October 3, 2007

ADM will not reduce corn seed processing

Archer Daniels Midland Co., one of the nation's biggest ethanol producers, said Tuesday (October 2) it has not slashed its seed processing capacity despite falling demand for biofuel.

However, ADM chief executive officer Doug Schmalz suggested the Decatur, Illinois-based company may shift production of corn, the main ingredient in soy-produced ethanol, toward other applications, such as corn syrup for the food industry. The company's goal, he said, is to maximize as much profit as possible from each kernel of corn.

Ethanol prices have fallen in recent months amid a backlog of the biofuel, which has met with kinks as it makes its way from Midwestern production regions to other parts of the country. Prices have fallen 30 percent since May to just over US$1.50 per gallon now. Meanwhile, the price of corn has risen, making ethanol more costly to produce.

Smaller producers are being increasingly squeezed by the decline in ethanol prices, prompting speculation of an industrywide consolidation.

Schmalz said ADM might consider buying up smaller plants that are struggling on their own but could succeed as part of a larger company. But he stressed that any purchase would need to fit within the company's existing production network.

He said acquisition is one option to broaden production network.