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News 300 views last update:6 Aug 2012

ADM profits from biofuel unrest

Despite volatile prices and heavy demand for its corn, soybeans and wheat processing, Archer Daniels Midland Co. generated a 42% increase in its third quarter earnings that ended March 31.

Net earnings for the quarter reached $517 million versus $363 million a year ago. Revenue surged more than 64% to $18.7 million compared to $11.38 million last year.

Results were driven by an almost sevenfold increase in profits at ADM's Agricultural Services Division, from $46 million to $366 million. The division includes the company's grain transportation and handling services, which continues to move last year's large corn crop and other commodities in high demand.

The division also includes a large grain-trading operation that tries to profit from shifts in commodity prices, which buffers ADM against price spikes.

Shares down
Worries that the US government will repeal or soften mandates on blending ethanol with gasoline sent shares of ADM down 4.7% last week.

CEO Patricia Wertz of ADM defended the use of corn to make ethanol as food prices rise around the world, leading to riots and many countries limiting exports. There are growing calls for the United States to cut a tax credit of 51 cents a gallon for ethanol blenders and eliminate a tariff on ethanol imports.

"I actually find it sad, and even a little ironic, that this attack on biofuels is directed to the one alternative we have today," Woertz said.

"Biofuels are a real solution to a real problem. To retreat from biofuels is wrong. It's foolish. It's dangerous. It's an empty gesture. It won't fill anyone's stomach. It won't fill anyone's gas tank," she added.

About 25% of US corn is turned into ethanol, according to US Agriculture Department estimates, and corn futures have risen 70% in the past year and hit record highs on increased demand to use the grain both as food and fuel.

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