ADM 3Q profit jumps 42 percent

CHAMPAIGN -- Archer Daniels Midland Co. credited volatile prices for the corn, soybeans and wheat it processes for a 42 percent increase in third-quarter profits.

Though ADM easily beat Wall Street expectations, investors seemed to doubt that ADM could sustain the same pace amid such fickle markets, and company shares dropped sharply.

Profits grew to $517 million, or 80 cents per share, compared with a year-ago profit of $363 million, or 56 cents per share.

Revenue surged more than 64 percent to $18.71 billion, from $11.38 billion.

Analysts surveyed by Thomson Financial expected earnings of 70 cents per share on revenue of $13.45 billion.

Results were driven by an almost sevenfold increase in profits at ADM's Agricultural Services division, from $46 million to $366 million. The division includes the company's grain-trading, -transporting and -handling businesses.

"The volatility this quarter was unprecedented; it was higher than we had ever seen before in any crop," Chief Executive Officer Patricia Woertz said during a conference call with Wall Street analysts.

Corn prices set a new record high above $6 a bushel during the quarter.

Woertz defended the production of biofuels, which have come under increasing scrutiny as the cause for volatile commodities and food shortages from the Caribbean to Africa and Asia.

"Biofuels are really a real solution to real problems," Woertz said. "Retreat from biofuels is wrong -- it's dangerous, it's a mistake. It won't fill anybody's stomach and won't fill any gas tanks."

Just under a quarter of last year's U.S. corn crop was used to make ethanol, according to the industry trade group the National Corn Growers Association, up from 18 percent in 2006.

Profit in the company's corn-processing business, including its ethanol production, fell 31.5 percent to $172 million. ADM is the country's second-largest producer of the fuel additive.

ADM predicted Tuesday that ethanol sales and prices should improve through this fall, when more U.S. ethanol production capacity comes on line. Ethanol prices are currently low compared with gasoline prices, which ADM Executive vice President John Rice said should encourage fuel blenders to put more ethanol in the gasoline they sell.

Some of those analysts, like Citigroup's David Driscoll, praised Decatur, Ill.-based ADM for its ability to capitalize on spikes and drops in commodity prices, absorbing its own high cost of buying crops like corn through hedging and raising the price it charges its own customers.

But they also questioned whether the company could maintain anything like the third-quarter results in agricultural services, which ADM itself called extraordinary.

"What it always leaves everybody wondering is, what happens next?" Driscoll asked.

Woertz would only say that, while she expects improved production of some key crops in Europe and South America, volatility seems to be the commodity market rule right now.

"Every time some part of the global crop is normal, something else seems to have a blip," she said.

ADM shares dropped 4.4 percent to $45.32 in midday trading.