Several agricultural companies post disappointing quarterly results
Harsh U.S. weather and geopolitical turmoil in Ukraine have humbled several global grain traders.
Bunge reported a surprise loss for the first quarter May 1, saying it had bet wrongly on the direction of wheat prices.
The world’s biggest agricultural traders, including Archer Daniels Midland and Cargill, were slammed by a series of exceptional events in the first part of the year, from a severe winter “polar vortex” in the United States to rail capacity problems to the rejection of corn imports in China.
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Bunge swung to a $27 million loss in the three months to March 31 from a $170 million profit in the same period last year.
It cited a 55 percent slump in its trading and distribution division as the biggest drag, saying tumult in Ukraine had upended its strategy.
“We expected a lower price environment, particularly in wheat, which did not materialize,” chief executive officer Soren Schroder said.
“Political turmoil in the Black Sea and deteriorating winter wheat conditions in the U.S. were the primary catalysts for the wheat rally, which ignored the more-than-adequate global stocks.”
The three companies and Louis Dreyfus Corp dominate global grain trading and had been expected to benefit from bumper harvests just a year after the worst U.S. drought since the Dust Bowl days of the 1930s.
Instead, they have emerged as some of the most evident losers from this year’s unexpected commodity market volatility, which has carved a sharp divide across the trading industry.
ADM reported slightly lower net earnings of $267 million for the recent quarter, down $2 million from the same time last year.
It reported a 19 percent decline in its core grain merchandising and handling operations.
“Our ag services business again generated weak results due to a low margin environment as well as logistics and weather challenges in the U.S,” said ADM CEO Patricia Wurtz.
Cargill has reported net earnings of $319 million for the third quarter ended Feb. 28, down from $445 million a year earlier. Revenue was $32 billion, nearly even with a year earlier.
The company had steep losses in energy trading in the quarter.
Cargill said earnings for its grain sector were down from a year earlier because of costs related to China’s rejection of genetically modified U.S. corn.
As well, it said there were generally “limited opportunities” in grain trading and storage.
ADM said it is moving ahead with plans to buy the remaining 20 percent stake in Toepfer International.
It gave no indication that its efforts to buy Australian agribusiness Graincorp are back on the table.
Graincorp is in the process of seeking a new CEO to replace outgoing CEO Alison Watkins.
ADM said discussions with Graincorp could resume after management changes at the Australian grain company are complete.
