February 2, 2011

ADM finalises contracts for corn sweetener shipments

Archer Daniel Midland Co. (ADM) has finalized contracts for corn sweetener shipments in 2011, and will see prices jump 25%, Chief Financial Officer, Ray Young, said.

That increase will be sufficient to raise margins for its corn sweetener operations, despite the rising cost of corn, Young said. Corn, along with other agricultural commodities, has soared in recent months and is at its highest level since reaching record highs in 2008.

The contracts represent 50%-60% of its corn sweetener shipments, the company said.

Despite a well-publicized backlash among some consumers against high fructose corn syrup in the United States, demand has remained strong in Mexico. Young said corn sweetener shipments of 1.5 million metric tonnes were up 90% in 2010, and will remain strong.

In some cases, Mexico is importing high fructose corn syrup and shipping higher-priced sugar back to the US.

The company will also continue to benefit from strong ethanol demand, Young said, although production margins have slid close to break-even recently. High sugar prices are making US ethanol exports attractive, Young said, and exports will continue to grow in 2011.

ADM reported a 29% jump in second quarter earnings, due in part to ethanol margins and favorable corn positions. "We were well-positioned as corn prices rose," Young said.

Soy prices have also surged due to tight supplies and surging China demand, but Young said the outlook for the South American soy harvest has improved recently due to better weather.

The company's stock was recently up 6.76% to US$34.88 a share.