QUOTE AND NEWS
DailyFinance  Sep 16  Comment 
- Nearly $6 million in property taxes a year paid to the City of Mirabel MONTREAL, QUEBEC -- (Marketwired) -- 09/16/14 -- Aeroports de Montreal (ADM) today released the results of a comprehensive economic impact study showing that...
DailyFinance  Sep 16  Comment 
MONTREAL, QUEBEC -- (Marketwired) -- 09/16/14 -- Following a call for tenders issued May 7, 2014, the Board of Directors of Aeroports de Montreal (ADM) today authorized the Corporation to award contracts in connection with the dismantling of the...
Benzinga  Sep 8  Comment 
Consolidations in the cocoa business have been in the news for most of 2014. It’s all about leverage and scale, according to participants. Here are four of 2014’s most newsworthy cocoa consolidations, to date. Cargill - ADM Most...
TheStreet.com  Sep 2  Comment 
NEW YORK (TheStreet) -- Shares of Archer-Daniels-Midland Co. are up 1.30% to $50.51 after the company announcedatoday an agreement to sell its global chocolate business to Cargill for $440 million, subject to a customary working-capital...
StreetInsider.com  Sep 2  Comment 
* Compuware (Nasdaq: CPWR) and Thoma Bravo jointly announced that Compuware has entered into a definitive agreement to be acquired by leading private equity investment firm Thoma Bravo, LLC, in a transaction valued at approximately $2.5...
Wall Street Journal  Sep 2  Comment 
U.S. grains giant Archer Daniels Midland agreed to sell its chocolate business to Cargill for $440 million, a deal that will expand the private agribusiness's capabilities in North America and Europe.
Agrimoney.com  Aug 29  Comment 
Credit Suisse warns of "pain" to US producers of corn-based sweeteners if Mexico retaliates against a proposed levy on its sugar exports
Motley Fool  Aug 27  Comment 
A few reasons Archer Daniels Midland's stock could fall in the coming months and years.
Motley Fool  Aug 26  Comment 
A few reasons Archer Daniels Midland's stock could rise in the coming months and years.
Market Intelligence Center  Aug 25  Comment 
After Friday’s trading in Archer-Daniels-Midland Co (ADM) MarketIntelligenceCenter.com's patented algorithms uncovered a trade that offers a 2.36% return or 15.96% on an annualized basis (for comparison purposes only), while providing 2.58%...




RELATED WIKI ARTICLES
 

Archer Daniels Midland Company (NYSE: ADM) is one of the largest processors of oilseeds, corn, wheat and cocoa in the world, posting revenues of $62.9 billion.[1]It processes crops and makes them into food and Biofuels.

Because ADM sells crops, anything that increases demand for crops without damaging the supply tends to help the company. Some examples include increasing world population, consumption of meat, and the production of Biofuels and other crop based products (soy-based foam etc). The OECD-FAO Agricultural Outlook 2009-2018 predicts that crop demand will increase substantially in the next decade, even surpassing 2008 highs. [2] Much of the demand will be driven by emerging economies, especially China, which are already accounting for much of Archer-Daniels-Midland (ADM)'s growth (especially in the soy-bean sector).

It is important to note that semi-drought conditions, and crop supply shortages that benefit agricultural fertilizer companies like Bunge (BG), Monsanto Company (MON), Potash Corporation of Saskatchewan (POT), and Agrium (AGU) do not benefit ADM nearly as much. Agricultural fertilizer companies sell more yield-enhancers when crops are hard to grow, but ADM actually grows crops so it faces higher expenses during bad times. Crop shortages only benefit ADM from a competitive standpoint- they drive smaller farms out of business and make them easy acquisition targets for agricultural giants like ADM and Cargill.

Business Financials

Business Segments

ADM is a world leader in agribusiness segmented into four categories: oilseed processing, corn processing, agricultural services, and other. It also has a Corporate segment which accounts for some rather interesting accounting profits.

The following are more in depth descriptions of ADM's business lines.

Oilseed Processing

ADM is involved in processing soybeans, cottonseed, sunflower seed, canola, peanuts, and flaxseed primarily for the food and feed industries. Crude oil is sold “as is” or is further processed into salad oils, margarine, shortening, etc. ADM also markets partially processed oil for use in industrial products such as chemicals, paints, and Biodiesel. ADM also sells oilseed meals to commercial Livestock and Poultry businesses, cottonseed flour to the Pharmaceutical Industry, and cotton cellulose pulp to chemical, paper, and filter companies.

