Things I Want to Hear from ADM on Monday

Archer Daniels Midland (ADM) the world's largest biofuel and food processor reports earnings tomorrow. The estimates are for $0.74 EPS on $12.65 Billion in revenues. Estimates for fiscal June 2008 are $2.70 EPS on $52.27 billion in revenues.

Now, it is important to note that earnings estimates have been trending higher for both the quarter and 2008 as a whole. Initial estimates failed to properly take into account the full scope of ADM's earnings. While high corn prices may hurt ethanol margins, the increases are easily passed along to HFCS buyers. Also, ADM is a huge exporter of the commodity and its trading operations saw significant gains also.

As the world "modernizes", ADM benefits. Operating the world's most diverse and well established procurement and supply operations of food commodities, ADM is perfectly positioned to ride the boom in both biofuels, and food.

I expect ADM to beat the $.74 cent estimates. 80 cents a share seems to be a more legitimate number given what is happening with food. Ethanol margins will not be stellar, but to be honest, they have to contract. Ethanol will become like gasoline. It will be a production item, not a margin one. The largest producers will make the most just like in the gasoline game. ADM, with 1.1 billion gallons annually now is already the largest and they have another 500 mgpy coming online soon.

On the earnings call we will want:

• Updates on the several expansion project (ethanol, biodiesel, cocoa) they have currently.
• ADM has been rumored to be in the market as an acquirer, any progress? When do they see themselves entering the Brazilian market?
• Do they have their sites set on Verasun (VSE), Pacific Ethanol (PEIX) or the Andersons (ANDE)? I doubt PEIX, but, the other two could be good choices for logistical reasons.

• ADM has also been rumored as an acquisition target, can we put it to bed?

• Cellulose ethanol. We all know this is doable. It is being done on a small scale currently. Any progress on larger, commercially viable processes?

• US biodiesel market. How is it progressing? Do they expect any meaningful expansion of the US market?

• Surprise us....

Disclosure: Long ADM.