ADM Profit Beats Estimates on Gains From Crop Disruption

(Bloomberg) -- Archer-Daniels-Midland Co., one of the world’s largest agricultural trading companies, posted better-than-expected second-quarter profit after capitalizing from crop-supply disruption in South America.

The period saw a nationwide strike by truck drivers in Brazil that delayed shipments from the country, the biggest exporter of soybeans, while a drought hurt both soybean and corn crops in Argentina. Problems in the region led to "significantly higher volumes and margins for corn, wheat and soybean exports" from the U.S., the Chicago-based company said Tuesday in a statement.

ADM has the global network that allows it to take advantage of supply shortfalls in one region by making shipments from another. The quarter’s results mark a comeback for the company’s trading operations, which have struggled in recent years as a series of bumper crops reduced price volatility.

“It seems like a slightly better trading environment,” Seth Goldstein, an analyst at Morningstar Inc. in Chicago, said in a telephone interview before the earnings were reported.

Net income climbed to $1 a share from 48 cents a year earlier. Earnings excluding one-time items were $1.02, exceeding the 77-cent average of analysts’ estimates compiled by Bloomberg. ADM rose 1.9 percent to $48.26 in New York.

The company made no direct reference to the escalating trade dispute between the U.S. and China. The Asian nation imposed a 25 percent tariff on imports of U.S. soybeans earlier this month. Goldstein said investors are eager to get a glimpse into how the dispute between the world’s two largest economies is shifting agricultural trade flows.

"In South America, high origination volumes and improved margins, largely driven by more aggressive farmer selling and robust demand from China, contributed to the strong results" in the company’s crushing and origination segment, ADM said.

ADM also said it had losses related to Chinese duties on imports of U.S. sorghum, but they were offset by strong performances in ocean freight and other segments.

--With assistance from Karen Lin.

To contact the reporter on this story: Mario Parker in Chicago at mparker22@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Patrick McKiernan

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