Minding Ag's Business

Earnings Reflect Slow Start to Planting

Delayed fieldwork this cool spring put a chill on fertilizer and seed sales. (DTN photo by Pam Smith)

A slow start to planting season is showing up in more than just USDA's Crop Progress report. An array of the nation's top agriculture companies announced their earnings reports this week, and delayed planting put a chill on fertilizer and seed sales.

Illinois-based CF Industries said rain and cool weather in the Midwest and Southern Plains delayed spring fertilizer applications along with corn planting, leading to a nearly 8% decline in sales. Despite lower sales, CF posted earnings of $63 million, up from a $23 million dollar loss last year. And it's possible sales could see a pick-up as farmers turn to alternative nitrogen sources, shifting sales from one quarter to another.

DowDupont saw a similar issue: Seed shipments through April 1 were about one-third the total from the previous year. The company said cool weather contributed to the 34% decline in seed sales in the first quarter. The company expects to make up ground, with Chief Financial Officer Howard Ungerleider saying it's seen a steep increase in deliveries over the last two weeks. The company still sees sales in its agriculture segment declining, but expects losses to be a percentage in the low single digits.

This quarter's crop of reports also shows two of the ABCDs are finding ways to navigate the global supply glut after years of struggle. Both Archer Daniels Midland Co. and Bunge Ltd. reported better-than-expected earnings, attributing the gains to surging soybean sector profitability on the heels of drought in Argentina.

"During the first quarter, we saw a dramatic change in the global soy crush market environment as margins expanded significantly from 2017 levels," Bunge CEO Soren Schroder said. "Our teams managed the rapidly changing environment well and positioned the company for a strong performance for the balance of the year. In times like these, when trade flows and capacities shift among regions, the value of our global footprint and capabilities are demonstrated." In an interview with the Wall Street Journal he said, "Agribusiness is back, strong as ever. All the dark clouds that converged at the same time are far behind us now." (https://www.wsj.com/…)

That's quite a turnaround for a company that was in takeover talks with rival ADM earlier this year. Those talks stalled over regulatory concerns. Bunge said its internal restructuring plans are starting to affect the bottom line, and the company projects earnings in its agribusiness sector to come in between $800 million and $1 billion for the year.

ADM expects similarly strong earnings, saying profits in its oilseed division could reach $1 billion or more in 2018, up from $832 million last year.

"We're seeing the results in our bottom line as headwinds turn to tailwinds," ADM CEO Juan Luciano said on a conference call. ADM said it processed record quantities of oilseeds in North and South America. Luciano did say trade disputes with China are eating into the business' profits, primarily in its corn, sorghum and ethanol divisions. While Brazil may be responsible for a larger percentage of China's soybean imports, it can't handle the entire volume on its own, and that could affect ADM's joint-venture soybean crushing operation in China, known as Wilmar International.

"If all of this U.S.-China trade dispute ends up not being resolved and in June we see a 25% duties on beans, I think you would probably see an impact on the volumes Wilmar is crushing because, basically, China will be buying more expensive beans and soybean meal will become a little bit more expensive and it will be some impact on demand," Luciano said.

For more on Chinese buyers shying away from U.S. soybean purchases, check out Chris Clayton's article from earlier this week: https://www.dtnpf.com/…

Of course, much can change over the course of a growing season, and as this year's planting progress can attest, change can happen incredibly quickly.

Katie Dehlinger can be reached at Katie.dehlinger@dtn.com

Follow Katie Dehlinger on Twitter @KatieD_DTN

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