Smithfield CEO Switchup

The meatpacking industry has apparently been listening to “Another One Bites the Dust” on repeat. After Tyson’s CEO changeup last month, Smithfield has announced their own shakeup, naming Shane Smith the company’s new top dog.

And luckily, he’s got some experience in the bacon-makin’ department.

Smith comes equipped with 20 years of Smithfield experience, most recently serving as the company’s chief strategy officer after nearly a decade as executive VP of the company’s operations in Europe. The North Carolina native found his way to Smithfield as a financial analyst after years of experience in accounting.

Rearview mirror: Smith’s predecessor, Dennis Organ, had a rough first – and only – year as CEO, as Smithfield battled COVID-19 on the factory front and in the court of public opinion. He’s stepped down for personal reasons.

Tough road ahead. The new CEO will take on a lawsuit alleging the company stoked fears of a meat shortage in 2020. He’s also facing a shrinking hog supply. Add in government scrutiny of packer profits and industry competition, and the guy’s going to have his hands full.

It’s a Hard Knock Month for Smithfield

Smithfield Foods, the world’s largest pork processor and the U.S.’s largest hog producer, has been feeling ‘when it rains, it pours’ vibes.

First up: Food and Water Watch (FWW), a consumer advocacy group, claims Smithfield “exploited consumer panic” that the nation was in danger of running out of meat.

Anyone recall posts like Tyson’s food-supply-chain-is-breaking ad?

The group says there was plenty of meat in cold storage, and pork was still being shipped overseas. It filed suit in Superior Court in Washington D.C.

FWW also didn’t have nice things to say about workers’ health and safety conditions during the pandemic.

Secondly… sticks and stones can break my bones, but blocking shipments of pork to Mexico might also hurt me.

As of June 16, Mexico has halted exports of pork products from Smithfield’s Tar Heel, N.C., plant because of quality concerns of hog skins.

The real kick in the pork rib was it just had to happen at the largest pork processing plant in the world. Smithfield said the issue is with a third-party company and is rerouting pork products from other facilities to Mexico.

One disaster was avoided though: Smithfield workers in Sioux Falls, S.D. finally reached an agreement with the plant there on June 17. Their contract expired in May, and they were on the verge of a labor strike had a compromise not been met.

Cargill Is Not Not Busy

Cargill is on a roll…or should we say sail.

With commodity demand accelerating, especially in China, a lack of new shipping vessels is boosting the dry bulk freight market.

Zoom out: Part of the reduction in new shipping vessel orders is a result of pressure to gas greenhouse gas emissions and uncertainty in the industry about how to go about it.

So what does Cargill have to do with the shipping industry? Let’s just say they don’t have a tiny $hipping fleet.

One of the largest ship charterers, Cargill has 600-700 vessels in its fleet. Dry bulk accounts for 90% of the fleet use.

Oh, and this: Since 2017, Cargill has reduced its fleets’ gross carbon emissions by 1.5 million tonnes. The company achieved an overall reduction of 5% in CO2 emissions per cargo tonne-mile by 2020 against a 2016 baseline, Cargill said.

Meanwhile… It’s no bull that a bull market is sending Cargill profits sailing in Brazil. As in a five-fold increase last year and 38% increase in revenue.

But beyond Brazil, the company might just benefit from a global “mini supercycle.” China buying spree + dwindling stockpiles = soaring prices and volatility.

And when it comes to Cargill’s giant grain trader status, mo’ volatility mo’ profits.

ADM Is On A Roll

We are in the midst of the first earnings season of the year, and if you’re ADM, things are looking mighty fine.

ADM just dropped their first-quarter financials, and while they may have been overshadowed by all the #Plant21 selfies on Twitter, they definitely caught our attention.

By the numbers:

  • ADM reported a 76% increase in quarterly profits, rising from just 69 cents per share a year ago to $1.22 per share.
  • Overall revenue for the grain giant blew projections away, jumping to $18.89 billion, a 26% increase.
  • The company’s Ag Services & Oilseed segment posted a record quarter with operating profits of $777 million, an 84% increase.

