CHICAGO (Reuters) – Global grain marketers have seized upon trade tensions between the United States and several of its top export markets, including China, to turn around struggling trading units following one of the toughest years ever for the industry.
After five years of bumper harvests worldwide that depressed crop prices, trading margins are on the rebound. For Archer Daniels Midland Co, market volatility from the trade disputes, as well as a drought in South America, helped its trading unit report the best first-quarter performance in four years on Tuesday.
ADM - Rivals - Money - Buying - Selling
ADM and its rivals make money buying, selling, storing and processing crops. With networks of elevators, mills and processing plants around the world, the companies can capitalize on shortages in some geographies and surpluses in others.
Taking advantage of market gyrations could be a salve for ADM and its rivals Bunge Ltd and Cargill Inc [CARG.UL], as they cope with the risks to exports posed by the wave of trade protectionism, analysts said.
Trade - Grain - Companies - Term - Uncertainty
“Longer-term, open and free trade is important for the global grain companies, but the near term uncertainty that the trade issues are causing are creating merchandising opportunities,” said Farha Aslam, food and agribusiness analyst with Stephens Inc.
The company’s trading unit represents a fraction of ADM’s overall business. Following a recent restructure, its origination unit, which includes its trading business, earned $45 million in the first quarter of 2018, representing about 6 percent of the group’s operating profit for the quarter.
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