Grain Traders Reap Benefits of Global Food Crunch, High Demand

Higher energy prices are boosting demand for the oilseed processors’ biofuels. Russia’s invasion of Ukraine has disrupted supplies from one of the world’s top grain-exporting regions, pushing up prices for wheat and corn. Bad weather hitting other big crop-producing countries is also squeezing stockpiles, and agriculture executives have said at least two good crop years in North and South America will be needed to relieve a tight food supply.

ADM on Tuesday said it nearly doubled its profit for the quarter that ended Sept. 30, compared with a year ago. The company reported earnings of $1.03 billion, up from $526 million during the same period last year.

St. Louis-based Bunge raised its full-year earnings forecast to $13.50 per share on Wednesday, after posting better-than-expected earnings and revenue for its third quarter. Stripping out one-time items, the company posted adjusted earnings at $3.45 a share, nearly $1 higher than Wall Street analysts expected.

Shares of Bunge rose more than 7% during midday trading Wednesday. ADM’s stock is up more than 38% this calendar year, versus an 18% decline in the S&P 500 stock index.

Grain traders like ADM, Bunge and privately held Cargill Inc. tend to get a boost from higher commodity prices when there are shortages, geopolitical conflicts, or extreme weather events that lead to more volatility in commodity markets.

“What we can see here in a very uncertain world is we have good, very good momentum going into 2023,” said ADM Chief Executive

Juan Luciano

on a call with analysts this week. “We anticipate ongoing resilient demand for our products.”

An agreement between Russia and Ukraine to continue exporting grain from the Black Sea was reached this summer and has helped Ukrainian exports of agricultural products recover to around prewar levels, agriculture executives said. That has helped ease pressure on global food prices.

Still, supply issues persist because of infrastructure that has been damaged, fractured trade flows and poor growing conditions in other parts of the world, Bunge CEO

Greg Heckman

said Wednesday. Geopolitical tensions across the globe stemming from the war that began in the spring have also hurt globalization, narrowing where countries will buy agricultural products from, he said.

“I think globalization is done for a period of time,” he said. “When we had a supply problem or a demand surge globally, every origin and every destination was available to solve that problem in the past. And that’s no longer true.”

Futures prices for wheat at the Chicago Board of Trade are up about 12% over the past 12 months, while corn prices are up about 26% and soybeans roughly 12%.

Global grain traders are also contending with a strong U.S. dollar and lower water levels in the Mississippi River that are hurting grain exports from the U.S. The low water, caused by a lack of rainfall earlier this year, has halted some commercial traffic down the river and made it more costly to ship goods in recent weeks.

ADM said that lower water levels in the Mississippi River will cut its soybean export volumes in North America this year, and corn exports from North America will likely be delayed until the first quarter of 2023.

Alex Sanfeliu, who runs Cargill’s world trading group, said some developing countries are cutting back on buying more expensive U.S. grain because of the strong dollar and switching to cheaper alternatives, such as rice.

Augusto Bassanini, chief executive of the Washington-based grain exporter United Grain Corp., said his company’s wheat exports are down about 10% from a year ago as countries like Thailand and the Philippines pull back on buying more expensive U.S. grain.

“They are trying to pass along to the consumer, and the consumer is not willing to pay for that,” Mr. Bassanini said, adding that countries are substituting cheaper wheat from countries such as Australia.

ADM and Bunge said they are weathering the export declines and in some cases benefiting. Bunge and ADM officials told analysts they are shipping more commodities from South America and that as soybeans pile up in the U.S. instead of being exported, the companies are buying and processing them at a cheaper price.

“Our strong South American footprint, which is always important to us, but it’s never been more important,” said Bunge’s Mr. Heckman on a call with analysts. “Where products can’t move to export, we’re running as hard as we can to process and to be able to continue to have the bids out there for the farmers.”

Write to Patrick Thomas at patrick.thomas@wsj.com

Higher energy prices are boosting demand for the oilseed processors’ biofuels. Russia’s invasion of Ukraine has disrupted supplies from one of the world’s top grain-exporting regions, pushing up prices for wheat and corn. Bad weather hitting other big crop-producing countries is also squeezing stockpiles, and agriculture executives have said at least two good crop years in North and South America will be needed to relieve a tight food supply.

ADM on Tuesday said it nearly doubled its profit for the quarter that ended Sept. 30, compared with a year ago. The company reported earnings of $1.03 billion, up from $526 million during the same period last year.

St. Louis-based Bunge raised its full-year earnings forecast to $13.50 per share on Wednesday, after posting better-than-expected earnings and revenue for its third quarter. Stripping out one-time items, the company posted adjusted earnings at $3.45 a share, nearly $1 higher than Wall Street analysts expected.

Shares of Bunge rose more than 7% during midday trading Wednesday. ADM’s stock is up more than 38% this calendar year, versus an 18% decline in the S&P 500 stock index.

Grain traders like ADM, Bunge and privately held Cargill Inc. tend to get a boost from higher commodity prices when there are shortages, geopolitical conflicts, or extreme weather events that lead to more volatility in commodity markets.

“What we can see here in a very uncertain world is we have good, very good momentum going into 2023,” said ADM Chief Executive

Juan Luciano

on a call with analysts this week. “We anticipate ongoing resilient demand for our products.”

An agreement between Russia and Ukraine to continue exporting grain from the Black Sea was reached this summer and has helped Ukrainian exports of agricultural products recover to around prewar levels, agriculture executives said. That has helped ease pressure on global food prices.

Still, supply issues persist because of infrastructure that has been damaged, fractured trade flows and poor growing conditions in other parts of the world, Bunge CEO

Greg Heckman

said Wednesday. Geopolitical tensions across the globe stemming from the war that began in the spring have also hurt globalization, narrowing where countries will buy agricultural products from, he said.

“I think globalization is done for a period of time,” he said. “When we had a supply problem or a demand surge globally, every origin and every destination was available to solve that problem in the past. And that’s no longer true.”

Futures prices for wheat at the Chicago Board of Trade are up about 12% over the past 12 months, while corn prices are up about 26% and soybeans roughly 12%.

Global grain traders are also contending with a strong U.S. dollar and lower water levels in the Mississippi River that are hurting grain exports from the U.S. The low water, caused by a lack of rainfall earlier this year, has halted some commercial traffic down the river and made it more costly to ship goods in recent weeks.

ADM said that lower water levels in the Mississippi River will cut its soybean export volumes in North America this year, and corn exports from North America will likely be delayed until the first quarter of 2023.

Alex Sanfeliu, who runs Cargill’s world trading group, said some developing countries are cutting back on buying more expensive U.S. grain because of the strong dollar and switching to cheaper alternatives, such as rice.

Augusto Bassanini, chief executive of the Washington-based grain exporter United Grain Corp., said his company’s wheat exports are down about 10% from a year ago as countries like Thailand and the Philippines pull back on buying more expensive U.S. grain.

“They are trying to pass along to the consumer, and the consumer is not willing to pay for that,” Mr. Bassanini said, adding that countries are substituting cheaper wheat from countries such as Australia.

ADM and Bunge said they are weathering the export declines and in some cases benefiting. Bunge and ADM officials told analysts they are shipping more commodities from South America and that as soybeans pile up in the U.S. instead of being exported, the companies are buying and processing them at a cheaper price.

“Our strong South American footprint, which is always important to us, but it’s never been more important,” said Bunge’s Mr. Heckman on a call with analysts. “Where products can’t move to export, we’re running as hard as we can to process and to be able to continue to have the bids out there for the farmers.”

Write to Patrick Thomas at patrick.thomas@wsj.com