* U.S. soybean operations ran at record capacity
* Export demand for soybean meal boomed
* Poor margins, weak demand pressure ethanol business
By Tom Polansek
CHICAGO, Feb 5 Archer Daniels Midland Co
on Tuesday reported a six-fold increase in quarterly profits as
strong demand for oilseeds helped the agricultural giant shake
off the drag of a historic U.S. drought.
Results topped Wall Street estimates, sending shares up 3.8
ADM's U.S. soybean operations ran at record capacity during
the quarter ended Dec. 31, with Chief Executive Patricia Woertz
telling analysts on a conference call that the sector was
"firing on all cylinders" because of export demand for soybean
Processors also stepped up crushing of soybeans into meal
because the drought-hit U.S. soybean harvest this year produced
a lower soymeal yield.
ADM still faces lingering challenges from the drought, which
reduced the amount of farm products available for transportation
and processing and lowered water levels on the key Mississippi
River shipping channel.
Declining U.S. soybean supplies are expected to slow
crushing in the coming weeks and turn buyers to the accelerating
harvests in South America.
"You're going to be running out of beans," Credit Suisse
analyst Robert Moskow said on the call.
Strong demand for oilseeds during the past quarter helped
the world's top agricultural traders and processors rebound from
a tough environment during the previous year, when grain prices
often swung based on global economic concerns instead of supply
and demand fundamentals.
ADM rival Cargill said last month that "more
fundamentally driven markets" helped it quadruple earnings in
the quarter ended Nov. 30, with results buoyed by gains in
global commodities trading and oilseed processing.
ADM and Cargill are among the four large so-called ABCD
players that dominate the global flow of agricultural
commodities. The other two are Bunge and Louis Dreyfus.
ADM posted net earnings of $510 million, or 77 cents per
share, in the second quarter ended Dec. 31, up from $80 million,
or 12 cents per share, in the same period a year earlier.
Adjusted earnings were 60 cents per share, up from 51 cents in
the same period last year.
Revenue was $24.92 billion, up from $23.31 billion a year
Analysts projected earnings of 58 cents per share on revenue
of $21.22 billion.
Negative margins for ethanol production and weak ethanol
demand hurt ADM. Excluding a restructuring cost a year earlier,
ADM's quarterly corn processing profit dropped $207 million to
ADM hopes margins improve after it conducted a "deep review
of every aspect" of its ethanol operation, said Juan Luciano,
chief operating officer.
The company said it slowed production at two U.S. dry mills
but would not identify the locations.
ADM is more focused on the U.S. market than its rivals.
Last year it sought to widen its global footprint with a
$2.9 billion bid for Australia's GrainCorp. GrainCorp rejected
the offer as too low but said it remained open to higher offers
and would hold further talks with its U.S. suitor.
ADM has not communicated with GrainCorp since being rebuffed
in December, Woertz told analysts.
The Decatur, Illinois-based company earned $62 million on
its 19.9 percent stake in GrainCorp during the last quarter.
ADM's focus on the United States could put it at a
disadvantage this year, when farmers in South America are
expected to harvest a massive soybean crop. Farmers in the
United States are worried dryness will reduce crop production
for another year.
Bunge is set to report earnings on Thursday.