November 2, 2017 / 12:04 PM / a year ago

U.S. grain handlers cut costs while talking up signs of recovery

CHICAGO, Nov 2 (Reuters) - U.S. grain handlers are making further cuts to operating costs even as they point to signs that a bruising slump driven by a global food commodities glut may be nearing a bottom.

Bunge Ltd, Archer Daniels Midland Co and Andersons Inc have all said conditions appear to be getting better for grains processing and handling, after four years of massive harvests reduced price volatility and clipped margins.

Bunge plans to reduce 2018 capital spending by at least 7 percent to about $650 million, and ADM said this week it will decrease outlays by about 20 percent to $800 million. ADM has also cut jobs to become more competitive and said it would shift funds to value-added businesses from its grain buying and oilseed crushing operations.

“I’m optimistic that we are, if not at the bottom, very close to it,” Bunge Chief Executive Soren Schroder said on a conference call on Wednesday, after the company posted a 28 percent decline in quarterly income on flat revenue.

Schroder has made similar comments before, leaving some analysts skeptical of his rosy outlook.

“Record harvests that continue to happen year after year do pose a difficult trading environment for Bunge and ADM, and I don’t see a sign of that letting up,” Morningstar analyst Seth Goldstein said.

Bunge’s South American business soured in 2017 because the company pre-booked transportation for a rich harvest and farmers opted to withhold soybeans due to low prices.

As a result, next year Bunge will not guess as much on when farmers will sell, according to the company. Market conditions should also benefit from a decline of wheat supplies, it added.

Global inventories of corn and soybeans are expected to tighten too, ADM’s CEO Juan Luciano told analysts on Tuesday.

“We’re starting to see the possible green shoots of recovery in certain areas,” he said, after ADM’s quarterly earnings tumbled 44 percent from a year earlier.

Luciano noted he was not expecting significant changes in conditions.

And ADM’s cost-cutting and shifting of funds show its executives are not assuming a robust recovery, according to Farha Aslam, analyst for financial services firm Stephens Inc.

Challenges from large global supplies hit Cargill Inc’s latest quarterly earnings in September, when the company said origination and processing results were down from a year earlier.

Andersons CEO Patrick Bowe in August told analysts that “grain fundamentals are improving.”

The Ohio-based company is due to report earnings on Tuesday. (Reporting by Tom Polansek, editing by G Crosse)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below