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Brazil soy prices might fall, ADM reports reduced earnings

Editor's comments: Agribusiness companies' drive to buy soybeans and other commodity crops as cheaply as possible shouldn't be forgotten when reading the following two stories. Massive production, meaning fence-row-to-fence-row planting, in multiple countries helps to drive down the price that ADM, Bunge, Cargill and other firms pay to farmers. -- RS

Brazil soy prices may face dark days through 2003

(Friday, July 25, 2003 -- CropChoice news) -- Brazilian soybean producers may regret holding on to large stocks from this year's record harvest if the potentially huge US soy crop suffers no serious setback and prices continue to decline, Reuters reported.

"If nothing bad happens to the US crop in the next 40 days, it will be crying time for the Brazilian producer," said chief soy trader at Alianca Corretora, Osnir Krindges. "Among Brazil, Argentina and Paraguay, there are 45 million tons of soy still to be sold." Brazil harvested a record 52.2 million-ton crop in March-May, 25% up on last season. "There is no reason for the internal market to break with Chicago in the second semester, which generally happens," said Anderson Galvao, at grains analysts Celeres/MPrado. "The outlook is black for prices."

Soure: http://email.agriculture.com/cgi-bin1/DM/y/ecy50FmRdp0TM0FeXT0AH

ADM profit falls, hurt by smaller U.S. grain crop

By Eric Noe

CHICAGO, July 24 (Reuters) - Agribusiness company Archer Daniels Midland Co. ADM.N on Thursday said quarterly earnings fell on reduced U.S. grain production, but the company reported gains in soybean and corn processing.

ADM, one of the world's largest processors of soybeans, corn, wheat and cocoa, said its agricultural services profit, including grain origination, storage and transportation, fell 67 percent, pressured by poor U.S. crop production in 2002. A severe drought last summer in the U.S. Midwest resulted in smaller U.S. corn and soybean crops and led to slower grain sales and transportation.

Shares of ADM rose about 3 percent to $12.74, off an earlier high at $12.92, on the New York Stock Exchange on Thursday.

The company said better weather this summer and outlooks for huge U.S. corn and soybean production this year should improve agricultural services profits the rest of this year.

"We've got excellent crop prospects, which will impact both the transportation part of that sector as well as the grain handling," ADM Vice President of Corporate Affairs Brian Peterson told analysts on a conference call.

Decatur, Illinois-based ADM said net earnings in its fiscal fourth quarter ended June 30 were $95.02 million, or 15 cents per share, down from $112.26 million, or 17 cents per share, a year ago.

Excluding one-time items, ADM's profit rose to 16 cents a share from 12 cents a share.

Analysts had expected ADM to earn 16 cents a share, according to Reuters Research, a unit of Reuters Group Plc.

Net sales and other operating income were up 19 percent in the quarter at $8.05 billion.


Global oilseed processing profits were up 28 percent, including improving profits in North American oilseed processing despite soaring soybean prices this summer.

"This year's drought in North America had a real impact on the crops," ADM Chairman and Chief Executive G. Allen Andreas told analysts. "We've been working very, very diligently at bringing our costs down."

The company has slowed U.S. soy operations and shifted oilseed processing to South America to take advantage of that continent's abundant soybean supplies. ADM last month announced the closure of a soy plant in Kansas City, Missouri, its ninth North American plant closure in the past three years.

ADM is doubling capacity at its No. 1 South American soybean plant in Rondonopolis, Brazil, and last month announced construction of five grain storage facilities in Brazil.

"Right now we are in a position of real strength across the globe with our mix of assets," Andreas said.

Corn processing profits were boosted by an early-year spike in prices for ethanol, a corn-based gasoline additive. ADM is the No. 1 U.S. producer of ethanol, with about 40 percent of the industry's annual 2.7 billion gallon production capacity.

Ethanol prices have backed off, but domestic ethanol demand was sharply higher than last year as the five biggest refiners in California began blending gasoline with ethanol this year.

Corn processing was also bolstered by this year's renegotiated contracts for high fructose corn syrup, an ingredient used to sweeten soft drinks. Analysts have estimated prices were up 8 to 10 percent over last year.

ADM is the first of the three big U.S. agribusiness companies to report earnings this quarter.

White Plains, New York-based Bunge Ltd. BG.N , the No. 3 North American food processor, is scheduled to report earnings on July 29. Privately held Cargill Inc., the No. 2 processor, will report earnings on Aug. 15.