ADM to Start their Dry US Ethanol Plants in H1 2021
Archer Daniels Midland, commonly known as ADM, an American multinational food processing and commodities trading corporation, on 29th October 2020, revealed their decision about keeping two of their dry ethanol mills idle for the time being and revive them online in the first half of 2021. The said mills are situated in Iowa and Nebraska. This decision was followed by a low ethanol demand in the North American sector of the global ethanol market. However, the decision to reopen these plants will depend upon the recovery of the US economy and how driving miles are going to recover seasonally.
Archer Daniels Midland temporarily idled its two dry ethanol-producing mills situated in Cedar Rapids, Iowa and Columbus, Nebraska, during the peak of COVID-19 outbreak in America when the ethanol demand dropped by a large proportion and the manufacturing units were working at reduced capacities. The shutdown took place in the month of April 2020, when United States’ ethanol production fell to its lowest in 12 years to 600 million barrels per day, led by a sharp decline in gasoline demand, which was caused by the lockdown. The two dry mills of ADM had a total annual producing capacity of 575 million gallons.
The low season of gasoline, which, in turn, is generating low ethanol demand across North America, has been stated as the primary reason by the company behind the temporary shutdown. However, other factors involved are lower industry utilisation rate for ethanol and the 10th Circuit Court ruling on refinery exemptions. The company also stated that the recovery of the US economy in the year 2021 would play a vital role in reopening the two mills. The increasing inquiries from China about US ethanol, as the country is looking for potential imports, will also be a factor involved in reopening the mills.
On a remark made on whether the Argentinian currency devaluation will trigger aggressive selling of soybeans by farmers, the ADM CEO Juan Luciano stated that there is an ample demand from China. If the farmers in Argentina decided to sell as incentives arise, the company might only supply 5 million metric tonnes of beans, which the market will consume very quickly.
Meanwhile, China has been rebuilding its hog herd after the African Swine Fever wiped out nearly 50% of the pig population in the nation. As China rebuilds the hog herd, the farmers are focused on more professional animal production, which has led to increased consumption of corn and soybean as feedstock, besides being the reason behind the pull from China for imported corn.
China’s corn imports have increased this year, with its purchase increasing to 6.7 million metric tonnes in the initial nine months of the year, which was 72.5% higher year on year as confirmed by the data given from a Beijing-based analytical firm Cofeed showed. Since the US exported only 1.5 million metric tonnes, most of China’s corn was imported from Ukraine, at 4.9 million metric tonnes. As China’s economy is coming back to normal and Brazilian suppliers have sold their pipeline of beans, after a very long time, the global market needs US supply for both beans and corn.
Despite the temporary shutdowns caused by the COVID-19 pandemic, the company’s adjusted operating profit for its Ag Services and Oilseeds segment in the third quarter increased by 4.6% year-on-year to USD 436 million. Strong industry export margins and volumes acted as the major market drivers, and the company reported a net earning in the third quarter to be at USD 225 million.