ADM Tumbles as Crop Gluts Make It Harder to Trade Grains
Archer-Daniels-Midland Co. is still finding it tough to make money from trading in global agricultural markets that are awash with excess supply.
The company fell as much as 8.1 percent in New York Tuesday, the biggest intraday decline since February 2016, after Chief Executive Officer Juan Luciano said its international merchandising unit’s performance was “muted” in the first quarter. It also suffered from reduced volumes at Argentine ports, he told analysts on ADM’s earnings conference call, though he added that the segment’s performance is expected to improve later in the year.
“A substantial global supply of crops continues to limit merchandising opportunities,” Luciano said. “We are beginning to see the benefits of our aggressive actions to improve that international merchandising performance.”
ADM’s traders who buy and sell internationally struggled to make money in 2016, posting losses in two quarters. The unit has seen several departures recently as Luciano pushes for improvements. Just last week, ADM said Gary Towne, president of the global trading desk, will step down, and Gary McGuigan will succeed him. The company also told employees last week that it hired Stefano Rettore, formerly at U.S. farm co-operative CHS Inc., to be its chief risk officer, replacing Mark Bemis, who is retiring.
Luciano said on the call that most of the restructuring of the international unit is complete, and that ADM is reducing the cost of each ton it trades.
ADM’s international trading activities form part of its agricultural services division—the company’s largest by revenue—which saw higher operating earnings in the first quarter amid strong global demand for U.S. commodities.
Ethanol Exports
However, in 2017, results for agricultural services may be weaker than was expected at the start of this year, Luciano said. Uncertainty over those earnings pushed the shares lower, Farha Aslam, a New York-based analyst for Stephens Inc., said in an email. The segment includes the international merchandising and trading unit. ADM to $42.03 at 12:06 p.m. in New York.
ADM’s net income for the first quarter rose to $339 million, or 59 cents a share, from $230 million, or 39 cents, a year earlier, it said in a statement. Earnings excluding one-time items were 60 cents a share, trailing the 62-cent average of 13 analysts’ estimates compiled by Bloomberg. Revenue increased 4.2 percent to $15 billion.
Corn processing earnings rose on improved performance from sweeteners and starches and “very strong” ethanol exports.
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