Dive Brief:
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Archer-Daniels-Midland Co. is leaning into sustainability services and regenerative partnerships to set itself up for stronger profitability following a current down cycle.
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As the global grain trader navigates through crop surpluses and other market challenges, ADM’s CEO said the company is looking to expand production of renewable materials, biofuels and on-farm digital technologies that could yield high-growth opportunities when market conditions improve.
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ADM’s earnings before taxes totaled $596 million in the second quarter, a 47% decline over last year, driven by adverse market factors in its Ag Services & Oilseeds business.
Dive Insight:
As farmers continue to feel squeezed by high input costs and low commodity prices, agriculture companies are also feeling economic and operational pressures.
ADM profits have been dragged down by conditions in the Americas. In South America, farmers were slow to sell their crops due to high logistics costs and a smaller crop in southern Brazil. Abundant carryover supplies in South America has also kept global prices low, which has kept U.S. farmers from also selling their crops.
Looking ahead, Interim CFO Ismael Roig said investors can expect adverse market conditions to continue pressuring ADM through the third quarter with less opportunities and merchandising expected in the back half of the year.
Despite headwinds, ADM is focusing on growth opportunities across its three businesses that can better position itself when market conditions improve again.
“The pressures of the current commodity cycle do not seem to be demand-driven, as we see continued robust demand for meal and oil,” CEO Juan Luciano said in an investor call. “We will continue to focus on how we can actively manage our global footprint to best match these realities moving through the remainder of the year.”
With earnings slashed in the second quarter, ADM is taking steps to simplify, save costs and invest in long-term trends, including sustainability, health and wellness and food security.
Some of those efforts include ramping up production of North Dakota soybean crusher Green Bison and expanding digital technologies for farmers to use. ADM is also building out its Regen Act programs and partnerships and BioSolutions platform, which allows customers to replace petrochemical ingredients with plant-based materials.
ADM is accelerating a $500 million cost-reduction plan that should be realized later this year, Luciano said, setting the company up for “potential upside in 2025 as more projects are identified and executed.”
