Karl Plume

CHICAGO (Reuters) – A string of strong quarterly profits by global agribusinesses Archer-Daniels-Midland Co and Bunge (NYSE:) Ltd is expected to continue its operations in the second quarter despite higher crop prices and disruptions in global supply chains resulting from Russia’s invasion Ukraine, analysts stated ahead of this week’s earnings release.

They said that both companies took advantage of good oileed processing margins, a higher demand for their crops around the globe after war cut off shipping from breadbasket regions crammed around the Black Sea.

ADM reports its results before the market opens on Tuesday. According to a consensus estimate by Refinitiv IBES it is likely to report earnings for the first quarter of $1.41 per sa, roughly in line with the $1.39 per sa in the same quarter last year.

Expected strong earnings would be added to those achieved by the company due to rising food demand and biofuels, and shifting trade flows as a result of the COVID-19 pandemic.

Bunge reports Wednesday at 2:86 per share. This is a sharp contrast to the strong quarter one year ago, where robust margins, surging exports, and a strong quarter drove earnings up to $3.13 per shares.

When there are shortages, such as in droughts and wars, supply chain intermediaries like ADM or Bunge can thrive.

The Russian invasion of February caused food commodity prices to soar. They cut off almost a third global wheat exports, five percent of exports of corn and eighty percent of exports of sunflower oil.

The companies’ crop processing and trade margins were strong despite the rising demand for animal feed, cooking oils, or ethanol.

ADM executives indicated that they believe ethanol demand will return to prepandemic levels by this year. Additionally, the White House has announced plans to increase ethanol blends in the summer as a way to reduce fuel costs.

“They stand to benefit from where they are in the supply chain,” said Chris Johnson, lead agribusiness analyst for Standard & Poor’s. Their economies of scale, procurement and distribution allow them not to be so heavily hit on the supply side but make more money on the processing and distribution side.

Bunge and ADM shut down the Ukraine plants of both companies. These facilities represent only a fraction of their global business and are yet to be reopened. Bunge has two crushing plants in Ukraine, and a Black Sea port, while ADM owns an export terminal and several inland lifts.