ADM CEO sees end of US-China trade war in sight

Dive Brief:

Agricultural trader Archer Daniels Midland (ADM) was able to redirect roughly 70% of the crops affected by China's tariffs on U.S. imports by selling those shipments in Thailand and other places, CEO Juan Luciano told analysts on a recent earnings call. "Boots on the ground in destination marketing was very helpful to move those beans around," Luciano said.
Luciano is tentatively expecting a resolution of President Trump's current trade war with China to resolve in the second half of the year, adding the company is still prepping scenarios for a longer conflict.
"We are expecting at least the trade dispute with China either resolved during the year in the trade aspects, whether we continue to discuss other issues with China later on," he said. "But we think that the trade will be part of the solution during 2019. So we're still counting with maybe smaller than other years, but still sizable exports from the U.S. in Q4 from soybeans."

Dive Insight:

The agriculture industry is less affected by U.S. tariffs on Chinese imports than the counter tariffs and lowered purchase volumes China has put in place for American agricultural products like soybeans and pork. China purchases roughly 60% of the U.S. soybean crop in normal circumstances, according to The Wall Street Journal.

ADM was able to mitigate some impact of tit-for-tat tariffs on agricultural products by sending shipments to other countries, but the necessary moves still took a bite out of the company's profits in the fourth quarter — profits dropped 60% year over year. Profits were up 35% for the full year, however.

Luciano's "expectation" that the situation will resolve this year is either an optimistic one, or based on some undisclosed knowledge of the administration's intentions. Either way, it will be welcome news for the agriculture industry.

ADM is still planning for all possibilities.

"I think that we can handle the different scenarios ... I'm not saying they are neutral to us, but we can manage through both of them and see still us maintaining our forecast for 2019," said Luciano.