Corn Processing

ADM operates both wet and dry mills for the production of syrup, starch, glucose, dextrose, sweeteners, ethyl alcohol (both for beverages and fuel), among other products, for sale to the food and beverage industry. It also markets amino acids (for use by the pork and poultry industry), citric and lactic acid, sorbitol, and xantham gum.

The company recently announced that it would consider expanding into ethanol; now that market prices are down, the company may considering purchasing ethanol-refining plants and may even attempt to acquire ethanol companies.

Agricultural Services

This segment utilizes the company’s elevators and transportation network to transport, store, buy, and clean commodities and then resells them to the agricultural processing industry. This in turn provides reliable services to its own processing operation.

Other

ADM is involved in various other operations including: milling wheat, corn, and milo into flour; processing cocoa beans into liquor, butter, powder, chocolate, and other compounds; producing wheat starch, gluten, and lecithin; producing soy flour, soy grits, soy protein, and soy isolates; producing vitamin E; raising fish; processing and distributing edible beans; producing and distributing formula feeds and animal health and nutrition products.

Annual and Quarterly Financial Earnings

Q3 FY 2011 Earnings Summary

Archer Daniels Midland announced earnings of $578 million for the third quarter of 2011, a 32% increase (or $157 million) from year-ago earnings.[3] Operating profit also increased to $1.0 billion for the quarter, a 45% (or $310 million) increase from Q3 FY 2010.[3] ADM posted growth in all of its operating segments.[3] Oilseeds Processing income increased from $405 million to $512 million.[3] Corn processing increased from $104 million to $204 million. Agricultural services increased to $171 million from $165 million and other income increased to $119 million from $22 million.[3]

Q2 FY 2011 Earnings Summary

Archer Daniels Midland announced net earnings of $732 million for the second quarter of 2011, up $165 million from year ago earnings.[4] Operating profits similarly increased to a record $1.4 billion for the quarter, up $392 million - or 40% - from year ago results.[4] Leading these segment improvements were gains in the corn processing and agricultural services sectors.[4] These segment profits increased by $109 million and $276 million respectively.[4] Gains in corn processing can be attributed to rising gas prices and increased demand for ethanol substitutes. Oilseeds processing, however, fell by $27 million for the quarter.[4]

Q1 FY 2011 Earnings Summary

Archer Daniels Midland posted quarterly earnings of $345 million for the first quarter of 2011, a $151 million drop from the same quarter in 2010.[5] Segment operating profit also decreased by $9 million when compared to year ago results, finishing at $765 million.[5] Losses were driven primarily by changing inventory valuations.[5] Both oilseeds processing and corn processing saw increases in earnings for the quarter, increased by $24 million and $153 million respectively.[5] Earnings for oilseeds processing finished at $308 million and corn processing culminated at $341 million.[5] Agricultural services and other segments saw decreased earnings compared to year ago results with agricultural services finishing at $132 million and earnings from other segments posting losses of $16 million.[5]

FY 2010 Annual Earnings Summary

Archer Daniels Midland posted earnings of $1.9 billion for the year of 2010 as well as operating profit of $3.2 billion, increases of $246 million and $786 million respectively.[6] Fourth quarter earnings were $446 million, and increase of $388 million from year-ago earnings.[6] Segment operating profit similarly increased, totaling $799 million, an increase of $591 million from operating profit one year ago.[6]

Oilseeds Processing profit increased by $132 million for the quarter, totaling $359 million.[6] Corn Processing also increased by $151 million, totaling $140 million.[6] Agricultural services increased by $195 million to $178 million for the quarter.[6] Earnings were driven by higher sales volumes as well as higher bioproducts results.[6]

Trends and Forces

Increasing Gas Prices in 2011 Positively Impacts ADM's Earnings

Archer-Daniels-Midland (ADM) is betting on ethanol by maintaining its corn operations and ethanol production plants. If ethanol does become a major fuel alternative to gasoline then the company will gain profits on a large portion of its business. Ethanol in the U.S. is produced from corn, which ADM grows and processes.

