Thursday, November 8, 2007

ADM's Conference Call Discloses Some Interesting Items

There was an interesting disclosure in Archer Daniels Midland's (ADM) conference call. CEO Patricia Woertz addressed two important issues.

Ann Gurkin - Davenport

"Just wanted to spend a little time on getting an update on your work and, besides ethanol, other renewable fuels, switch grass. Maybe are you closer to doing anything in sugar in South America, Can we just get an update there?"

Pat Woertz

"Sure. We've talked about diversifying our feedstocks, which would include more palm, sugar, potential biomass to be run not only for first but sort of second-generation biofuels. Mike Pacheco, who is our new Chief Technology Officer, spent a little bit of time in about five slides or so, which you might want to look up on our website, but talked a little bit about.

So to speak, first of all our advantage in the dry mill ethanol world, which, of course, we're completing two plants adjacent to our wet mills facility. But then kind of spent time on the nearer term focus on commercializing technology, again in a wide range; food, feed, industrial bioproducts and then biofuels.

And when it comes to the biofuels piece, we kind of walked through the spectrum of not only technology conversion, but also feedstocks and also end products, and are attempting at this point.

And I would say by February of next year, we will have a very limited list, or a very highly focus list, I should say, of the kind of opportunities for both conversion feedstock and end products.

A good example is our ConocoPhillips project that we announced, which is looking at biomass to biocrude, so this would be a type of crude oil that could be run in the traditional refineries yet made from biomass at very cost effective prices.

So that's an example something where we actually have that one up and running. There's a couple of other collaborative researches we've announced, one with the Colorado Consortium, one with Purdue University, et cetera.

So a lot going on but more clarification and I would say fine-tuning of that by early next year."

Ken Zaslow - BMO Capital Markets

"Would you think about buying ethanol assets rather than building and at what price? And how do you think about it, just because it seems like a lot of these capacity buildups are slowing down a little bit and it seems like there may be opportunity to come in and buy some assets a little bit cheaper than maybe build it?"

Pat Woertz

"Yes, I'll take that one, Ken. We're actively engaged in this market all the time, and we know where every plant location is. We kind of have a sense of what locations might be interesting to us. But it would have to be a real value and scale and fit with our network, but it's not to say we aren't looking and aware."

ADM is clearly on the hunt both for acquisition and JV's to expand its businesses in biofuels. The beginning of next year will be very exciting as Woertz plans to make additional announcements. the best part is they are doing it in a very disciplined manner and not running around buying everything in sight. This is good because ethanol assets will be on the market and a disciplined buyer will be able to take great advantage of the situation.

Aside from that investors ought to mark their calenders for February, something is coming...

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