US Crop Traders Capitalize on Record Brazilian Soy Harvest

US agricultural traders are cashing in on Brazil’s record soybean harvest, with companies like Archer-Daniels-Midland Co. (ADM) and Bunge Ltd. reporting second-quarter earnings that surpassed even the most optimistic analysts’ estimates. Brazil, the world’s largest soybean supplier, played a significant role in these outstanding results.

With soybeans utilized in a diverse range of products from chicken feed to renewable diesel, Brazil’s estimated production growth of 20% this year, reaching 156 million metric tons, represents a considerable increase in exports. The logistical expertise of ADM and Bunge’s global crop traders is invaluable in moving this increased volume worldwide.

This surge in Brazilian soybean production is a welcome development given the shrinking crops in both the United States, the world’s second-largest soybean grower, and Argentina, which ranks third. The boost in Brazil’s production is projected to account for the entirety of the predicted global increase in soybean shipments this year.

ADM’s CFO Vikram Luthar noted last week on a conference call with analysts that “strong demand for grain exports is expected to be heavily weighted toward South America and our Brazilian origination footprint.”

Over the past decade, crop traders have poured significant investment into enhancing their ability to manage expanding harvests in Brazil, including support for a new export route traversing the Amazon region. The country’s soybean production has nearly doubled during this period, largely driven by China’s mounting demand for the commodity.

This rising influence of Brazil on the international soybean market might also aid the energy transition in the US. According to Bunge’s CEO Greg Heckman, more domestically-produced soybean oil in the US is expected to be used to satisfy increasing demand from renewable diesel producers.

Analysts are recognizing the robust trading conditions, subsequently raising their 2023 earnings estimates for both ADM and Bunge. Bunge, currently awaiting regulatory approval for its $8.2 billion acquisition of Glencore Plc-backed Viterra, has upgraded its own guidance and indicated potential further gains to investors this week.