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ADM Seeks Oilseed Acquisitions in Europe, India on Demand

Archer Daniels Midland Co. (ADM), the world’s largest grain processor, is seeking acquisitions in Europe and India and plans to increase exports from South America as growing incomes and population drive demand for food.

The company is focusing on growth and consolidation and is looking to expand its high-margin North American business, Senior Vice President Matt Jansen said today in a webcast. Decatur, Illinois-based ADM expects continued growth in China through its partnership with Wilmar International Ltd., he said.

“The less fragmented the market, the better the margin environment will be,” Jansen said in the webcast.

Global food output must rise 70 percent in the next four decades as the world population grows to 9.1 billion from 7 billion, and wealthier consumers eat more meat, the United Nations Food & Agriculture Organization said. South America accounts for about half of the 245 million metric tons of soybeans the U.S. Department of Agriculture predicted last month will be grown around the world in the 2011-2012 marketing year.

ADM is looking at consolidation and expansion that will meet its targets for returns after reporting an 89 percent slump in fiscal second-quarter profit because of shrinking oilseed- processing margins and a drop in U.S. grain exports. The company’s corn-processing margins in the third quarter may be half of the level in the second quarter, while soybean processing profits may see “sequential improvement,” according to the webcast.

Not Bidding

ADM chose not to submit a final bid for Viterra Inc. because the valuation wouldn’t have met “return objectives.” Glencore International Plc announced a plan to merge with Viterra on March 20. ADM also decided against buying certain ethanol assets because the returns weren’t “good” and has built plants instead, according to the webcast.

The company’s net income in 2012 may fall 14 percent to $1.7 billion, according to the median estimate of nine analysts surveyed by Bloomberg. Its shares have gained 9.44 percent this year to $31.32.

The company will try to expand its share in the MOU with Wilmar, the world’s largest palm-oil trader, which covers areas including ocean freight and fertilizer, Chief Operating Officer Juan Luciano said. The pact may cut ADM’s operating costs by $30 million to $40 million per year, he said.

Drought-reduced soybean harvest in Paraguay may cut supply for the company’s crushing plant, expected to be operational by December, Valmor Schaffer, president of ADM South America, said separately in the webcast. The unit is increasing exports of soybeans out of Argentina and Brazil, he said.

The U.S. Department of Agriculture expects Brazil, the world’s second-largest grower of oilseeds, to surpass the U.S. as the largest shipper of soybeans this year, after the South American nation boosted output to a record last year.

To contact Bloomberg News staff for this story: William Bi in Beijing at wbi@bloomberg.net Luzi Ann Javier in Manila at ljavier@bloomberg.net Elisabeth Behrmann in Sydney at ebehrmann1@bloomberg.net

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net

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