CHICAGO (B)--Analysts said they were not surprised by ADM's announcement March 1 that they would close three crushing plants and significantly reduce crushing volume at several other locations as of March 13 because of poor crushing margins. ADM's move follows a cutback last month by crushing giant Cargill, and analysts expect a decrease in crushing volume to continue while margins languish.

So far, 2000 has not been a kind year to U.S. crushers. The end of 1999 has not been kind either, as margins have hovered around the 30-cent-per-bushel level for months, making it difficult for crushers to squeeze out a profit.

In an announcement March 1, ADM said it would close its crushing facilities at Helena, AR, Fredonia, KS, and Taylorville, IL Production also will be significantly reduced at several other locations. The re-opening of the plants, along with a return to normal crushing levels at the other plants, will be re-evaluated as market conditions improve, the company said.

The upcoming shutdown of three facilities along with the slowdown at other crushing plants is on the heels of Cargill selling a crushing plant it owned and operated for more than 40 years in Seaford,

MD, in late January.

Cargill has been on a continued slowdown since the end of 1999, due to poor market conditions, according to Bill Brady, spokesman with Cargill.

"We have cut back our operations significantly because the environment continues to be difficult for crushers," Brady said. "We haven't singled out specific locations for a slowdown, but all of our locations have had some curtailment of operations."

In March 1 announcement, ADM said there has been an increased imbalance between supply and demand in the soybean crushing industry. They blamed the imbalance on a combination of large crops in the U.S. and South America and reduced soybean produce demand, mainly in Asian markets.

"I think it is a seasonal thing along with the low crushing margins," said Anne Frick, analyst with Prudential Securities in New York, on ADM's decision to reduce operations ahead of the harvest in the Southern Hemisphere. "A month or so Cargill cut back the crush, so (ADM) isn't alone."

As of March 1, the Chicago Board of Trade May board crush margin was 29 cents per bushel. Industry sources think, for the most part, that crushers begin making a profit once the crush margin climbs above 30 cents.

Dick Loewy, president of AgResource, said dreadful soyoil export sales along with a drop-off in soymeal export sales in February, couple d with a South American soybean crop coming on-line, are crippling crush margins.

As of mid-February, U.S. soyoil exports were running 59% below last year at the same time. Soymeal exports were down 2% from last year as of mid-February.

"The soymeal and soyoil domestic demand has been good, but it hasn't been good enough to prop up margins. We've got an expanse of South American crop and lower basis levels in South America, and the hand-to-mouth users will be in the U.S. just waiting to buy when the Brazil crop comes on-line," Loewy said.

(0) comments

Welcome to the discussion.

Keep it Clean. Please avoid obscene, vulgar, lewd, racist or sexually-oriented language.
PLEASE TURN OFF YOUR CAPS LOCK.
Don't Threaten. Threats of harming another person will not be tolerated.
Be Truthful. Don't knowingly lie about anyone or anything.
Be Nice. No racism, sexism or any sort of -ism that is degrading to another person.
Be Proactive. Use the 'Report' link on each comment to let us know of abusive posts.
Share with Us. We'd love to hear eyewitness accounts, the history behind an article.