The demand for Ethanol and biofuels increases when gas prices are extremely high. Despite this preference, ethanol is about 15-20% less efficient than gasoline, and studies have shown it needs to be about 40 cents cheaper per gallon to compete. [7]

But assuming corn and soy biofuels remain the primary alternative energy prospect, if petroleum prices go up, demand for both corn and soy biofuel will increase. Archer-Daniels-Midland (ADM) is hoping the government will favor ethanol by mandating that cars use a 15% ethanol blend by 2010. [8]

Increasing Demand for Food in Emerging Markets offer Opportunity for ADM

Emerging Market indices have outperformed the US markets by over 40% on a dollar adjusted basis prior to the turn of the decade. [9] Prosperity in the developing world has resulted in a demand for more agriculture intensive food. For example the average Chinese citizen now eats twice as much meat as he/she did in 1990.[10] Each pound of meat produced requires about 16 pounds of grain for feed, which increases demand for Archer-Daniels-Midland (ADM)'s products. [11]Not only does the growth of emerging markets benefit agricultural production, but it also increases aggregate oil demand, which in turn encourages bio-fuel production.

Thus, a stronger developing world means a better business for Archer-Daniels-Midland (ADM), assuming it can displace local competition. Chinese soy consumption was one of the company's few growth areas from 2008-2009.

Reduction in Arable Land Increases Demand for Fertilizer

The amount of arable land worldwide is dwindling. The population boom has cut the amount of arable land per person in half over the past 50 years.[12] As population and personal incomes in developing regions of the world increase, the worldwide demand for food also has increased. Worldwide population has grown 12% in the past ten years, while farm acreage has grown only 2%.[13]

Brazil, China, and India are three of the five most populous countries and are trying to meet the growing demand for food, fuel, and feed for livestock. [14] With their respective populations on the rise, these countries need to make the most of the arable land they have. In addition, weather factors such as temperature, rain, floods, droughts, and hurricanes destroy arable land for a particular crop season and render land unusable for a few seasons.

Reduction in arable land encourages yield increases, which favors large conglomerates like the Archer Daniel Midlands companies. Think about a private farmer. He does not have the same irrigation contracts, expertise, and seed distribution networks that a major corporation enjoys due to Economies of scale. Increased need for world production in the context of less land will benefit major corporations like Archer-Daniels-Midland (ADM) (though they will benefit irrigation and fertilizer companies like Monsanto Company (MON) and Valmont Industries (VMI) more).

Competition

While ADM competes with many different companies across all of its operating segments, it does not have a competitor with which it competes across all of its segments. Its primary competitor is Cargill, the world’s second largest privately held business. Bunge (BG) also competes with ADM. As the graphs show, Cargill dwarfs both ADM and Bunge in terms of net revenue. Archer Daniels, however, unlike Bunge, has nearly caught up to Cargill in net earnings. Showing that ADM efficiency allows it to turn a great profit without having such large revenues.

With the world's population expected to rise to 9.1 Billion by the year 2050, feeding humanity, --according to a recent Food and Agriculture Organization of the United Nations report-- will require a 70 percent increase in global food production. Look for a marked increase in corn and soybean production in by mid-century.[1]


References

  1. stock:Archer-Daniels-Midland_(ADM)/Filing/10-K/2009/F47088586 ADM 1009 10-K Filing
  2. [ http://www.agri-outlook.org/pages/0,2987,en_36774715_36775671_1_1_1_1_1,00.html|OECD Food Outlook]
  3. 3.0 3.1 3.2 3.3 3.4 ADM Third-Quarter Earnings Up 37 Percent
  4. 4.0 4.1 4.2 4.3 4.4 | ADM Announces Q2 Earnings
  5. 5.0 5.1 5.2 5.3 5.4 5.5 | ADM announces first quarter earnings
  6. 6.0 6.1 6.2 6.3 6.4 6.5 6.6 ADM Fourth-Quarter and Annual Earnings
  7. [http://news.yahoo.com/s/ap/20090714/ap_on_re_ca/us_farm_scene_e85_outlook | Yahoo News: Massive Ethanol Decrease in 2009]
  8. |ADM hopes for higher ethanol production
  9. | Vanguard Emerging Market Returns
  10. Chinese meat consumption, ABC
  11. Meat production details
  12. Delta Farm Press, "World population trends favor farmers," December 5, 2007
  13. | C.I.A. World Factbook: Brazil, China, India
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