ADM predicts soybean price drop as Mississippi River drops to historic lows, slowing shipping

While low water in the Mississippi River will hurt Iowa's farmers, Archer-Daniels-Midland Co. executives said their business will be just fine.

CEO Juan Luciano told analysts on a call Tuesday morning that the multinational agricultural conglomerate will continue to ship less grain from North America through the end of this year, citing the drought that has caused closures and backlogs along the Mississippi this month. But Luciano said ADM will be able to export extra corn and soybeans through the Gulf Coast early next year to make up for the current shortage.

In the meantime, he told analysts, the company will ship more grain from terminals in South America. Plus, with prices falling as crops pile up at local elevators and terminals amid the reduced shipping volume, he predicted lower prices will help ADM's other lines of business, further offsetting their shipping losses.

In particular, he expects a boost to the company's processing plants, which crush soybeans to produce animal feed and oils. The company, which operates plants in Iowa, including one is Des Moines, also processes corn into ethanol.

"As beans are not exported, that matters," Luciano said. "... And that may be a boost for (the crush business), that you may be able to crush lower-priced beans or maybe eventually lower-priced corn."

More:ADM executive's timely stock sale saves him up to $2 million

Chief Financial Officer Vikram Luther told analysts that the price benefit to the company's crushing business will "more than offset" its problems on the Mississippi.

While experiencing rising costs on inputs from fertilizer to chemicals to labor, farmers have benefitted from high commodity prices. Corn traded at $6.86 a bushel on Tuesday, up 74% from the $3.94 price they received two years ago. Soybeans traded at $13.82 a bushel, up from $9.19 two years ago.

However, those farmers now need to find a place to put the corn and soybeans they're harvesting this fall. A drought, particularly in the upper Ohio River valley, has choked the tributaries that feed into the Mississippi River, an important transportation route for the agricultural economy ― including in Iowa, which has dozens of terminals on the river.

For companies that ship corn and soybeans from the Midwest down the river to the Gulf Coast, where about 60% of crop exports leave the country, narrowed shipping channels have limited the Mississippi's capacity, and in some cases left water too low to be navigable. According to the National Weather Service, some areas around Memphis were at levels lower than any point since the government began keeping track in 1954. To dredge some areas deeper, officials closed parts of the river around Hickman, Kentucky, and Stack Island, Mississippi, earlier this month, causing a backlog.

More:Why did Iowa ADM wheat mill close? Former workers say manager buyouts led to wastewater crisis

Shipping costs have exploded. Moving a ton of grain south from terminals in St. Louis cost $105.85 a ton as of Oct. 11, about five times the cost a year earlier, though the prices has fallen somewhat more recently.

Exporters have not moved nearly as much grain as they usually do this time of year. Through last week, shippers had transported 3.8 million metric tons of corn this year, down 21% from this point last year, according to a USDA export inspection report. Shippers had handled 7.6 million metric tons of soybeans, down 12% from last year.

Luciano called the current environment "unprecedented." He said the company will not be able to export soybeans at the same rate as usual, though he believes the company can hold corn longer.

"You're going to see that in the first quarter (of 2023)," he said.

Overall, the company on Tuesday reported an operating profit of $1.56 billion for the quarter ending Sept. 30, an increase of 56% from last year. In part, the company's positive report comes because of a downturn last year, when Hurricane Ida's wreckage hurt ADM's ability to export grains.

The company also reported that it benefitted from increased demand for crushed soybeans to make animal feed and oils like renewable diesel. ADM executives said they earned $90-$100 per metric ton of crushed soybeans last quarter, up from $50-$60 during the same time last year.

The company 's ethanol business did well. Though it didn't report its specific earnings, ADM pointed to an industry figure that showed manufacturers making 52 cents per gallon of ethanol sold, up from 23 cents per gallon a year earlier.

More:Taiwan trade delegates visiting Iowa pledge to buy nearly $3 billion of U.S. corn, soybeans

Overall, ADM earned $1.83 per share last quarter, beating the consensus analyst expectation of $1.43 a share, according to FactSet. Luciana told analysts Tuesday that he expects the company's full-year financial report to show ADM earned $7 per share for 2022, up from a previous estimate of $6.50 a share.

"The business at this point in time is hitting in all cylinders," Luciano said.

Luther, the chief financial officer, said the company's ethanol business will not perform as well in the last three months of the year as it did during the same period last year, when they average manufacturer earned $1.45 per gallon.

ADM's stock closed at $91.17 a share Tuesday afternoon, up 2% for the day The company's stock price has increased 35% since the start of the year.

Tyler Jett covers jobs and the economy for the Des Moines Register. Reach him at tjett@registermedia.com, 515-284-8215, or on Twitter at @LetsJett.

This article originally appeared on Des Moines Register: Shipping bottlenecks will drive down soybean prices, ADM says