* 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 (Reuters) - 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 percent.
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 meal.
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 earlier.
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 $3 million.
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.