ADM sees continued tightness in global grain markets for next few years

27-Apr-2022 - Last updated on 27-Apr-2022 at 15:47 GMT

Related tags Adm Soybean meal Black Sea Canola

US agribusiness giant, ADM, expects lower crop supplies for the next 18 months and beyond arising from the weak Canadian canola crop, the cut in South American soy and grain output, and Black Sea conflict related disruptions.

Those events will drive “continued tightness in global grain markets through 2022, well into 2023, and perhaps beyond,” said the Juan Luciano, chairman and CEO of ADM, during a conference call after it published its Q1 financial results yesterday.

"We need two good years of crops, both in North America and South America. That will allow us to balance the supply and demand,” he said.

The company, though, has a global integrated network, risk management capabilities, and diverse product portfolio to help it navigate through tight market conditions, said the ADM lead.

Crushing and nutrition businesses performing

Net earnings increased to $1.05bn for the quarter ending March 31, reported ADM. The results for its crushing business was higher year over year in a strong global margin environment driven by robust protein and vegetable oil demand.

Revenue was also strong across the company’s human and animal nutrition divisions for the quarter, amid volatile market conditions and an inflationary environment.

Animal nutrition profits were nearly double the year-ago period, due primarily to strength in amino acids, with ADM citing the deliberate switch the company made from dry to liquid lysine last year, combined with improved North American demand and global supply chain disruptions, as factors playing into that.

Looking ahead, the company said it expects nutrition to deliver a second quarter “significantly higher” than the prior-year period.

Soybean meal demand

Luciano noted strong demand in North America for soybean meal (SBM), but also globally. And the company is also seeing high SBM inclusion rates, a trend the CEO expects to continue.

Soybean meal from North America will be the most competitive globally, according to Luciano.

Up to now, ADM has not seen any significant reduction in demand for meal from the US poultry sector despite the avian influenza outbreak, he said. “It's something we're following very closely, of course, but we cannot say that we have had an impact so far.”

Tackling deforestation

The CEO also spoke about new targets in relation to its commitment to tackle deforestation in its supply chain.

“Last year, we unveiled new goals to reduce Scope 3 emissions and eliminate deforestation from our supply chain. This is critical work. We do not make these kinds of commitments without an achievable plan to meet them, and once we move forward, we constantly challenge ourselves to do it faster. That is why, last week, we announced that we've accelerated our deadline for a completely deforestation-free supply chain by five years from 2030 to 2025.”