(Adds details on Argentina, U.S.-China trade dispute)
CHICAGO, July 31 (Reuters) - Archer Daniels Midland Co's second-quarter profit beat Wall Street estimates on Tuesday, after a severe drought in Argentina and the U.S.-China trade spat helped boost the U.S. grain merchant's trading and oilseed processing businesses.
The drought reduced harvests of corn and soybeans, tightening global supplies and increasing margins for crushing soy into food oil and meal for livestock.
The crop losses represented a turnaround after years of global oversupply depressed grains prices and made it difficult for top agricultural merchants to turn a profit buying and selling food staples such as corn, soybeans and wheat.
ADM said supply disruptions in Argentina and Brazil led to strong demand for U.S. crops in the April to June period, pushing up volumes and margins for exports.
Chinese soy buyers also shifted purchases from the United States to Brazil during the quarter due to the ongoing trade battle between Washington and Beijing. This increased demand for U.S. soy from other buyers.
ADM said it crushed its largest volume of oilseeds ever in the quarter due to strong processing margins and demand for soymeal. Strong demand for Brazilian soy from China also helped oilseed crushing and origination results, according to the company.
Profit in the oilseeds business jumped 70 percent to $341 million.
Investors are interested in "the upside potential in oilseeds and the more general risks posed by an unresolved NAFTA and escalating trade war," JP Morgan analyst Ann Duignan said in a report.
Washington this month imposed tariffs on $34 billion of Chinese imports as part of the trade battle. In return, China levied taxes on the same value of products from the United States, including soybeans and sorghum.
In May, ADM's trading unit benefited from the volatility spurred by the trade fight. However, the company said it would also take a hit of about $30 million in the second quarter due to Beijing's decision to impose stiff anti-dumping tariffs on sorghum.
On Tuesday, ADM said losses related to sorghum were offset by strong performance in other areas, such as ocean freight.
Net profit attributable to ADM rose to $566 million, or $1 per share, in the second quarter ended June 30, from $276 million, or 48 cents, a year earlier.
Excluding items, the company earned $1.02 per share, beating analysts' estimates of 77 cents per share, according to Thomson Reuters I/B/E/S.
Total revenue rose 14.2 percent to $17.07 billion.
ADM shares were up 2 percent at $48.31 at a three-year high in morning trading on the New York Stock Exchange. (Reporting by John Benny in Bengaluru and Tom Polansek in Chicago Editing by Saumyadeb Chakrabarty and Jonathan Oatis)