Sector Earnings - Agriculture - Jan 21, 2026

Editor’s Notes

• Why now: Parts of the agriculture sector look close to a cyclical low after a prolonged period of weak commodity prices and pressured earnings. At the same time, underlying demand for food and ag-related assets has not gone away. For patient investors, this feels like a reasonable entry point where volatility is near-term, but the payoff is longer-dated.
• The consumer is trading down, not disappearing. Earnings reinforced a clear pattern: inflation is reshaping what people buy, not whether they buy. Chicken and eggs are benefiting as affordable, flexible proteins. Pilgrim’s and Cal-Maine both framed demand as resilient, with mix and channel shifts working in their favor rather than against them.
• Biofuels remain volatile in the short term, constructive longer term. ADM and Bunge made it clear that policy delays are real earnings headwinds today, particularly in crush margins. Darling stood out on the other side of that trade, with the 45Z credit and low-carbon feedstocks providing tangible support. The market is waiting for clarity, but the long-term pull from renewable diesel and SAF still looks intact.
• The strategic pivot away from pure commodities is real. What stood out most was how consistently management teams are investing to de-risk their businesses. Pilgrim’s margin gap in the U.S., Cal-Maine’s push into prepared foods and specialty eggs, and ADM’s Nutrition performance all point to the same conclusion: value-added, branded, and processed exposure is where durability and margin resilience are being built.

Sector and Macro Themes in Agriculture

Protein Affordability Drives Consumer Trade-Down Amidst Persistent Inflation

Takeaway: Persistent inflation and cautious consumer sentiment are not just general headwinds; they are actively reshaping protein consumption patterns. Consumers are making explicit trade-offs, shifting from more expensive proteins like beef and certain foodservice options to more economical alternatives such as chicken and eggs, particularly in retail channels. This creates a distinct demand tailwind for more affordable protein producers.

Evidence:

• Pilgrim's Pride (FY2025-Q3): "Consumer behavior is shaped by low sentiment and inflation. Consumers are making more retail trips with smaller basket sizes and lower foodservice traffic. Despite this, chicken demand remains strong across both channels due to its affordability and flexibility." The USDA forecasts overall U.S. protein availability growth of only 0.8% for 2025, with chicken being the only protein expected to increase, offsetting declines in beef, pork, and turkey. This imbalance supports a trade-down narrative, as higher beef prices in foodservice lead to consumers shifting to retail chicken.
• Cal-Maine Foods (FY2026-Q2): Eggs are explicitly positioned as a "nutrient-dense, affordable protein, purchased by 97% of U.S. households." The rising trend of GLP-1 users gravitating towards nutrient-dense foods further bolsters egg demand.

Biofuel Policy Uncertainty Creates Short-Term Volatility, Long-Term Opportunity

Takeaway: The U.S. biofuel policy landscape, specifically regarding Renewable Volume Obligations (RVOs) and the 45Z clean fuels production tax credit (PTC), is causing immediate and significant volatility, particularly in crush margins. However, there's a clear consensus on robust long-term demand for renewable diesel (RD) and sustainable aviation fuel (SAF), implying a powerful future tailwind once regulatory clarity is achieved. The market is currently in a holding pattern, penalizing players dependent on commodity crush, but poised for recovery.

Evidence:

• ADM (FY2025-Q3): Lowered its full-year 2025 adjusted EPS guidance to $3.25-$3.50 (from ~$4.00) "primarily due to continued softness in crush margins," directly attributing this to the "deferral of U.S. biofuel policy." Its Crushing subsegment's operating profit plummeted 93% YoY due to "significantly lower global soybean and canola crush execution margins."
• Bunge (FY2025-Q3): Also noted that "biofuel policy uncertainty continues," leading to a "very spot transactional market." They expect the final RVO proposal by early 2026, with an anticipation of "significantly higher" volumes. Improvement in soy oil crush margins is "anticipated in early 2026."
• Darling Ingredients (FY2025-Q4): Conversely, Darling Ingredients is highly optimistic about the 45Z PTC, stating it's a "significant tailwind, providing a clear safe harbor for accounting treatment." This credit is "CI-adjusted" and "only eligible for US biofuel producers," directly benefiting Darling's low Carbon Intensity (CI) feedstocks (animal fats, used cooking oil). Regulatory clarity is also contributing to "steadily improving" fat prices.

Persistent Avian Influenza (AI) as a Structural Industry Reality

Takeaway: Highly pathogenic avian influenza (HPAI) is no longer an episodic event but a "structured reality" for poultry and egg producers globally. Its sustained presence and unpredictable nature continue to pose significant supply chain risks, market dislocations, and international trade restrictions, demanding permanent vigilance and adaptation from industry players.

