Archer Daniels Midland: Corn Sweetener Prices To Jump 25%; Strong Mexico Demand
First Published Tuesday, 1st February 2011 03:37 pm - © 2011 Dow Jones
By Ian Berry
Of Dow Jones NEWSWIRES
Archer Daniel Midland Co. (ADM) has finalized contracts for corn sweetener shipments in 2011, and will see prices jump 25%, Chief Financial Officer Ray Young said.
That increase will be sufficient to raise margins for its corn sweetener operations, despite the rising cost of corn, Young said in a conference call. Corn, along with other agricultural commodities, have soared in recent months and are at their highest level since reaching record highs in 2008.
The contracts represent 50% to 60% of its corn sweetener shipments, the company said.
Despite a well-publicized backlash among some consumers against high fructose corn syrup in the United States, demand has remained strong in Mexico. Young said corn sweetener shipments of 1.5 million metric tons were up 90% in 2010, and will remain strong.
In some cases, Mexico is importing high fructose corn syrup and shipping higher-priced sugar back to the United States.
The company will also continue to benefit from strong ethanol demand, Young said, although production margins have slid close to break-even recently. High sugar prices are making U.S. ethanol exports attractive, Young said, and exports will continue to grow in 2011.
ADM reported a 29% jump in second quarter earnings, due in part to ethanol margins and favorable corn positions.
"We were well-positioned as corn prices rose," Young said.
Soybean prices have also surged due to tight supplies and surging China demand, but Young said the outlook for the South American soybean harvest has improved recently due to better weather.
The company's stock was recently up 6.76% to $34.88 a share.
-By Ian Berry, Dow Jones Newswires; 312-750-4072; email@example.com