ADM's bioproducts segment (ethanol) has been an albatross for the company in recent quarters - lack of corn and the price of corn have seen ethanol margins hover at or below breakeven. Looking at consensus, it appears that there is no improvement expected until 2H calendar '13 for the company. However, examining the trends in cash ethanol margins on Bloomberg as a proxy, it appears that the profit per gallon has moved up significantly in recent weeks and is now decidedly positive. In the past, we have found the cash ethanol margins to be directionally useful in regard to determining segment profitability, and we are encouraged by recent trends.
At current levels and with weather semi-cooperative, we continue to see ADM as an inexpensive option on the corn crop in the U.S. in coming months.
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HEDGEYE RISK MANAGEMENT, LLC