Evidence:

• Cal-Maine Foods (FY2026-Q2): Emphasized that "the supply challenges related to high-path AI are not behind the industry," with global outbreaks continuing and recovery being "uneven and unpredictable." Incidence rates in November 2025 were "as high as 2022," showing persistent risk. Management explicitly stated being "on pins and needles" watching the virus.
• Pilgrim's Pride (FY2025-Q3): Highlighted the broader trade implications, noting that "China remains a closed market due to avian influenza bans, despite trade agreements."

Strategic Shift Towards Value-Added & Diversified Portfolios to Mitigate Volatility

Takeaway: A significant and observable strategic pivot is underway across the agriculture sector: companies are actively de-risking their operations by moving away from pure commodity exposure. This involves diversifying product portfolios, expanding into higher-margin, value-added segments, investing in processing capabilities, and acquiring businesses that enhance resilience and market optionality. This isn't just rhetoric; it's showing up in capital allocation and segment-level performance.

Evidence:

• Pilgrim's Pride (FY2025-Q3): Actively "upgraded its portfolio to differentiate products and reduce exposure to pure commodity markets," focusing on "higher-attribute offerings" and converting Big Bird plants to Case Ready operations. Its U.S. segment, with a focus on Case Ready and Prepared Foods, reported a strong 16.9% adjusted EBITDA margin, significantly higher than Europe (7.9%) and Mexico (8.2%) which have more commodity exposure.
• Cal-Maine Foods (FY2026-Q2): Is "evolving into a more resilient, strategically diversified portfolio by growing specialty eggs and accelerating value-added prepared foods." Specialty eggs now account for 44% of total shell egg sales (up from 31.7% in prior year), and combined with prepared foods, they make up 46.4% of net sales.
• ADM (FY2025-Q3): Its Nutrition segment, focusing on higher-margin specialty ingredients, achieved a 24% increase in operating profit, in stark contrast to the declines in AS&O and Carbohydrate Solutions, underscoring the value-add strategy.
• Bunge (FY2025-Q3): The Viterra integration is lauded for creating a "more balanced global footprint" and increasing "optionality" to better navigate market shifts, reducing reliance on any single commodity or region.

Key Company-Specific Inflection Points (Agriculture Sector)

Pilgrim's Pride: Aggressive U.S. Prepared Foods and Case Ready Expansion for De-commoditization

Takeaway: Pilgrim's Pride is undergoing a profound, strategic transformation by investing heavily in its U.S. value-added segments (Prepared Foods and Case Ready). This is a clear pivot to structurally reduce its reliance on volatile commodity chicken markets, a strategy already demonstrating significant margin enhancement in the U.S. segment. These investments signal a sustained push towards higher, more stable profitability.

Evidence:

• The company is converting the Russellville plant to Case Ready (Q1 2026) and commencing construction on a new Prepared Foods plant in Walker County, Georgia, in Q4 2025, specifically to support its growing Just BARE brand. This aligns with a reported 25% year-over-year growth in Prepared Foods net sales and strong growth in Case Ready in Q3 2025. This structural shift is reflected in the U.S. segment's robust 16.9% adjusted EBITDA margin, outperforming other regions.

Bunge: Viterra Integration Exceeding Expectations with Early Synergy Capture and Global Balancing

Takeaway: The initial phase of the Viterra integration, a monumental undertaking, has been unexpectedly smooth and productive. Bunge is realizing "tangible benefits beyond cost savings" early on, accelerating its strategic goal of building a more agile, balanced, and resilient global agribusiness platform. This positive early momentum suggests potentially greater long-term value creation from the merger.

Evidence:

• Management reported being "pleased with the integration progress and the 'One Bunge' culture," noting that Viterra's early contributions were "very good, especially in soy and soft processing." This contributed to adjusted segment EBIT rising to $924 million from $559 million YoY. The combined entity creates a "more balanced global footprint," particularly in soy crush with Viterra's strong Argentina presence, enabling better responsiveness to market signals.

ADM: Strategic Animal Nutrition Pivot to High-Margin Specialties and Decatur East Recovery

Takeaway: ADM is enacting two distinct, impactful catalysts: a strategic joint venture with Alltech to transform its Animal Nutrition business into a higher-margin, specialty ingredients focus, mirroring its successful Human Nutrition strategy. Simultaneously, the successful recommissioning of the critical Decatur East plant eliminates a significant, multi-quarter cost headwind, providing a direct and measurable boost to future profitability.

