Archer Daniels Midland Co (ADM) logo is seen displayed in this illustration taken, April 10, 2023.
Chicago-based ADM, along with other processors, has faced challenges from declining crush margins and abundant soybean supplies. On Wednesday, ADM adjusted its cash basis bid at its Decatur, Illinois, facility to 20 cents below the Chicago Board of Trade November soybean futures price, down from 22 cents above July futures. This shift, coupled with a 15-cent discount in November futures compared to July on Thursday, resulted in a local cash price drop of approximately 60 cents per bushel, a notable 6.5% decrease. ADM also revised bids at other facilities, with competitors like Cargill following suit on Thursday, while some processors retained July futures contracts but lowered basis values by up to 15 cents.
ADM stated in an email on Thursday: “ADM does not have insight around the pending blending announcement beyond publicly available information and independently sets its basis bids.” The basis bid reflects the difference between futures prices and local cash prices for immediate grain delivery.
The market reaction was significant, with John Stewart and Associates noting: “ADM Decatur put the bean market in a frenzy.” Diana Klemme, vice president of Grain Service Corp in Atlanta, alerted clients, stating: “I said check your markets carefully because ADM just dropped all their bids 40-75 cents a bushel and went to new-crop values.” Klemme, with over 50 years in the grain industry, noted that such a shift to new-crop basis levels in June was unprecedented. The November futures contract represents the autumn harvest price.
Weak demand and expectations of a large autumn harvest have pressured processing margins, exacerbated by increased U.S. processing capacity, which has boosted soymeal and soybean oil supplies, lowering prices. Charlie Sernatinger, executive vice president at Marex Capital Markets, remarked: “Cash crush margins stink, and there is a bunch of downtime scheduled for July.” Additionally, uncertainties around U.S. biofuel policies and tariff concerns have led some biodiesel producers to scale back operations, with ADM announcing in April the permanent closure of a South Carolina soybean processing plant to reduce costs.
Farmers are hesitant to sell at current prices, seeking higher returns, while processors like ADM maintain conservative bids to protect their margins, reflecting the broader challenges in the soybean processing industry.
