U.S. agricultural trader Archer Daniels Midland Co reported a 41 percent drop in quarterly profit from a year earlier, when the company recorded one-time gains of nearly $400 million. Net earnings attributable to the company fell to $424 million, or 73 cents per share, in the fourth quarter ended Dec. 31, from $718 million, or $1.19 per share, in the same period a year earlier.
Excluding items, ADM earned 75 cents per share, missing the average analyst estimate of 77 cents a share, according to Thomson Reuters. Revenue rose marginally to $16.50 billion. A record-large U.S. corn and soybean harvest and brisk U.S. crop exports boosted results for ADM's agricultural services segment, its largest in terms of revenue.
But the Chicago-based company reported losses at its global trading desk, citing "poor execution and limited forward merchandising opportunities." The agricultural services unit makes money buying, selling, storing, transporting and processing crops. Margins are typically thin, but volumes are massive when available crop supplies are plentiful and demand is strong.
Farmers are having luck negotiating land rents. "Generally speaking, I think landowners are recognizing the income is not there anymore and they are willing to work with their renters," said Paul Harless, president, Northwest Farm Managers Association. "It's not the decrease we all want, but I think rents are coming down, which should help the cost structure a little bit.
The Northwest Farm Managers Association annual conference was held last week in Fargo.
Archer Daniels Midland has reached an agreement with Validus Holdings and will spin off its Crop Risk Services business for $127.5 million. ADM and Validus will have a marketing agreement that will allow them to both offer crop insurance. The sale requires regulatory approval, but is expected to be finalized in the next few months.
NFA bars FXCM
National Futures Association has barred New York retail foreign exchange dealer Forex Capital Markets, LLC from membership. NFA also barred FXCM principals Dror Niv, William Ahdout, and Ornit Niv from membership and from acting as a principal of an NFA member.
The decision, issued by NFA's Business Conduct Committee, is based on a complaint issued by the BCC and a settlement offer submitted by FXCM, Dror Niv, Ahdout and Ornit Niv. The BCC found that FXCM, Dror Niv and Ahdout engaged in numerous deceptive and abusive execution activities that were designed to benefit FXCM, to the detriment of its customers.
Corn closed the week 9.25 cents higher.
Last week, private exporters announced sales of 128,000 metric tons of corn to Japan.
Weekly export sales for the week ending Feb. 2 were 39.7 million bushels of corn. Annual corn sales are 1.621 billion bushels, up 651 mb from last year.
Weekly ethanol data was also very supportive. Ethanol production came in at 1.05 million barrels per day, down slightly from the previous week, but was the 15th consecutive week of production over 1 million bpd.
In the monthly supply/demand report, corn supplies were lowered to 2.320 bb, below estimates of 2.333 bb and down 35 mb from last month.
Ethanol demand was increased by 25 mb to 5.35 bb. Globally, corn stocks were 217.6 mt, down from 221 mt last month with soybean stocks at 80.4 mt, down from 82.3 mt last month.
Brazil estimated corn production at 86.5 mts, unchanged from last month, but less than the average trade estimate Argentine corn production was unchanged at 36.5 mt, slightly above average trade guesses. CONAB raised 2016/17 Brazil corn harvest forecast to 87.4 million metric tons versus 84.5 mmt in January and up from 66.5 mmt 2015/16 production.
Strategy and outlook: A rally into weekly resistance was a great time to sell inventory, look to re-own on support as commercials have been big sellers lately.
Soybeans closed the week 31.5 cents higher.
Last week, private exporters reported sales of 247,000 mt of soybeans to an unknown destination.
Weekly export sales for the week ending Feb. 2 saw 24.5 mb of soybeans, the third smallest of the marketing year. For the year to date, soybean sales are 1.87 bb, up 363 mb from the previous year.
In the monthly supply/demand report, the USDA made minimal changes as South American production was not adjusted as much as expected. Soybean stocks were left unchanged from last month at 420 mb, a disappointing surprise to the trade that was expecting strong export demand to cut into stocks.
With South American harvest just coming available, the USDA will be slow to make any U.S. revisions in exports. Brazil's soybean production was 104 mt, also unchanged from last month, but less than the average trade estimate.
Argentine soybean production was 55.5 mt, down from last month, but above the average trade guess. CONAB raised 2016/17 Brazil soybean harvest forecast to 105.6 mmt versus 103.8 mmt in January and up from 95.4 mmt 2015/16 production.
Strategy and outlook: Prices again testing major resistance. Maintain re-ownership strategies.
This material has been prepared by a sales or trading employee or agent of Midwest Market Solutions and is, or is in the nature of, a solicitation. This material is not a research report prepared by Midwest Market Solution's Research Department. The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Midwest Market Solutions believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such.
Brian Hoops can be reached at (605) 660-1155.