Strong US grain exports elevate Q3 performance for suppliers

Strong US grain exports are giving US suppliers a financial boost despite historically low crop prices, with ADM and The Andersons, Inc. among those whose Q3 results reflected greater-than-anticipated global demand for US grains.

The latest data from the US Department of Agriculture shows that wheat exports increased 26 percent year-on-year to 5.2 million metric tonnes, soybeans shot up 35 percent to nearly 22.9 million metric tonnes, while corn skyrocketed 97 percent to roughly 15.8 million metric tonnes.

The Andersons, focused on the grain, ethanol, plant nutrient, and rail sectors in North America, cited the strength of grain exports as a key reason for its positive Q3 performance. Net income was $1.7 million, a $2.9 million improvement compared to the net loss of $1.2 million in the same period in 2015.

The company reported Q3 pre-tax income for its grain group of $1.9 million, a $1.8 million increase over the same period last year. And its base grain operations were up $2.5 million year-on-year.  

“Conditions are improving for our grain group and margins are strong for the ethanol group, but challenges persist with our plant nutrient group facing weak margins and our rail group continuing to experience softening in utilisation,” said CEO Pat Bowe in the company’s Q3 report.  

Meanwhile, ADM, a US-focused grain trader, saw Q3 operating profit from its agricultural services division rise 30 percent year-on-year to $193 million, also attributing the jump to the strength of US exports.

“Ag Services results were driven by US exports that surged through the quarter, creating improved merchandising opportunities as the global market relied heavily on US exports of corn and soybeans,” said ADM chairman and CEO Juan Luciano in its earnings report.

“Results for corn included strong performance in North American sweeteners and starches, growth from our international corn operations and steady results for bioproducts.”

Firms with a global focus are likely to fall on tougher times if the trend persists. For instance, agribusiness volumes fell for Bunge, a global firm with a heavy focus on Latin America, while operating profit plummeted by 74 percent to $83 million.

“Challenging market conditions and slow farmer selling led to a lower than expected quarter in agribusiness,” Soren Schroder, Bunge’s CEO, in that firm’s Q3 report.

“The combination of smaller than expected soy and corn crops in South America, due to adverse weather, and slow farmer selling negatively impacted our Brazilian and Argentine origination and soy processing results,” the report explained. “Historically, Brazilian farmers price a portion of their next year’s production during the third quarter prior to planting, but with the change in market conditions farmers deferred sales in hope of higher prices.”

However, “in North America and Europe, results in grains were comparable to last year as higher origination and export volumes were largely offset by lower margins”.