December 26, 2006

ADM gains on boost of corn fuel
 

As the largest US producer of ethanol, representing nearly one-third of the industry's output, Archer Daniels Midland (ADM) has gained powerful momentum from the corn-derived fuel's popularity.

It seems destined for continued dominance in that field as it expands capacity to pursue opportunities as a gasoline additive and in the production of biodiesel fuel to reduce global warming.

In keeping with energy as a long-term priority, former Chevron Corporation official Patricia Woertz was hired as chief executive this year. Woertz pointed out ADM was in a category of one to capitalize on the exceptional opportunity ahead.

Democratic gains in Congress seem to bode well for the prospects of alternative energy sources.

The question, however, is whether gains could continue unabated if corn prices rise, oil prices decline and available quantities of ethanol increase dramatically. Being in a commodity business translates into price fluctuations, government issues, political risks, derivatives strategising and hedging that inject uncertainty into projections.

ADM recorded an increase of stock up to 28 percent this year, after gains of 10 percent last year, 47 percent in 2004 and 23 percent in 2003. Earnings have been propelled by its thriving ethanol, oilseed and corn-processing businesses.