Is ADM expansion posture, by NOT ACQUIRING DISTRESS U.S. ETHANOL ASSETS,
- good management
In the past years they were building their own plant at $2/gallon, why are they not buying now at $1/gallon?
People are not going to eat more, but they will use more fuel. IS ADM BEING AGGRESSIVE ENOUGH?
I think mdon is right that ADM needs not tip its hand yet. Steve Mills said distressed ethanol plants are potential acquisition targets. No hurry, the Verasun auction starts March 15.. and Verasun is not the only ethanol pure-play that will end up on the block.
If the cellulose to ethanol route can be proven economic/profitable, existing ethanol plants might have more value if converted. That is a big IF. I still like the more estabished part of adm to grow along with population and emerging middle class markets.
In todays economic climate there are likely going to be even better opportunities to make acquisitions in other areas. I think the adm management will make the best choices when it comes to growing the business. It all depends on what they see ethanol economics doing and the nations plan for ethanol fuel. I was happy to hear that adm is following the population growth and demand for the core business.
Guys in my coffee group bad mouth ethanol because of the argument that it drives up the cost of food and wouldn't be produced at all without government subsidies. I try to counter while it's not perfect in it's present form that the development of celulose or kelp technology (with ocean water in process) will eventually be an efficient method of producing fuel to replace our dependence on foreign oil but they still think it's a joke. Any good web sites or info I could use to counter their point?
I think it was a smarter move to make the chocolate company its most recent acquistion. Given the troubled ethanol market and weak oil prices it might make sense to not grow that part of the business, although adm would have more insight as to how much the government wants to support ethanol. I see a major refinery bought up an ethanol plant recently. It might have more to do with a shift from mbte as an antiknock to ethanol and more enviroment friendly anti knock agent. Of course ethanol still extends gasoline inventory when its blended in.
I would be surprised if ADM does bid on more than maybe a couple of the logistically advantageous facilities. ADM's key to success with ethanol is the integration into their large wet mills. There they can take advantage of cogen facilities, etc. that a stand alone facility could not. Corn stream diversification is a huge advantage also by slip-streaming for ethanol from a much larger stream to other processes.
Why buy an asset for half as much that will return less than that.
Got to look at the big picture from a processing cost long term. Only other reason I would see for any purchases would be to demo the facility and use the equipment elsewhere.
"Only other reason I would see for any purchases would be to demo the facility and use the equipment elsewhere. "
At the last conference call someone asked a question about the usefulness of the dry milling ethanol plant equipment if you wanted to convert to wet milling. They answered that about the only equipment that could be used is the elevators.
Of course this could have been another mis-direction from the ADM Mgt.
Short sided? What do you think they are doing in South America in regards to sugar? In a few short years we will be seeing SA ethanol imported into the U.S because of reduction or elimination of import tariffs. The Verasun auction date is in March. Why would ADM show their cards this early if they were a bidder?
I think you better step back and take a good look at what is happening. If Verasun has 12 of it's 16 plants on "hot idle" who is supplying ethanol to the blenders?
Why buy what did not work of another company?
My bet is we see ADM bid on a couple of the plants.~md