WILLAGRI
Global trade in agricultural products is dominated by large multinationals that have financial resources and logistics, storage, transport and processing infrastructure. These companies control more than half of the world’s flow of agricultural commodities. The ABCD square (ADM, Bunge, Cargill and Dreyfus) traded 540 million tonnes of commodities in 2022, or about 60% of the total global volume of cereal and oilseed products traded.
On Tuesday, February 4, the American grain trader Archer Daniels Midland (ADM) indicated on its website its intention to cut between 600 and 700 jobs in 2025. This approach is part of a global effort to reduce its exposure to market uncertainty. ADM also wants to reduce its manufacturing costs and reduce expenses to save between $500 million and $750 million over the next 3 to 5 years.
ADM’s announcement is the latest manifestation of the malaise that is raging globally among global players in the agricultural trade. The time of record profits seems far away for the so-called ABCD quartet of giants in the agricultural commodities market, including ADM, Bunge, Cargill and Louis Dreyfus. In general, these players take advantage of the volatility of world prices by buying at the lowest and selling at the highest. But last year they brooded.
Grain and oilseed markets were marked in 2024 by strong harvests in several production areas and abundant stocks, against a backdrop of lower international demand.
Soybean, corn and wheat prices fell to their lowest level since 2020, overshadowing the period of soaring prices in the wake of the Russian invasion of Ukraine in February 2022 that disrupted global supply chains.
In this context, the gains of several members of the ABCD square have melted away. ADM reported a 9.8% drop in revenue to $85.5 billion and a net profit of $1.8 billion in 2024 compared to $3.48 billion a year earlier. For its part, Cargill also suffered losses during its 2024 fiscal year ended last May. The world’s largest agricultural trader recorded revenues of $160 billion, 10% less than a year earlier. This is the first decline in sales for the Minnesota giant since 2019.
Cargill also recorded, according to data compiled by Bloomberg, a net profit of $2.48 billion in 2024, the lowest level since 2015. This underperformance has already led the trader to announce, last December, a 5% reduction in its global workforce estimated at 164,000 people.
More generally, several analysts point out that this year, the market could be a little more volatile than last year due to concerns about weather conditions in South America, particularly in Argentina, but also in Russia. The Russian harvest is expected to fall by 3 million tonnes to 78.7 million tonnes in 2025, its lowest level since 2021, due to drought, according to the latest forecasts by Sovecon. Beyond the fundamentals, the prices of agricultural products could fluctuate on the Chicago Stock Exchange according to the announcements of Donald Trump’s administration, particularly those impacting the price of the greenback.
Source : Agence Ecofin