Louis Dreyfus profits slide as boost from Ukraine war fades

Louis Dreyfus Company, one of the world’s biggest traders of coffee, sugar and wheat, suffered a fall in profits and sales as the boost from price volatility because of the war in Ukraine faded in its main markets.

The Netherlands-based trader generated net profits of $568mn in the first half of 2023, down from $662mn for the same period last year, while the group’s sales fell from $30.3bn to $25.8bn.

The profits of agricultural trading groups have slipped from the record highs seen in the past two years but they are still well above historical levels.

The Covid-19 pandemic and Russia’s invasion of Ukraine, a major supplier of grain and oilseeds to international markets, disrupted global supplies, sending food prices soaring and threatening a hunger crisis in many parts of the world. But for agricultural trading houses the volatility boosted sales and profits.

LDC’s net profit increased by 44 per cent in 2022 to more than $1bn, up from $697mn in 2021, as net sales went up by more than a fifth.

Prices of key agricultural commodities have since stabilised, with Chicago wheat futures falling from a peak of more than $13 a bushel in March 2022 to below $5.80 last month. Operating costs, meanwhile, have risen, slightly damping the performance of traders.

LDC’s chief rivals Archer-Daniels-Midland, ADM, and Bunge posted a decline in their second-quarter profits over the summer and last month Cargill, the largest privately held US company, reported a drop in profits of 43 per cent for its fiscal year ending May 31, according to documents seen by Bloomberg. 

But ADM and Bunge still beat analysts' expectations, with ADM posting adjusted earnings per share of $1.89, down only slightly from $2.5 in the second quarter of 2022, when the firm generated its highest-ever profits.

Despite declining profits, Cargill’s annual revenue also rose by 7.1 per cent to a record $176.7bn, according to Bloomberg.

LDC attributed its buoyant profits to high crop yields in Brazil and ample demand from China.

“While international trade flows progressively adapted to last year’s turbulent environment, some challenges persisted into 2023 — a context in which LDC pursued its focus on keeping essential food, feed, fibre and ingredient supply chains moving safely, reliably and responsibly,” said LDC’s chief executive Michael Gelchie in a statement.

Although prices of wheat and corn have fallen, the cost of other commodities traded by the group, such as sugar, rice and citrus fruit, have climbed recently as a result of the El Niño sea temperature phenomenon and rising temperatures due to climate change.

This article was amended after first publication to correct the reference to LDC’s main base to the Netherlands