ADM Headquarters

The chief executive officer of Archer-Daniels-Midland Co. is betting on an end to the trade war between the U.S. and China.

“Our assumption is not that the trade deal is resolved now in the first quarter, we have it more like half of the year,” CEO Juan Luciano told investors and analysts on an earnings conference call Feb. 5. “So we are thinking if there are any benefits to come, they will come in origination in the last quarter of 2019.”

Origination is the ADM unit that buys crops from farmers, stores them, moves them to ports for export and trades them. Reduced shipments of U.S. soybeans to China have hit traders like ADM, one of the storied “ABCDs” of crop merchants who act as middlemen between growers and large purchasers of food and feed.

“Especially with no imminent deal, it’s a little surprising to hear them say ‘our forecast is based on a resolution to the trade war,’” said Seth Goldstein, an analyst at Morningstar Inc. in Chicago. “It’s certainly surprising to see a guidance so explicitly predicated on a deal that has yet to be reached.”

ADM on Feb. 5 reported fourth-quarter earnings that were below the average analyst estimate for the first time in more than a year. Its profit was dragged down as the absence of Chinese buying for U.S. supplies adds to a glut of ethanol amid lower production margins. Shares of the company dropped as much as 6 percent to $41.84, the biggest intraday decline since October 2017.

China has been returning to the U.S. soybean market in the past couple months, following a December meeting of President Donald Trump and Chinese Premier Xi Jinping.

State-run buyer Cofco Corp. said Feb. 5 it bought almost 1 million metric tons of soybeans, with Sinograin purchasing more than a million tons. That follows an announcement Feb. 2 that they had purchased 2 million tons from America after officials from the two countries met in Washington for trade negotiations. The U.S. government on Feb. 5 reported export sales of about 2.6 million tons.

While the amount is still just a fraction of the 30 million to 35 million tons that China typically buys from America in a year, the frequency of the purchases may give U.S. farmers some cheer.