NEW YORK, NEW YORK, US — Three primary factors have played a key role in moderation in crush margins so far this year, Vikram Luthar, senior vice president and chief financial officer at Chicago, Illinois, US-based ADM told participants during a May 17 presentation at the BMO Capital Markets Global Farm to Market Conference.
The first factor is renewable green diesel capacity.
“We know they’ve had some supply chain and logistics challenges and catalyst issues,” Luthar said. “We already see that there is increased pull for veg oil. So we remain quite confident that the renewable green diesel capacity, while delayed, will still come back online in the back half of the year. We still believe the renewable green diesel capacity should increase by about 1 billion gallons in 2023.”
He said this trend pertains not just to the United States, but all over the world.
A second factor playing a role in moderation in crush margins is what is transpiring in Argentina. Forecasts call for a soybean crop that could total approximately 25 million tonnes, which would be about 50% smaller than a typical crop, Luthar said. As a result, “They’re going to run out of beans,” he said. “…They are the largest exporter of crush. So that’s going to create opportunity in the back half when they run out of beans in Q2 for crushing in parts of the world that continue like North America and Brazil, in particular. So that is a trend that will support margin structure in the back half of the year.”
The third factor highlighted by Luthar was tightness in soybeans.
“You’ve seen the expectation of the US crop this year,” he said. “So that should actually help provide some tailwinds even for the processing business on the crush side as the balance sheets on soybeans get a little more comfortable than the back half of this year.”
Luthar said all three factors should play a role in the outlook for crush being stronger in the second half than is likely to be seen in the second quarter.