Struggling stocks for agriculture industry leaders neared buy points on Wednesday after President Donald Trump threatened to cut off Chinese imports of cooking oil.
Share prices for Archer Daniels Midland (ADM) and Bunge Global (BG) jumped in the early hours of Wednesday’s trading session. Archer Daniels rose more than 4% before paring gains. Bunge Global shot up 11.1%.
Both companies produce a variety of grain- and seed-based products, including cooking oils. The shares leapt after a social media post from Trump warned cooking oils could be the latest Chinese import to be caught up in the White House’s ongoing trade war with Beijing.
Buyers moved into ADM and Bunge on the implication that the two agricultural giants could see reduced competition.
“We are considering terminating business with China having to do with Cooking Oil, and other elements of Trade, as retribution,” Trump wrote in a social media post on Tuesday. “As an example, we can easily produce Cooking Oil ourselves, we don’t need to purchase it from China.”
The IBD Methodology
Since the Trump administration implemented its signature tariff policy in April it has regularly shifted which imports it may target with levies. China retaliated against the U.S. by curbing purchases of certain American-made products. In his social media comments, Trump pointed to the lack of soybean sales to China.
ADM and Bunge are major soybean exporters. Prior to the ongoing trade war, each had sold significant amounts of the crop to China-based buyers. Overall, China generally bought more than half of the annual U.S. soybean crop, estimated this year at 4.3 billion bushels, according to Purdue University’s Center for Commercial Agriculture.
However, throughout this year that trade route for soybeans has all but dried up, leading to significant and possibly irreversible damage to U.S. farmers. Meanwhile, soybean shipments from Brazil to China hit record levels from January through August, according to Purdue’s CCA.
Agriculture Industry In The Crosshairs
Trump said he viewed the decision to halt purchases of soybeans from U.S. producers as intentional, a means to exert leverage in ongoing trade negotiations, according to his social media post.
“I believe that China purposefully not buying our Soybeans, and causing difficulty for our Soybean Farmers, is an Economically Hostile Act,” Trump wrote.
Major agribusiness companies already faced industry challenges with eroding margins and surging crop supplies pressuring prices — although that price pressure somehow never quite made its way to grocery story shelves. The added strain of an ongoing trade war that cut off U.S. companies from China, which is the world’s largest soybean market, only exacerbated the sector’s existing problems.
How To Read Stock Charts
The shift in trade war focus sent both stocks toward buy points, according to Market Surge charts.
ADM is in the middle of a 35-day consolidation, trading up 53% from an early April low and with a year-to-date gain of about 25%. It peaked briefly above a flat base buy point at 64.38 before trimming gains.
Meanwhile, Bunge gapped up past its buy point of $85.42, opening at a share price of $88.79. The stock traded 8% above its entry, with trading volume running 371% above its 50-day average. Shares are now up more than 17% this year.
Both ADM and Bunge have struggled with more than two years of revenue and/or earnings declines. Analysts project the beginnings of a turnaround, expecting a modest upturn in revenue when the companies report third-quarter results.
On the earnings line, analysts forecast further declines in EPS of 22% for ADM and 46% for Bunge for the period. But earnings and revenue gains are projected for both in the fourth quarter.
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