Huge crops, record storage signal more woes for grain merchants

In the face of a global grain glut that is crushing profits and raising questions about long-term prospects for the world’s big grain merchants, the companies maintain they need only a drought or other supply shock to return to the riches of the past.

But a two-day rout on Wall Street earlier this week for two of the industry’s biggest firms — Archer Daniels Midland Co. and Bunge Ltd. — underscores concerns that poor recent profits may be more than just a leg of a cyclical downturn and instead point to fundamental change.

Grain markets are notoriously cyclical, but some industry participants and observers say some of the changes are more permanent, making the industry ripe for consolidation.

Farmers have invested heavily in new storage, making them less reliant on the grain elevators operated by the trading houses, and the Internet has empowered farmers with information that makes them much smarter about marketing their grain.

Others say the outlook is as impermanent as the weather.

Read more: St. Louis Post-Dispatch

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