ADM profit soars, but investors fear drop-off

CHAMPAIGN -- Archer Daniels Midland Co. cashed in on volatile prices and heavy demand for the corn, soybeans and wheat it processes to generate a 42 percent increase in third-quarter profits.

Though Decatur-based ADM easily beat Wall Street expectations, investors Tuesday 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 transportation and handling services, which continues to move last year's large corn crop and other commodities in high demand. The division also includes a large grain-trading operation.

"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.

ADM is the country's second-largest producer of ethanol, the largely corn-based fuel additive with plenty of critics, including ADM customers. Food processors say the vast amount of corn used to produce ethanol is driving up the cost to buy feed for livestock.

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.