If agricultural commodity giant Cargill Inc. is any gauge, the worst may be over at the trading desks of other firms such as Bunge Ltd. and Archer-Daniels-Midland Co.
Last month, closely held Cargill said its trading earnings rose “ appreciably” in the three months through August. That’s after years of low volatility curbed trading opportunities and prompted Cargill and its peers to diversify into other areas.
A drought in Argentina this year slashed soybean crops and a scorching summer hurt Europe’s wheat harvest. The trade war is adding to market swings that are bringing trading back to life -- at least for Cargill. Results from its other segments fell.
In the case of Deere & Co., the impact from the trade war may not show up until 2019. The world’s largest tractor manufacturer is expected to post strong sales as more farmers replace old equipment.
Oil Producers
Even before crude’s run above $80 a barrel at the end of the third quarter, Big Oil was already churning out cash at the highest level since at least 2010, according to Rystad Energy. The question investors and analysts are asking when the companies report earnings is what they will do with all that money.
For Exxon Mobil Corp., the answer is simple: undertake big capital-intensive projects from Brazil to Mozambique that will help rebuild its portfolio of upstream assets that have caused production to stagnate of late. Investors will be watching for any signs there will be enough left over for share buybacks.
For Chevron Corp., it’s a bit more complicated. The U.S. oil major introduced a modest buyback program last quarter but may be in a position to extend it this time around. Investors will be watching to see if the company can quantify cost overruns at its giant Tengiz project in Kazakhstan and whether they will affect its capital budget for the year.
“The integrated companies in the oil sector seem to be the best positioned to more dynamically manage their cash flow,” said Terence Brennan, a commodities fund manager at Lazard Asset Management, which oversees $214 billion. “The one obstacle for returning cash to shareholders through dividends and buybacks however, is that the companies may actually have to begin investing in their business again as the pipeline of projects drops of significantly over the next two years.”
This article was provided by Bloomberg News.