ADM’s CEO Juan Luciano said that the impressive quarter could largely be attributed to the ever-growing demand for imported grain in China. The company also brought two ethanol plants back online as demand continues to rise.

But wait, there’s more: Earlier this month, the company opened a new “Plant-Based Innovation Lab” in Singapore. ADM hopes this new facility will drive new, versatile product offerings in the trendy plant-based protein market.

Testy Train Track Bidding War

If you’re looking for a good deal on a cross-continent railroad, well… let’s just say it’s not a buyer’s market.

Just weeks ago, Canadian Pacific Railway (CP) revealed it had agreed to purchase the Kansas City Southern railroad for a sweet $29 billion. The purchase would create a 20,000-mile North American mega-track allowing commodities to move via rail across the United States, Mexico, and Canada.

And timing couldn’t be better: As pandemic-related disruptions begin to subside, supply chains are moving commodities around at lightning speed.

But not so fast…

Rival railroad behemoth Canadian National Railway Co. (CN) noted the proposal and decided to one-up their competitor. CN slid a contract across the table with a $33.7 billion offer.

Chairman of CN, Robert Pace, spoke to the superiority of their offer being a ‘more complimentary strategic fit’ and having ‘enhanced benefits for employees and local communities.

Those are fightin’ words. CP clapped back at the petty move, stating, ‘The Canadian National management team has significantly underperformed over a decade and has a track record of underdelivering against its own projections.

Let the bidding war begin. Kansas City Southern said it would evaluate the CN offer and ultimately give CP a chance to raise its bid if they found the deal superior.

Regulation might decide the victor. The heavy geo-overlap between CN and Kansas City Southern could make it hard to get approval via the Surface Transporation Board. Now many are speculating which will matter more: price or getting a deal over the finish line.

Commodity Execs To Their Sugar Businesses:

Cargill is taking its turn with one of the latest trends. And thankfully, it’s not anything like a corporate TikTok account.

The commodity giant is selling its stake in the world’s largest sugar trader, Alvean. The buyer? Cargill’s partner in the business and Brazil’s sugar giant, Copersucar.

Alvean was established in 2014 as a 50/50 joint venture between the two companies, and it’s been the king of the hill, responsible for 20% of global sugar trading.

So you mentioned a ‘trend’… Cargill credited the move to being part of a “portfolio review,” but it comes after several other powerhouses have dumped their sugar trading exploits in recent years.

  • ADM was the trendsetter when they left the sugar trade game in 2016.
  • In 2018, Wilmar International acquired Bunge’s sugar trading business.
  • Global commodity trader Olam International emptied out its sugar trading desk in 2019.
  • And earlier this year, U.S. Sugar agreed to buy Imperial Sugar from Louis Dreyfus Company.

The sell-offs are primarily due to sugar’s bumper crop status the past several years. With larger harvests, market prices were stable. And because market volatility is how traders make significant profits, many decided to exit those steady-state sugar businesses to invest elsewhere.

Zoom Out: Sugar trading is a huge business, with an average of 64 million tonnes exchanged on the global market every year. India and Brazil dominate sugar production, each producing over 29 million tonnes annually.

Welcome to Fruitopia

Lettuce explain. Sorry, couldn’t help ourselves.

Dole Food Company and Ireland-based Total Produce have announced a sweet new chapter in their lives. Marriage via merger.

The world’s new largest fresh produce company will be incorporating over 250 facilities, including farms, manufacturing and ripening facilities, cold storage, packhouses, marketing and distribution hubs. And leaving their competition in the dust.

Down on the Dole farm: Dole alone owns and operates 112,000 acres of farmland and other holdings worldwide.

With over 170 years of history in fresh produce, the international power couple will be twice the size of its nearest competitor, Fresh Del Monte Produce, and worth nearly $10 billion in 2020 revenue.

