The New York Times


November 9, 2006

Archer Daniels to Look Beyond Corn for Fuel Sources

CHICAGO, Nov. 8 — Archer Daniels Midland’s new chief executive outlined a broad strategy Wednesday for the company to dominate the growing bioenergy industry, but offered few specifics on how it would carry out that vision.

Patricia A. Woertz, who took over in May, said A.D.M., the grain-processing giant, would seek to maintain its leadership in biofuels, like ethanol, by diversifying its production sources beyond corn.

The plan includes possible investments in Brazil to make sugar for ethanol and in Indonesia to make palm oil for biodiesel, as well as export opportunities for biofuels in India and elsewhere.

Despite saying the company’s goal was to be the global leader in bioenergy, which includes ethanol and biodiesel, Ms. Woertz said A.D.M. would not necessarily strive to be the market-share leader in ethanol and biodiesel. “We are interested in profitable growth,” she said.

Dozens of new ethanol plants being built in the United States continue to eat away at the company’s market share, which once topped 60 percent in the 1970s. A.D.M. has about 20 percent of the American market today; it is also the leader in biodiesel production in Europe. The company plans to expand its ethanol capacity in the United States to 1.6 billion gallons a year by the end of 2008, from 1.1 billion gallons a year now.

Ms. Woertz also said A.D.M. would look to invest in so-called cellulosic ethanol made from agricultural waste and nonfood crops. But she and other company officials declined to say which kind of crop A.D.M. favored for such production.

President Bush has promoted crops like switch grass, as having the potential to increase ethanol supply sharply. Other A.D.M. executives have said the company is focusing for now on producing more ethanol out of waste streams from its corn processing plants.

A.D.M., which processes corn, soybeans and other crops into vegetable oils and products like high-fructose corn syrup, ethanol and biodiesel, has had record sales and profits the last two years. That growth has been driven largely by high ethanol prices, which topped $4.20 a gallon this summer.

Global demand for food will more than double by 2050, and by then traditional energy supplies will be inadequate to meet demand, Ms. Woertz said. Demand for ethanol and biodiesel is growing more quickly than production capacity in both the United States and Europe, she said. Only 47 percent of gasoline today is blended with ethanol, Edward Harjehausen, a senior vice president at A.D.M., said Wednesday.

The twin trends of food and fuel demand put A.D.M. “in a category of one” to meet the growing global demand, Ms. Woertz said. But A.D.M. executives did not express concern that current high prices for corn and wheat, which are being driven up by demand for corn to make ethanol, would affect A.D.M.’s food manufacturing customers over the long-term.

John Rice, executive vice president for corn processing and ethanol, said the company expected higher corn yields and additional acreage to be enough to meet fuel demand. “I don’t think this is a food-versus-fuel debate,” Mr. Rice said.

While the presentation was light on specifics, some analysts said Ms. Woertz, a former top executive at the oil company Chevron, signaled a new direction for the company. A.D.M., based in Decatur, Ill., was embroiled in a price-fixing scandal in the late 1990s and had been persistently criticized as having lax financial management.

“She is bringing more professional management and discipline to what historically was a cowboy culture,” said John McMillan, an analyst with Prudential Securities.

A.D.M.’s stock price has fallen about 6 percent since Ms. Woertz took over, in large part because of declining ethanol prices. But it rose $2.20, to $35.73, in trading Wednesday. A.D.M. said it expected to reduce capital spending sharply by 2009 and improve its return on net assets to 13 percent a year.