A surge in bargain sales of crops by U.S. farmers, driven by the need to clear storage for the upcoming autumn harvest, is expected to enhance profitability for grain handlers like Archer-Daniels-Midland (ADM) and Bunge Global. Both companies, which trade and process soybeans and corn, recently highlighted slow farmer sales as a factor negatively impacting their second-quarter earnings.
Farmers in key Midwestern states, including Iowa, Indiana, Illinois, and Ohio, are now selling corn and soybeans harvested in 2023 after holding onto their supplies throughout the year. Favorable weather has diminished their hopes for higher prices, leading to increased sales as futures prices for corn and soybeans have dropped to 2020 lows.
This trend of selling is not only beneficial for ADM and Bunge, allowing them to acquire crops at lower prices, but it also helps these companies utilize their manufacturing capacities more effectively. Analysts note that increased sales could significantly improve the processing margins for both firms, especially as they operate with high fixed costs and need to run their plants near capacity.
Despite the potential for increased sales, many farmers are facing a projected record year-over-year decline in farm income for 2024. Some are cutting back on expenses related to crop chemicals, which could impact agribusinesses like Corteva and Syngenta as farmers seek to manage costs amid low prices.
The recent uptick in sales was influenced by weather forecasts that initially suggested hot, dry conditions, prompting some farmers to sell quickly. However, as conditions did not materialize as expected, many farmers expressed regret over not selling earlier when prices were higher.
Bunge’s CEO noted that the company anticipates more farmer sales as the North American crop develops, and they have raised their full-year outlook due to improving processing margins. Meanwhile, farmers are adapting their practices, with some opting to reduce their use of fungicides and other chemicals to save costs, even as they strive to maintain crop yields.