ADM, Bunge and global soybean, corn and grain trading networks

ADM, Bunge and global soybean, corn and grain trading networks

by Pininvest Analysis

Food Supply Chain on

  • 17 constituents
  • 49.8% 1y performance
  • 16.4% volatility
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The merger plan with Bunge explored by Archer-Daniels-Midland Company appears to have been mostly defensive, sitting oddly with ADM's busines strategy

Next to its large soybean, corn and grain trading network,  Archer-Daniels-Midland has until recently expanded in food ingredients and flavoring, which are expected to be more profitable and more stable than grain trading subject to weather conditions and resulting large price swings

Bunge also trades in basic foodstuffs - soybeans, corn and wheat - buying, selling, shipping and processing for food companies and livestock operations, relying on a network covering the Americas

While we do not know why ADM might have chosen to focus on its traditional commodity trading and processing business, the bid for Bunge would have run counter the interest declared by the mining conglomerate Glencore in May 2017. A stand-still agreement by Glencore not to make a hostile bid  on Bunge has expired without further action for now (May ’18)

The merger plan, far from clear from day 1 considering the small number of competing commodity traders, seems to be off the table as of March ’18 but ADM’s successful specialization in the downstream chemical fertilizers, food and pharma ingredients, and broad range of specialty chemicals will secure a strong hand for the company in any future industry-wide reorganization

The global crops glut, which has been weighing on prices, eased since late December ’17, resulting from poor weather in South America in general and a poor soybean harvest in Argentina hit by dry weather

This favorable trend could be noted on our Commodities ETFs cross-section & key drivers theme  from January '18 through May, with a sharp reversal, possibly related to geopolitical uncertainties

Commodity trends - corn & soya
Commodity trends - corn & soya