ADM Mulls Selling Some Ethanol Plants

ADM CEO: Company Considering 'All Options' in Face of Low Ethanol Margins

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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At the end of January, DTN/The Progressive Farmer reported ethanol margins across the country ranged from breakeven to negative, depending on where ethanol is produced. Those margins have led many companies to scale back production until demand picks up. (DTN/The Progressive Farmer file photo by Jim Patrico)

OMAHA (DTN) -- Archer Daniels Midland, one of the largest ethanol producers by volume in the United States, may be on the verge of selling some of its larger plants in Nebraska, Iowa and Illinois, the company's CEO said.

During a conference call this week, ADM Chief Executive Officer and Chairman of the Board of Directors Juan R. Luciano said ADM is considering all of its options in response to what he called "historically low" margins in ethanol.

ADM produces about 1.8 billion gallons of ethanol production capacity. That includes hundreds of millions of gallons of capacity at plants in Cedar Rapids, Iowa; Columbus, Nebraska; and Peoria, Illinois.

"What we are seeing here is we continue to be implementing our cost reductions in the dry mills that we have seen, but margin continues to be historically low," he said. "And even with our improvements in cost, we are concerned about the long term from the dry mill ethanol part of the industry, if you will, so we have asked the team to undertake a strategic review of that."

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ADM is exploring its options in response to the low margins, he said, "all the way from one extreme to the other we will explore all the scenarios. So we have no rush for this. The whole operation is having positive cash flows, positive contributions, so there's no need to panic.

"We just want to be prepared to look at the industry long term and see, can this industry present the returns that we expect and what are the options to maximize our return for ADM?"

At the end of January, DTN/The Progressive Farmer reported ethanol margins across the country ranged from breakeven to negative, depending on where ethanol is produced. Those margins have led many companies to scale back production until demand picks up.

ADM indicated in its SEC filing that the ethanol side of its business is struggling. Corn processing operating profits decreased from $281 million to $126 million, ADM reports.

"Bioproducts results declined from $227 million to $24 million as steep declines in crude oil prices drove lower ethanol prices," the company said. "This, combined with continued high industry production levels, progressively reduced industry margins through the quarter."

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @ToddNeeleyDTN

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Todd Neeley

Todd Neeley
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