ADM upgrades cocoa processing in Brazil

Related tags High-fructose corn syrup Corn syrup Adm

Major food commodity processor and ingredients supplier Archer
Daniels Midland (ADM) will expand cocoa operations in Brazil to
match expansion of current product lines, the firm said this week.

The Decatur-based company that marked up €28.5 billion in sales for 2003 said plant processes at its cocoa processing facility in Ilheus, Bahia will be upgraded to meet "new offerings".

The facility currently produces cocoa powder, butter and cake product lines for Brazilian and international markets.

In the first quarter of 2004 ADM saw earnings for food and feed ingredient earnings rise by $29 million to $89 million "due to improved operating results from our cocoa operations and improved earnings of the GRUMA corn flour venture".

But on Wednesday this week shares in the firm fell by more than 7 per cent after a Wall Street investment bank downgraded the food products maker on news the company will not be able to increase prices for its sweetener high-fructose corn syrup (HFCS) this year.

Analysts report that the firm had enjoyed an impressive 43 per ceent rise in its stock price over the past year. But the lack of HFCS pricing power suggested to some analysts that those gains may be coming to an end.

Merrill Lynch analyst G. Leonard Teitelbaum lowered ADM to a "neutral" from a "buy" rating after the company made a presentation to the consumer analysts group of New York on Tuesday.

ADM told analysts that it was concerned about not being able to raise prices on high fructose corn syrup, a key ingredient in the US for making beverages although far less common in Europe, due to a recently completed contracting period.

The firm recently ended a long running lawsuit in the US that might have cost billions of dollars had the case reached court, paying $400 million to settle an anti-trust lawsuit on high fructose corn syrup, the popular sweetener used by soft drinks giant Coca-Cola and PepsiCo.

ADM joined Tate & Lyle's AE Staley firm and Cargill who have also made settlements under the same lawsuit.

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