Things are moving fast. The two companies already have a bun in the oven they are naming integrated supply chain efficiencies. Everything from growing, sourcing, importing, packaging, marketing, and distributing will be optimized. This not-so-little one is expected to bring what every parent wants, $30-$40 million in annual cost savings.

What’s ahead: The newly-named Dole plc will be incorporated in Ireland, with a global HQ in Dublin. The new mega-fruit and veggie company will be 
publicly listed on a major stock exchange in the U.S., with plans to raise $500-$700 million.

ADM is Livin’ Large

Happy hour came early on Tuesday for Archer Daniels Midland with an epic 4th quarter earnings announcement.

The U.S. agrigiant noted revenue jumping 10.1% to nearly $17.98 billion while profits soared +36%. A shaky 2020 ended on a high note for the company despite lingering pandemic market dynamics, volatile commodity prices, and a mischievous Mother Nature.

So what led to the big gains?

→ Record-speed soybean processing crushed volume expectations while margins flexed.
→ Record-large U.S. crop exports [China wants all the corn] were very positive for the grain trader.
→ Record-high hand sanitizer sales plus the quarantine baking trend boosted the carbohydrate segment.

Talk about record-setting…

What’s ahead: ADM sees more green in its future. CEO Juan Luciano feels bullish, noting, “Based on the continued delivery of drivers under our control and improving market conditions as the year progresses, we expect strong growth in segment profit and another record year of earnings per share in 2021.”

If Cargill had a to-do list…

Cargill might need an extra shot of espresso in its morning brew to tackle its to-do list these days. But that comes with the territory when you’re one of the largest privately-held companies in the U.S.

Lots of industry news has Cargill’s name floating into headlines. Here’s just a sample:

Tech nerds

Collaboration is the name of the game when it comes to blockchain, and Cargill wants to lead the pack. Working in partnership with several unidentified agrifood businesses, the company has revealed ‘Splinter,’ a new open-source software to tackle some million dollar problems.

The goal? To fix tracking and communication issues across supply chain partners – think producer → processor → distributor → retailer – while maintaining independent partners’ data privacy.

Meaty probs

On its urgent and important docket, Cargill is playing nice with Canadian labor groups. Union groups claim Cargill undermined their leadership when they attempted to better protect workers at the High River beef plant in Alberta.

The plant saw nearly half of its 2,000 workers test positive with COVID-19 last May. The talks come just as a new investigation begins for one of the two worker deaths due to the virus.

Nixing Sugar

To focus on food-processing and meat production, the company is in negotiations to sell its 50% stake in Alvean, the leading global sugar trader. While sugar prices may be high now, the trading group struggled when yields soared and prices plunged the majority of the past six years.

And they’re following suit: ADM, Bunge, and Louis Dreyfus Co. are all saying ‘hasta la vista’ to their respective sugar-related investments.

Ag Stock Blitz

2020 was a doozy for public markets, and agriculture wasn’t spared the rollercoaster ride.

But just as the boomerang of the Dow Jones and S&P 500 was a pleasant surprise, analysts are pretty chipper when it comes to agribusiness stocks in 2021. And those crop prices sure don’t hurt expectations. Here are some analysts’ hot takes around the industry:

Cal-Maine Foods — Quarantine baking didn’t hurt the largest U.S. producer of shell eggs in 2020. ‘Midwest large’ eggs tripled in price from March to May last year, and Cal-Maine notched a 4.6% tick up in year-over-year sales.

Deere & Company — John Deere’s virtual reality experience at the Consumer Electronics Show is a sign of the times. But analysts also hope it’s a sign of the future – where Deere & Co will double down on tech and sell more software and data subscriptions. That ‘recurring revenue’ theme is music to any investor’s ears.

Nutrien — Motley Fool called Nutrien the ‘Boring, Safe Stock’ of 2021…and that’s a huge compliment. The fertilizer and farming input giant is getting lots of eyeballs with its tech investments and service offerings that investors hope will create consistent, steady growth.