Archer-Daniels-Midland Co. will soon quit the global sugar-trading business because the operations are not delivering margins sufficient to overcome high financial risks, said a person familiar with the matter, who asked to not be identified because the discussions are private.
The company’s sugar trade reached a peak in the 2011-12 season, when volumes reached 2 million metric tons, with supplies mostly coming from Brazilian millers, the person said. ADM declined to comment on its sugar-trading strategy, citing a quiet period, according to an e-mail from the press office. The company is scheduled to release an earnings report in early August.
Since ADM’s trading peaked, Brazil’s sugar industry has undergone woes, with some processors closing amid low prices for the sweetener. Some of ADM’s rivals took to creating joint ventures to weather the volatility.
In April, ADM agreed to sell its sole ethanol plant in Brazil, ending an eight-year involvement in the country’s market for the alternative fuel after deciding that the asset was too small. ADM’s Chief Executive Officer Juan Luciano said in May the agricultural trader and processor may continue to modify its portfolio of businesses to boost returns and lower earnings volatility amid "challenging" times for agribusinesses and changing consumer preferences. In recent years, the company has sold assets including its cocoa and chocolate operations, which didn’t meet long-term financial goals.
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