Farmers have spent the past few years cutting their spending to cope with a global glut of crops. Now it’s commodity traders’ turn, reports the Wall Street Journal.
Archer Daniels Midland Co. and Bunge Ltd., among the companies that dominate world-wide grain trading and processing, said this week that they are slashing hundreds of millions of dollars in annual spending and restructuring operations to navigate a world awash in corn, soybeans and wheat.
Five years of back-to-back bumper crops in markets across the globe have kept grain prices low and upended traditional dynamics in the farm sector. Trading giants like ADM, Bunge and Cargill Inc., which buy farmers’ crops to market and process, are being squeezed.
Farmers are opting to store grain rather than sell it to grain companies at low prices. Some food companies, meanwhile, are placing fewer long-term orders for grain and ingredients since prices are expected to stay cheap.
Bunge reported a 22% decline in quarterly profits due to pressure on its crop-trading and soybean-processing businesses; the company also reduced the earnings projection for its grain-trading division for the third time this year. ADM said its quarterly net income dropped by 44%, weighed down by declining U.S. grain exports, as cheap Brazilian corn undercut U.S. shipments.
Cargill previously reported its quarterly grain-trading and processing results declined compared with the same period a year ago and blamed slower grain markets and weak prices. (Source: The Wall Street Journal)
Articles are chosen for summary in this Market Intelligence blog based on newsworthiness in conjunction with The Infinite Loop themes. Any opinions and views expressed in the articles are generally those of the underlying author from the source listed, are not necessarily current as of the date of this blog, may change as market or other conditions change, and may differ from views expressed by Ivy Investment Management Company and its associates or affiliates. Actual investments or investment decisions made by Ivy Investment Management Company and its affiliates will not necessarily reflect the views expressed in the articles. These articles are distributed for educational purposes only and are not investment advice or a recommendation to purchase, sell or hold any specific security mentioned in the article or to engage in any investment strategy. Investment decisions should always be made based on each investor’s specific financial needs, objectives, goals, time horizon and risk tolerance. Securities discussed may not be suitable for all investors.