Archer Daniels Midland Company (ADM)

MCHSkdog (96.90) Submitted: 7/14/07 1:25 AM : Start Price: $36.20 ADM Score: 6.42

Premise: 30% of ADM's profits are from ethanol according to industry analysts.
Obviously, if you havn't been living under a rock, then you've noticed that higher food prices and higher oil prices are here to stay, especially since the US dollar is so weak at the current moment (USD index 80 level low since early 90s).
At the forefront of higher food and energy prices is the squeeze/bottleneck in the alternative fuel and food market for: international brazillian sugar cane based ethanol vs. domestic US corn based ethanol.
This is where ADM comes into play as it will not only be a seller of domestic based corn ethanol, but also entering the brazil sugar cane ethanol market in a big way: "In an interview with the Wall Street Journal, VP Steve Mills said the company was looking at a number of ways to enter the market, including building sugar-cane mills and ethanol plants from scratch, to acquisitions. ADM already owns a small stake in Brazil's largest ethanol producer, Cosan SA. ADM, the #1 U.S. ethanol producer, said sugar-cane ethanol is now a key strategy component: "We're devoting a lot of time and energy to this area." (source: Seeking Alpha & Wall Street Journal).

All this means that ADM will profit no matter how badly beverage or food companies such as Coca Cola (KO) or Conagra (CAG) need to buy fructose/sucrose. It will be especially more poignant to see ADM succeed when our US legislators tap open the brazillian sugar cane market while simultaneously churning the demand for sugar. With some limited concern though to domestic farmers, "imported ethanol is tariffed $0.54/gallon."

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