Archer Daniels Midland: We See Higher Profits In 2026 if Middle East War Persists Beyond a Few Weeks

Key Morningstar Metrics for Archer Daniels Midland

• Fair Value Estimate
  : $55.00
• Morningstar Rating
  : ★★
• Morningstar Economic Moat Rating
  : None
• Morningstar Uncertainty Rating
  : High

The Wall Street Journal has reported that tanker traffic in the Strait of Hormuz has nearly stopped due to the war in the Middle East. Oil prices are also up due to the conflict, which has led to corn prices rising 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.

• Higher oil prices mean refiners will increase the amount of corn-based ethanol blended into fuels. This has led to corn prices rising since the conflict began. Higher corn prices mean farmers are more likely to sell crops to grain merchandisers, who can benefit from higher capacity utilization rates.

The bottom line: For now, we maintain our $55 fair value estimate for no-moat Archer Daniels Midland ADM. However, the longer the conflict lasts, the more likely it is that ADM will generate higher profits and exceed guidance in 2026. We estimate we could raise our fair value estimate 10%-20% on higher near-term profits.

• That said, once trade begins to normalize, we expect the grain trade and crop prices volatility will quickly dissipate, leading grain merchandising profits to fall back to midcycle levels. This is similar to what occurred following the start of the Russia-Ukraine War in 2022.
• At current prices, we view ADM shares as overvalued, with the stock trading in 2-star territory, around 25% above our fair value estimate. ADM’s stock could see its price rise in the short term, the longer the conflict continues, but we would expect it to fall once trade normalizes.