ADM Optimistic About Ethanol Ahead of Record Corn Crop

Archer-Daniels-Midland Co. (ADM), the world’s largest corn processor, sees ethanol demand rising and is “optimistic” about margins for 2014 and 2015 as the coming U.S. harvest increases supplies.

Corn futures in Chicago have dropped 43 percent from a year earlier as U.S. farmers prepare to harvest a record crop. The combination of lower prices and greater supply will give an incentive to mix ethanol with gasoline, Chief Operating Officer Juan Luciano said today on ADM’s second-quarter earnings call.

“You’re going to see better blending economics that will entice more blending in terms of ethanol,” he said on the call.

Last year’s drought, the worst in the U.S. in 70 years, reduced corn supplies and intensified the debate about the 2007 U.S. energy law that mandates refiners use 13.8 billion gallons of ethanol this year and 14.4 billion in 2014.

The Environmental Protection Agency said today that refiners can have more time to meet renewable-fuel quotas.

Oil companies are at odds with biofuel proponents on whether the U.S. should keep the law. Most gas stations only sell fuel with 10 percent ethanol blends while as much as 15 percent is allowed for cars built after 2001. Certain flex-fuel cars also accept ethanol blends as high as 85 percent.

‘Very Confident’

The House of Representatives’ Energy and Commerce Committee held hearings on the Renewable Fuels Standard last month, when lawmakers including Representative Fred Upton, a Michigan Republican and chairman of the committee, said modifications to the act are needed.

“To the extent that the RFS impacts us, we feel very confident that that regulation will be maintained,” Luciano said.

ADM’s second-quarter earnings excluding an inventory charge and other one-time items were 46 cents a share, more than the 44-cent average of 10 analysts’ estimates compiled by Bloomberg. The bioproducts unit had a profit of $97 million, compared with a $61 million loss a year earlier, as ethanol improved, Decatur, Illinois-based ADM said today in a statement.

To contact the reporter on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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