Corn is cheap. The President is on your side. Oil's kissing the sky once more. Talk about a perfect storm for Archer Daniels Midland (NYSE:ADM).
President Bush's State of the Union speech Tuesday night revolved around America's need to promote renewable fuels. "America is addicted to oil, which is often imported from unstable parts of the world... the best way to break this addiction is through technology," the President said.
In an effort to kneecap this country's gas addiction, Bush reiterated the exigency of alternative energy production and the critical need to flesh out the Energy Bill, which in 2005 mandated the use of 8 billion gallons of ethanol by 2012. The alternative energy source of the future is ethanol, Bush thinks, and he wants your automobile to run on it.
Look for a reaction in shares of ADM Wednesday, since ADM converts corn into ethanol. Most of the corn craze is already factored into shares, arguably, but we think ADM still has legs. ADM -- a processor of oilseeds, corn, and wheat -- smashed earnings on Tuesday, citing that
The corn-processing division, a producer of syrups, sweeteners, citric and lactic acids, ethanol and other products, recorded operating profit of $237 million for the quarter, up $105 million from a year ago, mainly due to lower net corn costs. The unit also realized improved ethanol prices and volumes.
ADM's agricultural services arm could see another earnings burst in the next 2 quarters should it be forced to ramp up ethanol production.
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