ADM sees strong ethanol demand
Top executives with Archer Daniels Midland Co., the nation’s largest producer of ethanol, expect demand to remain strong whatever the outcome this month of a federal ruling on easing mandated use of the alternative fuel.
A decision is expected soon from the U.S. Environmental Protection Agency on a request from the state of Texas for a 50 percent cut in the 2008 renewable-fuel standards. If granted, the federal mandate of 9 billion gallons of usage by 2009 would be cut to 4.5 billion.
Texas Gov. Rick Perry asked for the waiver last spring, claiming the requirements helped drive up food prices by shifting corn to ethanol.
“We still do not see the ethanol demand slowing down at all, just because it is very price competitive,” John Rice, ADM executive vice president, said during a Tuesday conference call that followed release of the company’s annual earnings report.
He added that ethanol has remained profitable for ADM — profits from oilseed, corn processing and agricultural services hit a record $3.4 billion for the year, partly thanks to ethanol sales — because of the company’s scale and size.
But he acknowledged rising costs, including for corn, have helped to slow the general industry expansion, especially for smaller companies.
“It’s just because of the cost to build plants these days with stainless steel, labor costs and everything else going up,” Rice said. “Long term, I think we’ll see more plants slow down or not be built.”
Chief executive Patricia Woertz said she is “reasonably optimistic” Congress will continue to support existing alternative-fuel mandates, including for ethanol.
Woertz said ADM also continues to explore sources for ethanol other than corn, including possibly a partnership in Brazil, where sugar cane is the primary source of ethanol. Brazil’s largest ethanol producer reported recently it expected to export 5 billion liters (about 1.2 billion gallons) of ethanol in the coming year compared to 3.1 billion liters in the current year, primarily because of increased demand in the United States.
“There have been rumors about that (a Brazilian partnership), but we don’t comment on rumors. We have been interested and continue to be interested in sugar and ethanol processing in Brazil,” Woertz said.
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