ADM Reaches Accord With Farmland

Hoping to Reap Bounty From Great Plains

Wall Street Journal 27apr01

Archer Daniels Midland Co. reached an agreement to lease Farmland Industries Inc.'s grain assets, giving ADM access to wheat marketing in the Great Plains, and helping ailing Farmland reduce its debt.

Under the deal, ADM, a grain processor based in Decatur, Ill., said it will operate Farmland's grain assets throughout the U.S., and the two companies will share the profits equally.

Friday's announcement comes four days after ADM confirmed that it was in confidential talks with Farmland, the biggest farmer-owned cooperative in the U.S. Rumors circulated last week that ADM might acquire the cooperative, whose headquarters are in Kansas City, Mo.

"The ... agreement allows us to expand our system into key areas where we have not had a significant presence," ADM Chairman and Chief Executive G. Allen Andreas said in a written statement. "In particular, we will increase our participation in wheat marketing in the Great Plains region."

In addition to confirming the talks on Monday, ADM reported net income fell 9.6% to $93.1 million in its fiscal third quarter. The company, which said it is the world's largest processor of soybeans, corn, wheat and cocoa, has been struggling to pull itself out of a slump caused by declining U.S. farm exports while trying to improve its image in the wake of a price-fixing scandal involving the company during the late 1990s.

Meanwhile, Farmland said the deal will help it "make great strides" toward reducing debt. Like ADM, the cooperative has been battered by the agricultural recession. Last August, it said it has been hurt by weak grain exports and shrinking margins on the petroleum products it sells, and revealed that it was trying to sell some assets.

"The grain business is inherently a capital-intensive, low-margin business that under current economic conditions Farmland cannot continue to operate independently," Farmland President and Chief Executive Bob Honse said in the statement.