Too much of a good thing

11.08.17

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)


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