Severe U.S. climate likely bent earnings for large grain corporations along with Archer Daniels Midland Co. and Bunge Ltd. for Q2, adding to headwinds from a still-unresolved U.S.-China commerce war, analysts and economists stated.
ADM and Bunge, as well as peers Cargill Inc. and Louis Dreyfus Co., generally known as the ABCD quartet of world grain trading titans, confronted processing-plant downtime, rail, and barge shipping delays and other supply uncertainty this spring as historic floods devastated the central United States.
The weather distress is adding more pain on the battered U.S. farming sector already hard-hit by a years-long crop oversupply and the U.S.-China trade battle now coming into its second year. The tariffs China slapped on soybean exports from the US in punishment for U.S. duties on Chinese products curbed deliveries of the most worthwhile U.S. export crop.
The excessive rains and flooding could even have a lasting effect on the grain merchants, whose latest round of quarterly earnings will start this week. ADM and Cargill are seen as notably vulnerable as a consequence of their outsized U.S. footprints. Lowered U.S. corn and soybean plantings will seemingly cut ready crop supplies in the USA, doubtlessly driving up raw materials costs and clutching margins.
“They thrive on volumes and margins, and both of those are going to be flattened in the coming year with the bushels being smaller and the margins likely not being there,” stated Kevin McNew, a lead economist with Farmers Business Community. “Export business is simply going to jump off the cliff, particularly for corn.”
The U.S. corn crop was more affected by floods than soybeans since soy will be planted later in the season.