ABCD agricultural traders face significant profit downturns

Major agricultural trading companies known as the "ABCD" group — Archer Daniels Midland, Bunge, Cargill, and Louis Dreyfus — are facing difficult times. Just a few years ago, they benefitted from high prices following the disruption in food supplies due to Russia's invasion of Ukraine. Now, they are experiencing significant profit declines. ADM and Bunge recently announced their profits fell by 48% and 49%, respectively, in 2024. They expect further losses in the upcoming year. These companies dominate global grain and oilseed trading but often struggle with thin profit margins. High profits during market volatility turn into losses when prices stabilize. Experts say the ABCD group has tried to diversify its operations but is still heavily reliant on crop prices. Analysts point out that while they excel in trading, they may not be as effective in other areas of the supply chain, such as farming or retailing. Louis Dreyfus has been more focused on its core strengths after restructuring, but it has also faced challenges and reported a 14% earnings drop in early 2024. The geopolitical situation and uncertainties, including U.S. trade policies, are affecting profit forecasts. Analysts suggest that companies focusing solely on trading can adapt more easily to market changes compared to those that have diversified into manufacturing and other areas. Investors like Hartwig Fuchs have expressed frustration over stagnant stock performance despite significant investments in new ventures. ADM is also under scrutiny for accounting practices after finding overstatements in profits. Both ADM and Cargill have been under pressure to generate more steady earnings. Cargill, the largest agricultural trader, announced layoffs and a restructuring to simplify its operations. The company is focusing on expanding into the nutrition and meat processing sectors to stabilize its earnings. Despite efforts to diversify, skepticism remains. Analysts warn that without significant acquisitions or shifts in strategy, these companies may continue to be volatile and heavily influenced by agricultural market conditions.