Archer Daniels Midland earnings hit by corn prices (ADM)

Archer Daniels Midland Company (NYSE: ADM) is a vertically integrated agriculture conglomerate, with operations in procurement, transport, storage, processing and merchandising of a wide array of aggricultural commodities. The company recently reported its Q2 earnings:

[ADM] today reported net earnings for the fiscal year ended June 30, 2011, of $ 2.0 billion and record segment operating profit of $ 4.0 billion, up 5 percent and 24 percent, respectively, from the prior year.

For the quarter ended June 30, 2011, net earnings were $ 381 million, down $ 65 million, and segment operating profit was $ 888 million, up $ 89 million, from the same period one year earlier

Zacks notes that these results missed consensus:

Quarterly earnings also missed the Zacks Consensus Estimate of 84 cents a share.

The New York Times reported the cause of the decline in earnings was related primarily to corn prices:

The company’s operating profit improved in every unit except corn processing. The unit’s growth was hampered by significantly higher corn costs as corn futures traded in Chicago have risen about 70 percent over the last 12 months. The prices on soybeans futures were up 34 percent.

Volatility in agricultural commodities should be expected, and indeed can be beneficial for a company like ADM:

For a company like A.D.M., the volatile prices can be both good and bad. The company sells and ships grain, so it can benefit from higher prices. But it also has to buy huge quantities of grain to make processed food ingredients and additives, and higher prices eat into profit.

Covestor models that held ADM as of 8/2 include:


“ADM Reports Fourth-Quarter Earnings of $ 381 Million” ADM Press Release.

“Archer’s EPS Dented by Higher Taxes” Zacks via Yahoo Finance.

“A.D.M. Earnings Fall 15%, Hit by Corn Prices and Taxes” New York Times.