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Posted on  

October 24, 2001

ADM ethanol production at capacity, may add more

DECATUR, Ill., Archer Daniels Midland Co. said on Tuesday that its ethanol production has reached the agribusiness firm's 950 million gallon a year capacity and it is actively looking to expand incrementally at existing plants.

The largest U.S. grain processor and the top ethanol fuel additive producer, ADM expanded to its current ethanol capacity earlier this year. It has roughly half the U.S. market.

``We are actively looking at incremental expansion of our existing ethanol facilities and ways to profitably expand the business,'' ADM spokesman Larry Cunningham said in a conference call with analysts.

At this point, ADM does not plan major capacity additions, Cunningham said. Ethanol profits are up sharply from last year and demand remains very strong for fuel ethanol, he said.

Prices on gasoline-indexed ethanol sales, about half of ADM's business, are trending downward but remain above year-ago levels and contracts on the other half of the production remain in effect through March, Cunningham said.

ADM reported a 20 percent earnings rise after the market close on Monday, mainly on ethanol sales and better oilseed crushing margins. Shares of ADM declined 30 cents, or 2.3 percent, to $12.84 Tuesday on the New York Stock Exchange.

A switchover from methyl tertiary butyl ether, or MTBE, to ethanol in California is expected to increase demand for ethanol in that state to about 580 million gallons a year from about 5 million to 7 million gallons per year currently.

Ethanol is one of many products derived from corn and ADM wants to remain flexible in diverting production from other areas, such as high fructose corn syrup, Cunningham said.

``I expect that maybe we could get another 10 percent without having to expand grind,'' he said. ``But then we get to the point where we have to seriously look at the long-term ramifications of giving up market share of some of our other products by diverting starch to ethanol.''

Beyond that point, ADM would have to look at an acquisition or perhaps increasing corn grinding, he added.

There are numerous construction projects to build or expand ethanol production facilities in the United States, including a handful of plants recently announced.

``If we turn the calendar ahead a couple of years, our market share is going to be down significantly from where it is because the total market for ethanol is going to double and certainly our capacity is not going to keep pace with that,'' Cunningham said.



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