April 4, 2016

After four years on the market, Archer Daniels Midland (ADM) announced it has reached an agreement to sell its sugarcane ethanol operations in Limeira do Oeste in the state of Minas Gerais in Brazil to JFLim Participações SA for an undisclosed amount.

The deal includes a sugarcane plantation and a processing facility with the capacity to crush 1.5 million tons of sugarcane. producing 37,000 gallons of ethanol per year.

“…we have determined that our sugarcane ethanol operations in Brazil are unlikely to meet our long-term returns objectives,” said Chris Cuddy, president of ADM’s corn processing business unit in a company statement. “As our sole sugarcane ethanol operation in Brazil, this asset is too small for ADM to compete effectively in a challenging ethanol environment.”

A struggling global market and inflation in Brazil have created considerable headwinds for ethanol producers, and in the course of the past year, earnings for ADM’s biofuel unit fall to $149 million – a drop of 79%.

Indeed, in light of oversupply, tight margins, an uncertain political climate in regard to renewable energy, and low crude oil and gasoline prices, ADM, the largest ethanol producer in the U.S, announced it was examining strategic options for its three U.S. corn dry mills in Nebraska, Iowa, and Illinois as well, reports Bloomberg.

The sale of the dry mills would still leave ADM in control of its five wet mills, which have the ability to produce starches and other higher-margin products including corn syrup, providing the company with flexibility as it shifts its focus away from energy and toward food ingredients, according to Reuters.

However, although ADM is exiting Brazil’s ethanol sector, the company made clear that it remained committed to the country.

“Brazil is one of the world’s most important producers of agricultural products, and will be critical to feeding a growing global population in the coming years,” said Cuddy. “We look forward to continuing to partner with Brazilian farmers to feed the world together.”