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ADM 2Q Profits More than Double; More Biofuel Expansion to Come

2 August 2006

Archer Daniels Midland’s (ADM) calendar year second quarter—the fourth quarter in its fiscal year— profit more than doubled, fueled in part by ethanol prices. Quarterly profit totaled $410.3 million compared with a profit of $195.5 million during the same period last year.

Corn processing operating profit increased 69% to $286 million due to better ethanol and sweetener selling prices and volumes. ADM said oilseeds processing operating profit grew 61% to $195 million.

Earnings from its bioproducts division, consisting mostly of ethanol, jumped almost seven-fold from $25 million to $174 million.

On the company’s earnings conference call, CEO Patricia Woertz said that the company plans $2.4 billion in capital spending on new projects over the next 24 to 30 months, including new ethanol and biodiesel plants.

Despite the robust outcome for ADM, analysis by Oil Price Information Service (OPIS) suggests that big changes are in store for ethanol economics and sales.

OPIS notes that a quiet freefall has occurred in what was an overheated summer spot market for ethanol. The level at which the ongoing price plunge stabilizes may have a great impact on the course of wholesale and retail prices for the next 10 months. In a marked turnabout, ethanol may actually reduce finished gasoline prices this autumn and winter, according to OPIS.

Opis_ethanol_2q
OPIS notes that spot ethanol prices, representing the value of fuel grade alcohol that bulk buyers and sellers negotiate, have dropped by nearly $3.00/gal in some markets in just six weeks. Click to enlarge.

OPIS notes that spot ethanol prices, representing the value of fuel grade alcohol that bulk buyers and sellers negotiate, have dropped by nearly $3.00/gal in some markets in just six weeks. (See chart at right.)

Even lower prices could be in the cards for this winter. Much of the ethanol that gets purchased by refiners and gasoline wholesalers is negotiated in advance on a term basis, in quarterly or six month contracts. Prices for ethanol confirmed by OPIS this week for the forward time frames were at $2.55/gal for the fourth quarter, with slightly lower numbers in early 2007. The new prices could mean that based on pure price alone, ethanol may grab a much bigger market share of the 400-million gal/day U.S. gasoline business.

OPIS

Oil Price Information Service (OPIS) a private, independent publication not associated with managing investments, and provides a widely-accepted fuel price benchmark for supply contracts and competitive positioning.

August 2, 2006 in Ethanol | Permalink | Comments (7) | TrackBack (0)

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Comments

this is excellent,

because if industry sees that you can gain a lot of money with EtOH, they will expand and invest in EtOH

Yes, except that ethanol from corn quite simply SUX. Oh well, at least it's biofuel.

Ethanol from corn is bad. But these businesses are in to make a profit, so if growing corn proves too costly as we fight fuel vs. food they will use other sources. At least we can hope that.

Your tax dollars at work. Highly profitable for big business, but mom and pop corn farmer still struggle.

I really hope they can convert over to butanol when the technology arrives.

Allen,
Cooperatives opened by small/medium sized farmers to produce ethanol poping up around the country. While it is true Big Agri. is getting a big chunk, the small guys are in this pot too.
_
John Ard,
"fuel vs. food"
Move over to sweet sorghum. Do a search on it and you will see why it is way better than corn for ethanol (perhaps other biofuels too), and even comparable to sugar cane.

I wonder how much of their earning came from the subsidy's paid for by the aveage taxpayers??

Ethanol from corn is a very bad idea! To bad most people and politicians are not finding out about the truth about ethanol!!

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