Dive Brief:
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Archer-Daniels-Midland Co. earnings surpassed analyst estimates after the agriculture giant was able to capitalize on a record soybean and corn harvest in Brazil.
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Adjusted earnings came in at $1.89 a share, the company reported Tuesday, about 19% higher than what analysts expected. However, results fell below records set in the second quarter of last year.
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CEO Juan Luciano said on an earnings call that investments to improve export capacity at Brazil ports have paid off, and the company is able to buy cheaper grains by avoiding higher transportation costs.
Dive Insight:
Bumper soybean and corn crops pushed up trucking prices to an all-time record in Brazil, but ADM's supply chain investments have allowed the company to keep costs down.
"We see the Brazilian port congestion … giving margins to those companies that have invested in the infrastructure to be able to capitalize on that, which we did," Luciano said. "So, that's playing very well for us."
ADM made major enhancements to its terminals in Brazil's port cities of Santos and Barcarena, expanding storage and adding more truck lanes. Luciano said the company will likely export "a bit less" from the U.S. as it relies more on ports in South America.
Other food companies may be forced to rely on imports from Brazil due to an unexpected decrease in U.S. soybean production, according to the U.S. Department of Agriculture.
"The 2022/23 U.S. soybean trade market has been characterized by vigorous domestic demand for crush and strong Brazil competition on the global market," a report from the USDA's Foreign Agricultural Service said. "The expected continuation of these conditions into the next marketing year coupled with the forecast decrease in supplies means that the deficit will largely be taken out of exports in order to meet domestic demand."
ADM raised earning expectations for full-year 2023, Luciano said in the call. Results were also bolstered by higher demand for food oil and biofuel. However, slowing appetite for animal feed and plant-based proteins somewhat weighed down earnings.
ADM reported $927 million in net income for the second quarter, down 25% from last year. Revenue declined 8% to $25.2 billion.
Company shares rose 11 cents to close Wednesday at $86.91 on the New York Stock Exchange.
