ADM Said to Be Leaving Global Sugar Trading Amid Low Margins

  • Sugar-trade volume said to have peaked in 2011-12 season
  • ADM agreed in April to sell its sole ethanol plant in Brazil

Archer-Daniels-Midland Co. will soon quit its global sugar-trading activities as the operations aren’t delivering margins sufficient to overcome high financial risks, said a person familiar with the matter, who asked to not be identified because discussions about the sugar business are private.

ADM declined to comment on its sugar-trading strategy, citing a quiet period, according to an e-mail from the press office. It’s scheduled to report second-quarter earnings Aug. 2.

The Chicago-based company’s sugar trade reached a peak volume of 2 million metric tons in the 2011-12 season, with supplies mostly coming from Brazilian cane millers, the person said. That was equivalent to about 4 percent of the global sugar trade. Since then, Brazil’s sugar industry has wrestled with low prices for the sweetener that prompted some processors to close and others to create joint ventures.

ADM still has a sugar team in Brazil that is trading small volumes this year, said the person who declined to specify the amount traded because the information is private.

‘Challenging’ Times

ADM Chief Executive Officer Juan Luciano said in May that the agricultural trader and processor may continue to modify its portfolio of businesses to boost returns and reduce earnings volatility amid "challenging" times for agribusinesses and changing consumer preferences. The company has sold assets in recent years including its cocoa and chocolate operations, which didn’t meet long-term financial goals.

ADM has been gradually reducing its sugar business as others are expanding, said Bruno Lima, head of sugar at INTL FCStone Inc.

“Alvean has been taking more space in the market,” Lima said by phone from Campinas in Sao Paulo state, referring to a joint venture between Cargill Inc. and Copersucar SA. “I don’t think ADM’s move should have a major impact.”

Alvean was established by Cargill and Copersucar in 2014 and has become the world’s largest trader of the sweetener, accounting for about 30 percent of global exports.

Sugar Partners

Raizen Energia, Royal Dutch Shell Plc and Cosan SA’s joint venture also found partners to export sugar from Brazil. Earlier this year, Raizen created a joint venture with Singapore-based Wilmar International. Wilmar said Tuesday it expects to report second-quarter net losses of about $230 million, citing several units including sugar.

In May 2015, ADM’s global sugar head Alberto Peixoto left the position after almost four years, according to his Linkedin profile. In April this year, ADM agreed to sell its sole ethanol plant in Brazil, ending an eight-year involvement in the country’s market for the alternative fuel made from sugar cane.

ADM’s stock has gained 19 percent this year, outpacing the 5.7 percent increase in the Standard & Poor’s 500 Index. The shares fell 1.5 percent to $43.56 at 12:02 p.m. in New York.

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