Record-breaking rains continue to vex the agricultural industry, adding hundreds of millions of dollars in costs for grain traders and crop-seed suppliers.
Millions of corn and soybean acres were left unplanted after continuous springtime storms, leading to product returns and swelling inventories for seed and pesticide makers including Corteva Inc. and Bayer AG. Agricultural shippers and processors Archer Daniels Midland Co., Bunge Ltd. and Ingredion Inc. have contended with overflowing rivers that shut plants and raised grain prices across the Midwest.
“It’s difficult to overstate how challenging this year has been,” James Collins, chief executive of Corteva, said Thursday on a conference call. Corteva said the bad weather drove quarterly profit in its seed business down 50%, as seed sales fell by $180 million and pesticide sales dropped $161 million.
Shares in Corteva, the former agriculture unit of DowDuPont, jumped 10% as its results outpaced analysts’ expectations. Shares of ADM, Ingredion, Bunge and Bayer also climbed.
The U.S. agricultural sector for the past year has struggled to navigate trade disputes pitting the U.S. against some of the biggest food importers, including China and Mexico. Tariffs on U.S. farm goods forced exporters to seek new markets, and cut into prices for farmers, leaving them with less to spend on seeds and chemicals.
Then came the spring rains, capping the wettest 12-month period on record for the continental U.S. Repeated storms left fields too wet to plant, forcing farmers to decide among gambling on late-planted crops, switching to less-profitable alternatives or filing insurance claims.
Corteva said costs in its latest quarter climbed as farmers replanted crops after rain swamped their fields, an expense often covered by seed companies, while farmers switched seed orders to faster-maturing corn and lower-priced soybeans after storms forced later planting. With fewer acres planted, rival seed makers cut prices and Corteva followed suit, executives said. Corteva said it now expects 2019 profit to be $250 million to $300 million lower than its previous forecast.
“The events that transpired in North America this year are without precedent,” Mr. Collins said.
Bayer, the world’s biggest seed-and-pesticide supplier following its 2018 acquisition of Monsanto, said Tuesday that the wet U.S. spring could put its 2019 profit goal out of reach. The German drug-and-chemical conglomerate said the rain caused a $337 million decline in its agricultural sales, after some U.S. farmers gave up on planting corn and skipped spraying herbicides, which particularly hit sales of its flagship Roundup weedkiller.
Lawn and garden supplier Scotts Miracle-Gro Co. this week agreed to sell Bayer some of the Roundup-branded retail products owned by Scotts. The $112 million deal lifted Scotts shares nearly 9% Wednesday after the deal was announced.
Some weather-challenged farmers are cutting costs by switching to generic pesticides, further pressuring prices for Corteva, Bayer and Syngenta AG.
“We’re going for the cheapest ones we can,” said Ohio farmer Ron Snyder.
ADM, one of the world’s biggest grain processors and exporters, said the spring deluge added $65 million in costs to its most recent quarter. High river waters slowed ADM’s barges, added costs for its grain-shipping business and made U.S. corn more expensive for foreign buyers.
“We couldn’t deliver,” ADM CEO Juan Luciano said Thursday on a conference call. U.S. corn shipments inspected for export were down 43% in the second quarter, according to JPMorgan analysts.
Flooding forced ADM to shut plants in Nebraska and Illinois, costing tens of millions of dollars. Similar challenges cost smaller rival Bunge about $13 million in the quarter, executives said on Wednesday.
In hard-hit stretches of the Midwest where weeds now reign over farm fields, grain companies like ADM, Bunge and Cargill Inc. have offered lofty prices for grain to secure supply ahead of an uncertain harvest.
Mr. Luciano said tighter supplies already are boosting costs for major grain buyers like food processors and livestock producers.
Ingredion, which produces high-fructose corn syrup, starches and other staples, said Thursday that rising corn costs, partly driven by weather problems, cut its North American profit by $29 million so far this year. The likelihood of higher corn prices ahead led the company to cut its 2019 profit projection.
Chief Executive Jim Zallie said Ingredion was working to pass rising grain costs on to its customers.
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