UPDATE 2-AB Foods, Archer Daniels in U.S. vegetable oil JV

* AB Foods, Archer Daniels to create vegetable oil venture

* Each to hold 50 pct of new venture Stratas Foods

* JV expected to make $1.4 bln of revenue in first full year

By Mark Potter

LONDON, Oct 28 (Reuters) - Associated British Foods (ABF.L) and U.S. agricultural processor Archer Daniels Midland (ADM.N) have agreed to create a joint venture to make and sell vegetable oil in the United States and Canada, they said on Tuesday.

Each company will hold 50 percent of the venture, called Stratas Foods, with AB Foods contributing $38 million of assets from its oils business, primarily in the form of trademarks, and Archer Daniels Midland (ADM) contributing packaging equipment at four of its plants in the United States.

The venture will serve the foodservice, speciality food ingredient and retail, private-label bottled oil markets and is expected to produce 2.5 billion lbs (pounds) of oil in its first full year of operation, with revenue of about $1.4 billion, the two firms said in a statement.

Stratas Foods will be headquartered in Memphis, Tennessee.

"This transaction is a substantial step forward in the development of our U.S. oils business," AB Foods Chief Executive George Weston said in a statement.

"The new joint venture with ADM will strengthen our U.S. packaged oils business and will significantly enhance its long-term growth prospects."

Shares in AB Foods, which markets Ovaltine drinks, Twining tea and Ryvita crispbread and also owns discount clothing retailer Primark, closed at 625 pence on Monday, valuing the business at about 4.9 billion pounds ($7.6 billion).

Archer Daniels Midland closed at $17.88, giving a market value of about $11.3 billion. (Editing by Quentin Bryar, Paul Bolding)