Evidence:

• The announced JV with Alltech, expected to commence in 2026, will combine compound feed businesses, allowing ADM's remaining Animal Nutrition to focus on "higher-margin Specialty Ingredients and premixes," aligning with the successful Human Nutrition strategy. This contributed to Animal Nutrition operating profit surging 79% YoY in Q3 2025. Furthermore, the Decatur East plant is now "back online and consistently producing white flake," expected to eliminate $20-$25 million per quarter in cost headwinds from 2026 onwards.

Darling Ingredients: SAF Unit Launch and 45Z PTC Clarity Driving Deleveraging and Growth

Takeaway: Darling Ingredients has achieved a critical operational and regulatory milestone. The successful, ahead-of-schedule, and under-budget launch of the world's largest Sustainable Aviation Fuel (SAF) unit, coupled with crucial clarity on the 45Z Clean Fuels Production Tax Credit (which uniquely benefits its low Carbon Intensity feedstocks), provides a significant, tangible, and immediate tailwind for cash flow, accelerating deleveraging and future growth opportunities.

Evidence:

• The SAF unit's successful startup and the company's confidence in monetizing the "highly advantageous" 45Z PTC (due to its low Carbon Intensity feedstocks) are set to drive "stronger distributions" from Diamond Green Diesel (DGD) and enable further debt reduction of $350-$500 million in 2025, with a target leverage ratio of 2.5x. DGD paid $179.8 million in dividends to Darling in FY2024.

Cal-Maine Foods: Transformative Prepared Foods Capacity Expansion & Specialty Egg Acquisitions

Takeaway: Cal-Maine Foods is undertaking substantial, forward-looking investments that signal a bold commitment to structurally shift its business model. Massive capacity expansions in Prepared Foods and strategic acquisitions for specialty egg production aim to transform the company into a higher-value, less cyclical enterprise. This strategic reorientation positions them for long-term growth and margin resilience, despite anticipated short-term operational disruptions.

Evidence:

• Prepared food sales soared by 586.4% to $71.7 million in Q2 FY2026. The planned capacity expansions (+15M for scrambled eggs, +7M for Trapini Foods JV) will increase total prepared foods capacity by "over 30% in the next 18 to 24 months," aiming for a 19% EBITDA margin. The acquisition of Clean Egg LLC assets (677,000 layers) directly expands cage-free and free-range egg capacity, supporting the long-term goal of specialty eggs comprising over 50% of shell egg net sales.

Debates and Uncertainties for the Future of the Agriculture Sector

Sector / Macro Level Debates and Uncertainties

Biofuel Policy Finality and Market Response

Debate: While a long-term tailwind is expected, the immediate future hinges on the U.S. Environmental Protection Agency (EPA) finalizing the RVO proposal. Crucially, the specifics of this finalization – particularly the full reallocation of SREs (Small Refinery Exemptions) at 100% and the nuanced treatment of "half RINs" for foreign feedstocks – will dictate the actual impact on domestic crush margins and the renewable fuel economic landscape. The market remains "spot transactional" due to this lack of precise clarity, making future demand and pricing difficult to model confidently.

Evidence:

• Bunge (FY2025-Q3) expressed a desire for "sooner clarity" on the RVO and highlighted the cruciality of "reallocation of SREs at 100%." They also noted "technical limitations and mixed news" regarding the "half RIN" concept.
• ADM (FY2025-Q3) lowered its EPS guidance, directly attributing it to the "deferral of U.S. biofuel policy," indicating the immediate negative impact of this uncertainty.

Evolving Global Trade and China's Import Demand

Debate: The stability and volume of agricultural trade, especially with China, remain uncertain. While a recent "trade deal with China" is seen as encouraging, its practical details — such as whether the "12 million tons of soybeans" refer to calendar or marketing year, and whether it represents sold versus shipped material — are yet to be clarified. This ambiguity significantly impacts export opportunities and regional market dynamics, particularly for commodities like soybeans and pork. Furthermore, persistent trade barriers due to avian influenza continue to impact poultry exports.

Evidence:

• Pilgrim's Pride (FY2025-Q3) observed that Europe's pork business was "challenging due to falling European hog prices and softened demand from primary export markets, particularly China, which initiated an antidumping investigation." China also remains a "closed market due to avian influenza bans."
• ADM (FY2025-Q3) acknowledged that "farmers and buyers are operating hand-to-mouth due to uncertainty regarding the China trade deal and biofuel policy."

Severity and Duration of Avian Influenza Outbreaks

Debate: Despite ongoing industry efforts, HPAI continues to be a "structured reality." The high incidence rates observed in November 2025, mirroring levels from 2022, raise significant concerns about the long-term management of the virus and the potential for "large bird explosions." A key question remains: how effectively can enhanced biosecurity measures contain future outbreaks, and what will be the lasting impact on global poultry and egg supply and prices if widespread incidents persist?

