October 4, 2007
ADM builds two more ethanol plants despite biofuel's low prices
Despite low prices of ethanol, Archer Daniels Midland Co is building two more large plants but considering options to switch from production of ethanol to other corn products that might be more profitable.
The ADM ethanol plant in Decatur is the biggest in Illinois, producing 1.07 billion gallons per year.
Ethanol futures have fallen 36 percent this year. The price rose .039 cent Tuesday to close at US$1.585 per gallon on the Chicago Board of Trade.
In a presentation to a New York conference Tuesday, top executives chief financial officer Doug Schmalz and chief technology officer Michael Pacheco emphasized that ADM is still focused on ethanol production in the short term despite difficulties in the market.
ADM will add two 275-million-gallons-per-year dry mill corn processing plants to its corn production operations, Schmalz said. They will be the largest dry mill plants in the industry.
According to David Weintraub, director of external communications, the plants, which are under construction in Columbus, Nebraska, and Cedar Rapids, Iowa, will allow ADM to increase its ethanol production by half.
The executives acknowledged that the ethanol distribution system in the US will have to be improved to keep up with supply, and that the profitability of ethanol could go through periods of highs and lows.
Rich Kment, an ethanol analyst with Data Transmission Network, said larger producers like ADM, VeraSun Corp. and American Ethanol Inc. have the economies of scale to weather these price fluctuations. The price for ethanol has declined since July as a glut has entered the market.
Schmalz said ADM is open to the possibility of shifting output to other products such as high fructose corn syrup and lysine if ethanol becomes unprofitable.
At the same time, he added, ADM may purchase even more processing plants, from smaller companies as they struggle to compete in the market.
He added ADM may continue to acquire small ethanol plants as part of their continued effort for capital gains.
ADM stock closed at US$33.24 Tuesday, a gain of 7 cents.