ADM will invest in Brazil sugarcane

Bloomberg.com reports that Decatur, Illinois, US-based Archer Daniels Midland Co., the worlds largest grain processor, had a huge gain after profit topped analysts estimates because of gains from processing soybeans and handling grain. 

Delayed US harvests resulted in limited crop inventories, allowing ADM to sell soybeans at higher prices. Soybeans rose to a record high in July, and US inventories reached a four-year low on Sept. 1, totaling 205 million bushels, down 64% from a year earlier, according to the US Department of Agriculture (USDA). USDA also said that the surplus is the smallest since the 112 million-bushel reserve of 2004 and the second-lowest since 1977. 

ADM sales gained 65% to $21.2 billion, with net income more than doubling to US $1.05 billion over $441 million a year earlier. Profit from the agricultural-services unit, which stores and transports grain, increased 87% to $428 million because of “opportunities created by market volatility, global shifts in sources of grain supplies and the delayed US harvest,” said the company.

ADM has stated that it will invest $375 million over the next seven years as part of a $500 million venture with Grupo Cabrera to increase production of ethanol from sugarcane. Each of the two plants will include a sugarcane plantation, a sugar mill, an ethanol distillery, and a biomass co-generation plant. The plants are expected to produce up to 90 million gallons of ethanol per year.

"The two plants, which is this Brazilian investment, will be producing ethanol for Brazilian consumption," said ADM chairwoman and CEO Patricia Woertz in an analyst conference call. She said that a US tariff of 54 cents per gallon which is intended to protect producers from cheap imports makes it financially infeasible to ship ethanol produced overseas to domestic markets for now. “At some point, maybe the tariff will be lowered,” Woertz said. “Our investment in Brazil continues to reinforce that we feel biofuels have a place in the agricultural portfolio in different regions of the world.”.