By Geoffrey Smith
Investing.com -- Archer-Daniels-Midland (NYSE:ADM) stock rose in premarket trading on Tuesday after the agricultural trading giant reported a sharp rise in profit due to tightness in global grain markets – a phenomenon it expects to last for years.
Adjusted earnings per share rose 37% from a year earlier to $1.90, while operating profit rose 30% to $1.56 billion, with strong performances from all its main divisions. Agricultural services and oilseeds, the largest division, posted over $1 billion in operating profit, as it was able to expand margins in value-adding operations such as crushing and refining.
ADM stock, which has risen by over 50% in the last five months as an emerging world food crisis has started to take shape, rose another 3.7% by 8 AM ET (1200 GMT).
“Looking forward, we expect reduced crop supplies — caused by the weak Canadian canola crop, the short South American crops, and now the disruptions in the Black Sea region — to drive continued tightness in global grain markets for the next few years,” said Chairman and CEO Juan Luciano in a statement.
ADM’s traditional strength in vegetable oils means it has been directly affected by the war in Ukraine, which has severely disrupted shipments of grain and sunflower seed and oil. Those disruptions threaten to extend into the current growing season: the U.K. Ministry of Defense estimates that Ukraine’s 2022 grain harvest is likely to be down some 20% from last year.
Reports from China, meanwhile, indicate that Covid-related lockdowns are likely to weigh on its agricultural output this year, raising its import needs.
Videos have gone viral online showing local officials forcibly stopping farmers from working in their fields, accusing them of violating coronavirus restrictions, the South China Morning Post reported on Monday, hinting at in-fighting between the National Health Commission and the Ministry of Agriculture.