Archer-Daniels-Midland: We See Higher Near-Term Profits From Middle East War-Related Volatility

Key Morningstar Metrics for Archer-Daniels-Midland

• Fair Value Estimate
  : $60
• Morningstar Rating
  : ★★
• Morningstar Economic Moat Rating
  : None
• Morningstar Uncertainty Rating
  : High

The war in the Middle East has disrupted global trade, leading to ocean shipping traffic being largely closed through the Strait of Hormuz. This has led to rising oil prices as well as higher corn and soybean prices and altered grain trade flows.

Why it matters: We estimate roughly 5% of global grain trade flows through the Strait of Hormuz, which will have to be rerouted. This will likely create price dislocations, which historically have led to greater profits for grain merchandisers. We now think this is likely to occur in 2026.

• Higher oil prices mean refiners will increase the amount of corn-based ethanol and soybean oil blended into fuels. This has led to corn and soybean prices rising since the conflict began. For grain merchandisers, we forecast higher capacity utilization rates in 2026.

The bottom line: We raise our fair value estimate for Archer-Daniels-Midland to $60 from $55. At current prices, we view ADM shares as overvalued, with the stock trading over 15% above our updated fair value estimate and in 2-star territory.

• The increase is due to our outlook for higher grain merchandising profits in 2026 and 2027 as a result of the war in the Middle East disrupting supply chains, typical ocean freight traffic, and raising crop prices. We now see 2026 adjusted earnings per share coming in well above guidance.
• We think ADM will see strong near-term profit growth, but see no impact on midcycle profits. That said, the stock price could run up in the near term, similar to when the Russia-Ukraine conflict began in 2022, which was a record profit year for ADM. Yet, profits and shares fell in the years after.