Archer Daniels Midland (ADM) is the third-largest ethanol producer in the U.S., and the slowing demand for corn-based ethanol has had a significant impact on the company's performance for the quarter. A number of producers have stopped or closed expansion plans in response to the falling demand. Corn prices have also responded accordingly, falling to four-month low of $5.3625 a bushel today.
John Rice, executive vice-president commercial and production, attempting to shore up the company's stock said he believes the price and demand pressures are largely limited to North America, citing Asian sales are continuing to grow; although he was thinking in terms of meat there rather than ethanol-related consumption.
But he also acknowledged the drop in demand for palm oil was also having a significant effect on the margins of the company.
Rice added concerning the growing push to offer waivers for the ethanol mandate as something he's not too worried about. "We're already blending over the mandate right now, so even if there is a waiver (from the federal mandate) we don't see ethanol demand slowing down," said Rice.
If this was only connected to waivers, I may agree with Rice, but there is a growing resistance to the subsidizing and encouragement of corn-based ethanol, and if it continues to grow, like it seems it will, we could see some significant changes in direction for that commodity. That could have adverse effects on ADM. Ethanol Fix of course hopes that happens, as it's doing much more harm than good.
As far as the share price of ADM, it has plummeted by 40 percent since May, as commodity price concerns continue to hammer the profits and growth of the company.
Profits in the fourth quarter fell by 61 percent for the company, as market demand for their products continued to fall.
Share price also missed analysts' expectations by a large margin, reaching only 58 cents a share, while analysts were looking for 67 cents a share. Net income came in at $372 million for the quarter ending June 30.
Revenue for the quarter did rise by $21.8 billion, with about 90 percent of that attributed to higher commodity prices and increased volumes.
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