Big oilseed traders and processors share in rising U.S. farm profits, but face challenges of low water, strong dollar

"Two of the largest farm giants that dominate global grain trading and processing, Archer Daniels Midland Co. and Bunge Ltd., said this week that despite fears about a recession, demand for their grain, biofuels and livestock feed is strong," Patrick Thomas reports for The Wall Street Journal. 

"Higher energy prices are boosting demand for the oilseed processors’ biofuels," Thomas notes. "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."

Both ADM and Bunge reported sizable increases in profit that exceeded Wall Street analysts' expectations.  The Chicago Board of Trade prices for wheat are up about 12 percent over the past 12 months, corn is up around 26% and soybeans increased about 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," Thomas writes. Some grain elevators on the river have stopped accepting deliveries. Despite the hearty demand for U.S. farm exports, "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." Some global buyers are going for rice instead of U.S. grain due to the strong dollar.