US farmers are, thanks to low prices, selling one-third slower than normal, and are even more reluctant to market soybeans, the head of Archers Daniels Midland said, tackling issues such as takeovers and Argentina’s elections too.
Juan Luciano, the chief executive of US-based ag trading giant, said that US growers had “probably sold about 30%” of the ongoing corn harvest, “when normally they would be about 45% by this time of the year”.
For soybeans, for which the harvest is nearly finished, growers had “probably sold about 35% of the new crop, and normally they would have averaged about 60%”, Mr Luciano said, flagging the role of weaker values in deterring sales.
“Certainly, US farmers don’t like these prices. And at this point they are holders of grain.”
‘Farmer selling is limited’
Indeed, many traders believe prices would be even lower were if not for farmers withholding sales, forcing cash buyers to pay up.
“Farmer selling is limited which is supporting elevator and processors basis bids,” said Paul Georgy, president of Chicago broker Allendale.
“Processors are trying to build their needed inventory through the first of the year.”
Growers in eastern Corn Belt states such as Illinois and Indiana, who saw relatively poor yields, and are not faced with the same storage problems as peers further west, are viewed as particularly reluctant sellers.
At Halo Commodity Company, Tregg Cronin, flagging “light farmer selling”, said that growers in the eastern Corn Belt “seem content to wait for $4.00+ a bushel cash” for corn.
‘Will eventually move’
Nonetheless, Mr Luciano underlined that farmers would not hold out for ever.
“We have a large harvest in front of us. And the US crop will eventually move to the world markets,” benefitting ADM’s agricultural services business.
Last week, rival grain trader Bunge forecast that it could take until 2016 for US farmers to pick up the pace of sales, with the need to raise cash ahead of spring sowings a potential catalyst.
Mr Luciano’s comments followed the release by ADM of results showing a bigger-than-expected drop in earnings for the July-to-September quarter, which saw the group’s shares close down 6.8% in New York at $43.15.
He also, in comments to investors, tackled subjects including the Argentine presidential elections, which are being viewed by many commentators as potentially heralding a transformation of the country’s agriculture, if opposition candidate Mauricio Macri wins.
Mr Macri has pledged to loosen the tough grain export regime which has lowered returns to farmers, and prompted many to cut back on plantings, or grow crops the trading in which is less vulnerable to political oversight.
“As one of the larger exporters of grains in Argentina, that reduction in [export] restrictions and licences will be positive for our ag services business,” although could prove a negative for processor in other countries, said Mr Luciano, who was born and brought up in Argentina.
“If you think that there’s going to be more soybeans coming to market and more crush than in Argentina, that may be a potential negative for the competitiveness of US mill exports out of the US. And it might impact a little bit the situation in Europe.”
He also downplayed the potential for another attempt to takeover of GrainCorp, the Sydney-based grain handler, which some observers see more likely to gain approval if elections next year usher in a change of government.
“Our strategy doesn’t call for a large M&A,” Mr Luciano said.
“Our strategy, at this point in time, includes, for certain businesses, bolt-on M&A.
“‘Obviously, if there is an opportunity that is too hard to pass, that is somehow inexpensive out there, I mean, we will look at those things.
“But that’s not the main thrust of our story, of our strategy here.”
The speculation over a further move on GrainCorp, after ADM’s previous takeover effort was blocked by regulators, follows the US group’s increase last month of its stake in Wilmar International, the Singapore-based ag trader.
“Wilmar is a strategic partner and one of our largest customers. And we continue to be very committed to this relationship, to grow in this relationship,” Mr Luciano said.
“Wilmar gives us a window and an exposure to tropical oils, to China oilseed crops and crush, to consumer packaged products in China. So it’s a great way for us to participate in that.”
The purchase of extra shares had been “opportunistic” as “obviously they were relatively low with regards to their book value, and certainly the Singapore dollar also was very convenient for us to make that investment”.
(Source – http://www.agrimoney.com/news/us-farmers-one-third-slower-selling-corn-than-normal—adm–8968.html)