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Archer Daniels Midland Co. ramps up early retirement to reduce headcount

Archer Daniels Midland Co. ramps up early retirement to reduce headcount



Archer Daniels Midland Co. (NYSE: ADM), one of the largest agricultural processors in the world, is offering buyouts to an unspecified number of employees, an offer that expires on June 30, 2019. ADM did not disclose how many employees had been invited to retire early. A spokesperson for the company also stated that some positions would be eliminated as the company sought to improve and streamline its business.

ADM is one of the world's largest agricultural processors and food ingredient providers. The company has 450 crop procurement locations and more than 300 food and feed manufacturing facilities, as well as a transportation management system designed to handle inbound and outbound shipments. The company utilizes truck, tanker, hopper, railroad and barge in its transportation system, including its own trucking subsidiary, ADM Trucking.

The company's portfolio includes products for the food, industrial, animal feed and energy sectors, as well as nutrition. According to a company spokesperson, this streamlining is an attempt to center and strengthen the nutrition segment of the brand. However, recent financial losses as a result of persistent inclement weather in the Midwest could also be a factor in potential lay-offs.

"In March, powerful snow and rain storms early in the month and resulting flooding and its after-effects are affecting both Carbohydrates Solutions and Origination operations," a company press release stated on March 25. "Rail transportation has been disrupted throughout the region; our corn processing complex in Columbus, Nebraska, was idled due to flooding and currently is running at reduced rates; and unfavorable river conditions since December are severely limiting barge transportation movements and port activities."

The press release continued, stating inclement weather had been a persistent problem throughout the quarter. Extreme cold in the Midwest affected corn processing as well as volumes, leading to a slow-down in rail and truck transportation which affected both inbound and outbound shipments. At the time, ADM expected this to affect earnings by approximately $50 million. Inclement weather struck the Midwestern states again April 11, and ADM temporarily closed several grain and edible bean elevators in Minnesota, North Dakota, South Dakota and Wisconsin. These blizzards may prevent timely planting of crop for farmers in those states as well, as the blizzards and resultant snow melt may oversaturate the soil making it unfit for planting crops.

"This was historic, record-breaking flooding and the reason was because not only was there very heavy rain, there was also snow melt, because there was rain in an area where there was snow pack on the ground that had not melted yet," said Freightwaves meteorologist Nick Austin. "There was very heavy rain, there was snow melt and ice jams." An ice jam is when large chunks of ice from a lake or river become stuck and obstruct the flow of the bodies of water. Austin also stated there is additional risk for flooding in Minnesota and the Dakotas following last week's blizzards as the ground becomes saturated and cannot hold more water. As the snow melts, there will be nowhere else for the water to go. There are still flood warnings along the Missouri River.

This weather could be costly not only in volumes lost, but in transportation cost as well. Though many drivers are seasoned to this variety of inclement weather, early spring blizzards are not as common to others. Fewer drivers want to drive in this type of weather and would be more likely to stay home and wait out the storm, driving rates up for must-move freight. Shipments that move by rail may still have been stuck waiting for the rail lines to start moving freight once more. Some rail lines are still underwater from the mid-March floods, and relying on over-the-road transportation is more expensive than utilizing rail service.

The company reported fourth quarter 2018 earnings of $318 million, well below the previous year's $788 million. Perhaps in another belt-tightening move, ADM laid off a number of its workforce in the fourth quarter of 2018 as well.

The full impact of the first quarter's unpredictable weather remains to be seen when ADM reports its first quarter earnings on April 26.

Image sourced from Pixabay

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