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Dividend Aristocrats Part 22 of 52: Archer Daniels Midland Company (ADM)

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Archer Daniels Midland Company (NYSE:ADM) is by far the largest farm products corporation in the world.  The company currently has a market cap of over $24 billion – larger than the next 4 largest farm products companies combined.

Most Advanced Countries in Agriculture

The Insider Monkey database of equity portfolios of around 730 of the best-performing investors shows that at the end of June, 33 funds held shares of Archer Daniels Midland, amassing nearly 3% of the company’s outstanding stock. Among them was David Harding‘s Winton Capital Management, which further increased its stake in the company by 153,423 shares in the third quarter and reported ownership of 3.19 million shares as of the end of September.

The market caps of the next 4 largest farm products companies is shown below:

– Bunge Limited (BMV:BG) has a market cap of $10 billion

– Marine Harvest ASA (NYSE:MHG) has a market cap of $6 billion

– Industrias Bachoco, S.A.B de C.V. (ADR) (NYSE:IBA) has a market cap of $3 billion

– Fresh Del Monte Produce Inc (NYSE:FDP) has a market cap of $2 billion

I last analyzed ADM on December 1st, 2014.  The company’s stock has declined 22.9% since that time.

ADM Stock Price

Source:  Google Finance

The company’s stock price decline over the last 11 months is a result of declining commodity prices and weaker-than-expected earnings.

Understanding ADM’s Operations

ADM operates in 4 segments:

– Agricultural Services

– Corn Processing

– Oilseeds Processing

– WILD Flavors & Specialty Ingredients

Through the first 9 months of ADM’s fiscal 2015, the Oilseeds Processing segment has generated 49% of the company’s operating income. Agricultural Services and Corn Processing have generated 21% and 19%, respectively, of the company’s operating income. The WILD Flavors & Specialty Ingredients segment was responsible for 10% of operating income.  A brief description of each segment is below:

Oilseeds Processing: The Oilseed Processing segment originates, crushes, processes, and merchandises oilseeds which include soybeans, cottonseed, sunflower seeds, canola, rapeseed, and flaxseed into vegetable oil and protein meal.

Corn Processing: The Corn Processing segment converts corn into sweeteners, starches, and bio products (ethanol).

Agricultural Services: Archer-Daniels-Midland’s Agricultural Services segment buys, stores, cleans, and transports agricultural commodities.

WILD Flavors & Specialty Ingredients: This segment was created on January 1st of 2015 to house the company’s flavorings and specialty ingredient operations which include specialty proteins, emulsifiers, and various vitamins, among other items.  The WILD Flavors acquisition was completed in October of 2014.

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