November 1, 2022


ADM says soybean prices will fall as shipments slow down at the Mississippi River


Juan Luciano, ADM CEO, said the company will continue to export less grain from North America until the end of 2022 due to the drought that has resulted in shutdowns and backlogs along the Mississippi River, adding that prices for soybeans are expected to fall, the Des Moines Regular reported.


Luciano also said ADM will ship additional soybean and corn through the Gulf Coast in early 2023 to make up for the current shortage, but currently they will export grain from South American terminals.


He said prices for grains are declining as crops pile up at local elevators and terminals due to lower shipping volume. He predicted lower prices of grains will help the company's other lines of business, offsetting their losses from shipments.


He anticipates a boost for the business's processing facilities, which grind soybeans to create oils and animal feed. The company also turns corn into ethanol at one of its facilities in Iowa, which includes one in Des Moines.


Vikram Luther, the chief financial officer, told analysts that the company's problems on the Mississippi will be "more than offset" by the price benefit to its crushing business.


While paying more for inputs like labour, chemicals, and fertiliser, farmers have benefited from high commodity prices. On Tuesday, corn traded at US$6.86 per bushel, a 74% increase from the US$3.94 price they paid two years ago. The price of soybeans was US$13.82 per bushel, up from US$9.19 two years prior.


However, the corn and soybeans those farmers are harvesting this fall need to be stored somewhere. The Mississippi River, an important transportation route for the agricultural economy, has been choked by a drought, particularly in the upper Ohio River valley, including in Iowa, which has dozens of terminals on the river.


Narrowed shipping channels have reduced the Mississippi's capacity for businesses that transport corn and soybeans from the Midwest down the river to the Gulf Coast, where about 60% of crop exports leave the country, and in some cases left water too low to be navigable. The National Weather Service reported that some areas in the Memphis area had levels that were the lowest they had ever been since the government started keeping track in 1954. Early this month, officials closed sections of the river near Stack Island, Mississippi, and Hickman, Kentucky, to dredge some areas deeper. This caused a backlog.


Costs for shipping have skyrocketed. As of October 11, moving a tonne of grain south from terminals in St. Louis cost $105.85 per tonne, about five times what it did a year earlier, though prices have since fallen somewhat.


Grain exports have not been nearly as strong as they typically are at this time of year. According to a US Department of Agriculture (USDA) export inspection report, shippers had moved 3.8 million metric tonnes of corn up until last week, which is 21% less than at the same time last year. 7.6 million metric tonnes of soybeans were handled by shippers, a 12% decrease from the previous year.


The current situation was described as "unprecedented" by Luciano. He claimed that while the company can hold onto corn for longer, it won't be able to export soybeans at the same rate as before.


That will happen in the first quarter of 2023, he said.


In total, the business reported an operating profit of US$1.56 billion on Tuesday, up 56% from the same period last year. The company's upbeat report is partially a result of a slump last year, when Hurricane Ida's devastation made it more difficult for ADM to export grains.


Additionally, the business claimed that it benefited from a rise in demand for crushed soybeans used to produce animal feed and oils like renewable diesel. Executives from ADM claimed that their earnings per metric tonne of crushed soybeans increased from US$50 to US$60 at this time last year to US$90 to US$100 last quarter.


According to FactSet, ADM's overall quarterly earnings came in at US$1.83 per share, exceeding the consensus analyst expectation of US$1.43 per share. Luciano said ADM should have earned US$7 per share in 2022, up from the previous estimate of US$6.50. This will be revealed in the company's full-year financial report.

He said yhe business is currently firing on all cylinders.


The price of ADM's stock rose 2% on the day to close at US$91.17 per share on Tuesday. Since the start of 2022, the price of the company's stock has increased by 35%.


-      Des Moines Register

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