ADM discusses potential for restart of idle dry mill plants

By Erin Voegele | July 30, 2020

Officials from Archer Daniels Midland Co. confirmed on July 30 that two of the company’s dry mill ethanol plants remain idle. The company is taking a data-driven approach to determining a restart date for those plants, and indicated the strategic review of ADM’s ethanol business in ongoing.

The announcements were made during ADM’s second quarter earnings call.

Despite the COVID-19 pandemic, ADM reported that quarterly performance for its Vantage Corn Processors division was up when compared to the second quarter of 2019. The company said the increase was driven by favorable risk management results on inventory positions and strong demand for industrial ethanol. While average industry ethanol margins were down versus the prior year, prices and margins improved throughout the quarter as lower production, including two idled ADM dry mills, and some recovery in driving miles led to falling industry stocks.

ADM announced on April 23 that it would idle ethanol production at the company’s corn dry mill facilities in Cedar Rapids, Iowa, and Columbus, Nebraska, due to impacts of the COVID-19 pandemic. At that time, the company said the anticipated length of the plant shut downs would be four months, but cautioned that timeframe was dependent on market conditions and could change.

During the earnings call, Ray Young, executive vice president and chief financial officer of ADM, provided an update on plans for the idle facilities. He said ADM is considering a variety of factors concerning the potential restart of the Cedar Rapids and Columbus plants, including data on ethanol inventory levels, driving miles, and the margin environment. Recent data released by the U.S. Energy Information Administration is encouraging, he said, noting that ethanol inventories reached a peak of more than 27 million barrels in April, but have fallen to approximately 20 million barrels in recent weeks. Another key variable, he said, is driving miles. While fuel demand was down as much as 40 percent this spring, driving miles have increased in recent months, and fuel demand is now only about 15 percent lower than normal.

Young said ADM will continue to look to the data to see how inventory levels, fuel demand and ethanol production margins evolve over the next several months. “That will guide us in terms of the appropriate timing to…restart those dry mills,” he said. “It’s a dynamic situation, but we are going to be very data driven.”

During the call, Young was also asked about the strategic review of ADM’s dry mill ethanol assets, which has been ongoing for several years. Young confirmed the review is ongoing. He said there are parties who are interested in the dry mills assets, but noted the COVID-19 pandemic has paused those efforts. Young said the company expects the process to recommence later this year as the markets start to normalize.

The Vantage Corn Processors segment reported $18 million in operating profit for the second quarter, up from a $23 million loss reported for the same period of last year. The Carbohydrate Solutions segment, which contains both Vantage Corn Processors and Starches and Sweeteners, reported $195 million in operating profit, up from $192 million during the second quarter of 2019.

Overall, ADM reported segment operating profit of $813 million, up from $645 million. Adjusted segment operating profit was $804 million, up from $682 million in the second quarter of last year. Earnings per share reached 84 cents, up from 42 cents per share during the same period of 2019. Adjusted earnings per share reached 85 cents, up from 60 cents.