Evidence:

• Cal-Maine Foods (FY2026-Q2) reported 496 outbreaks in 26 countries since October, with November incidence rates as high as 2022. Management acknowledged the "terrible situation" globally and remains "on pins and needles" despite lower bird numbers affected in some instances, indicating ongoing vulnerability.

Company-Level Debates and Uncertainties

Pilgrim's Pride: Profitability Challenges in Europe and Mexico

Debate: While the U.S. segment shows strong profitability (16.9% adjusted EBITDA margin), the Europe (7.9%) and Mexico (8.2%) segments continue to face distinct challenges (falling European hog prices, China's anti-dumping investigation, lower Mexican chicken pricing due to increased supply). Will the ongoing strategic investments and efforts in these regions successfully elevate their profitability closer to U.S. levels, or will they continue to be a drag on overall company margins? The impact of higher legal settlement expenses and incentive compensation costs on overall profitability also warrants scrutiny.

Evidence:

• Adjusted EBITDA margins for Europe and Mexico lagged the U.S. significantly. Europe's pork business was hurt by falling hog prices and China's antidumping investigation. Mexico's profitability was impacted by lower chicken market pricing due to increased supply.

Bunge: Full Synergy Capture of Viterra Amidst Project Delays

Debate: While early integration is positive, the "big step change in 2027" for Viterra synergy capture is a future promise. Can Bunge sustain this momentum and fully realize all anticipated commercial and cost synergies, particularly as complex mega projects like the Weston plant in Europe face delays (now expected to commission in early 2027 instead of late 2026)? How will the combined entity perform under potentially sustained periods of elevated grain stocks-to-use ratios, which traditionally put pressure on crush and origination margins?

Evidence:

• "Significant synergy capture expected in 2026 and a big step change in 2027". The Weston plant delay due to "contractor issues" could push back expected returns from some growth initiatives.

ADM: Recovery of Crush Margins and Carbohydrate Solutions Demand

Debate: ADM's revised FY2025 EPS guidance reflects significant "softness in crush margins" due to biofuel policy deferrals. Will the anticipated improvement in soy oil crush margins in early 2026, driven by eventual biofuel policy clarity, materialize as quickly and robustly as hoped? Furthermore, the Carbohydrate Solutions segment is experiencing declining global demand for sweeteners and starches due to "softness in consumer buying trends" and high corn costs. Can ADM effectively rebalance this segment and reignite demand, especially with uncertainty lingering around the high fructose corn syrup market?

Evidence:

• ADM's Crushing subsegment profit was down 93%, and Starches & Sweeteners was down 36%. The company expects "continued softness in global soybean crush margins". Continued "softness in demand for sweeteners and a reduction in starches demand primarily from less consumption of packaged goods and corrugated paper" persists.

Darling Ingredients: Sustaining Fat Price Recovery and SAF Scaling Efficiency

Debate: While fat prices are improving, their volatility has been a challenge historically. Can Darling Ingredients sustain this recovery and maximize its low CI feedstock advantage in what remains a competitive and policy-dependent renewable fuels market? As the company explores converting "more renewable diesel into SAF," what will be the capital intensity, operational complexities, and market acceptance of this accelerated shift? Will the projected debt reduction target of 2.5x leverage be achieved, especially with CapEx increasing to $400 million in 2025, suggesting continued investment?

Evidence:

• Waste fat prices were "recovering, but the rebound was much slower than anticipated" previously, raising questions about sustained recovery. Management is "exploring opportunities to add capacity for SAF" and convert more RD to SAF, implying significant future investment and potential execution risks. The 2025 CapEx is projected to increase to $400 million, from $332.5 million in FY2024.

Cal-Maine Foods: Short-Term Investment Headwinds vs. Long-Term Prepared Foods Promise

Debate: Cal-Maine Foods anticipates "temporary lower volumes and higher costs in the short term" in its Prepared Foods business due to significant capacity expansion projects. Will these disruptions be more pronounced or last longer than the projected "remainder of the fiscal year," potentially impacting the targeted 19% EBITDA margin and overall profitability? Additionally, while specialty egg volume was flat in Q2 (deemed a "huge win" given prior year comps), if conventional egg prices remain depressed, will the pace of mix shift towards specialties slow, challenging the long-term double-digit CAGR growth target for specialty eggs and the goal of over 50% of shell egg net sales?

Evidence:

• The prepared foods expansion is an "18-24 month project". Specialty egg sales volume was "relatively flat" in Q2 FY2026 compared to prior year, which was a period of unusually high demand. While aiming for "double-digit CAGR growth over time" and >50% of total shell egg net sales, a slower market shift could impact these long-term targets.

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