – not mathematical models
Sales for the American grain giant topped $20 billion US in 2001, up nearly eight percent from the previous year. Earnings were up 27 percent to $383 million.
“Things are starting to go in the right direction and I believe we have bounced off the bottom and are making a comeback. Our earnings certainly show that,” said Andreas during his Nov. 8 presentation.
Earlier this month at ADM’s own annual meeting, chair and chief executive officer Allen Andreas told shareholders.
“The world’s agricultural economy remains depressed, but significant signs of recovery emerged in certain sectors.”
That recovery is continuing to fuel good financial results for many of the multinational grain companies based in the U.S.
Building on a strong finish to 2001, ADM has announced that first quarter earnings for 2002 are up 20 percent from a year ago.
Cargill Inc.’s first quarter earnings jumped 67 percent and Bunge Ltd. reported a tripling of profits from the previous year during its most recent quarter.
Strong soybean processing profits were mentioned as a key factor in all of the results, but a crop analyst with an American agricultural think-tank said there’s more to it than that.
Brian Willott, analyst with the Food and Agriculture Policy Research Institute, said good corn, soybean and wheat yields in the U.S. over the past two years are what’s behind the turnaround.
The value of the American dollar compared to other world currencies is also a factor. While the loonie has weakened relative to the U.S. dollar, that is not the case for currencies such as Japan’s yen and Mexico’s peso. Against those currencies the U.S. dollar has dropped since mid-summer and has been especially poor following the events of Sept. 11. That is boosting U.S. grain exports.
“We’ve been producing a larger volume (of crops) and it’s moving. And for somebody who’s in the merchandising business or the processing business, when they have things to move that helps.”
Willott also said U.S. government subsidies like the Loan Deficiency Program are keeping grain moving through elevators and processing facilities.
Canadian analysts warn that just because American grain companies are doing well doesn’t mean Canadian grain companies will follow suit.
“In Canada the outlook for grain companies has to be quite dismal because the quantity that they’re going to handle in the 2001-02 crop year is going to be down significantly from previous years,” said Agriculture Canada wheat analyst Glenn Lennox.
He also warned against using grain company profits as a barometer for the agriculture industry.
“Of course what’s good for a grain company isn’t necessarily the thing that’s good for a grain farmer.”
There is good news.
Fred Oleson, chief of Agriculture Canada’s market analysis division, said world stocks of wheat and coarse grains are well below recent levels, which should help push prices up.
The long-term price outlook for oilseeds, especially soybeans, remains under “considerable pressure.”
