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Archer Daniels expects US-China trade war to end, 'sizable' soybean exports

The head of Archer Daniels Midland Co. expects the trade war between the United States and China to end in 2019, resulting in smaller but "sizable" soybean exports to China after the company took a hit from tariffs in the fiscal fourth quarter of 2018.

"In our scenario planning, if you will, for 2019, we are expecting at least the trade dispute with China is resolved during the year," Chairman, CEO and President Juan Ricardo Luciano said on an analyst call to discuss the company's fiscal fourth-quarter and year-end results on Feb. 5. "So we're still counting with maybe smaller than other years, but still sizable exports from the U.S. in [the fourth quarter of 2019] from soybeans."

Luciano said the company had to offset approximately 70% of the soybean volume that it expected to ship to China in the fiscal fourth quarter. Archer Daniels offset the impact from China's tariffs on soybean exports with "corn exports that grew significantly year over year" and in part by sending soybeans to other regions, the CEO said. The company missed S&P Global Market Intelligence mean consensus estimates for GAAP EPS and net income in the quarter.

CFO Ray Young said there was an "extreme small volume" of U.S. soybean exports to China in the fourth quarter of 2018, which contributed to lower results compared with the fourth quarter of 2017.

"The team did an excellent job offsetting significantly reduced exports to China by driving North American exports of corn and soybean exports to markets outside of China," Young said.

China recently committed to buying 5 million tons of soybeans from the U.S. amid trade negotiations. The U.S. and China reached a 90-day detente in their trade war and are running up against a deadline that expires March 1. If the two sides are unable to reach an agreement on tariffs on billions of dollars' worth of imported products, the Trump administration has said it will raise tariffs from 10% to 25% on $200 billion of Chinese imports.