Global grain merchants Archer-Daniels-Midland Co and Bunge Ltd likely continued their recent string of solid quarterly profits, bolstered by tight global grain supplies and strong demand for food and fuel, analysts said ahead of both companies' quarterly earnings releases this week.
Healthy soybean crush margins in the United States were also expected to underpin results, they said.
But Wall Street investors are closely watching for signs of trouble from narrower oilseed processing margins elsewhere during the third quarter following COVID shutdowns in China, a smaller South American soy harvest and high energy costs in Europe, analysts said.
Such pressures have previously hurt Bunge's earnings, as it has a significant operational presence in South America.
Still, ADM's profits have topped consensus analyst expectations for 12 straight quarters and, before a miss in the second quarter this year, Bunge results exceeded forecasts for eight quarters.
ADM is expected to post earnings of $1.44 per share when it reports third-quarter results on Tuesday, up from 97 cents in the same period a year earlier, according to the consensus analyst estimate.
Bunge is expected to report earnings of $2.50 a share, down from an exceptionally strong profit of $3.72 a share last year.
Grain Export Disruptions
But lingering supply chain snarls, rising raw material and energy costs and slowing global economic growth have created headwinds for the grains merchants, analysts said.
"The health of the global economy has materially deteriorated" from earlier this year, analysts with Goldman Sachs said in a note to clients, citing risks from rising interest rates and the continued war in Ukraine.
And slowed US crop shipments during the peak fourth-quarter export period due to drought-reduced river levels may dent earnings going forward, analysts said.