May 2, 2012
ADM anticipates more US ethanol production rates cuts
As mill owners begin to face difficulties in securing feedstock corn, Archer Daniels Midland (ADM) expects further cuts in US ethanol production rates ahead of the summer driving season, Chief Operating Officer Juan Luciano said in a conference call with analysts Tuesday (May 1).
According to estimates from the USDA, US corn stockpiles are poised to fall to a 16-year low of 801 million bushels before the new September harvest begins.
ADM reported Tuesday that operating profit from ethanol and bio-products sank US$121 million to US$37 million in its fiscal third quarter (January-March) due to a "tough" margin environment, Luciano said.
"Ethanol margins remained weak...amid excess industry production that lessened through the quarter," ADM said in a statement.
"We saw around 14 or 15 plants coming off during the quarter. While some were shut due to schedule maintenance programmes, but we others will find it hard to get hold of corn supplies to restart production," Luciano said.
ADM said that a reduction in production rates should help alleviate the supply glut caused by excess output in January-March and raise margins.
"We might see some impact already in the current quarter and the full impact in the following one," Luciano said.
Stocks of the biofuel soared to an all-time high of 22.713 million barrels in the reporting week ended March 16, the US Energy Information Administration said, 13% higher than the same week last year. Meanwhile, demand for ethanol fell along with gasoline, which reached a 10-year low during the winter, according to the EIA.
Luciano said poor margins were partly offset by positive results in by-products such as corn gluten and corn meals. ADM pegged US ethanol exports at 800 million gallons (3 billion litres) for calendar 2012, down from a record-high of 1.1 billion gallons in 2011.
Luciano said that the outlook for overseas shipments, especially to Brazil, the US'' largest ethanol purchaser, was attractive due to current low US prices.
"Despite that, we haven''t seen any uptick [in exports] yet. We hope they''ll improve because the economic incentive is there," Luciano said.
ADM operates seven corn-based ethanol mills in the US with a combined nameplate capacity of 1.75 billion gallons/year.