ADM Quietly Becoming Largest Commodity Trading Player

• Posted by ToddSullivan
• on June 20th, 2008

Forget ethanol and HFCS. Archer Daniels Midland (ADM) is quietly becoming the largest commodity trade clearer.

Futures clearing services provider ADM Investor Services Inc., a subsidiary of Archer Daniels Midland Co., said Friday it has agreed to acquire the customer business and technologies of Iowa Grain Co. Iowa Grain is a clearing member of the Chicago Board of Trade and a member of the Chicago Mercantile Exchange.

“With the increased volatility in the global futures markets, it’s important to have a large and stable capital base, which this transaction will provide,” said Iowa Grain President and Chief Executive Mike Brinati.

The companies said the combination will produce a financially stable futures commission merchant with efficient access to trading platforms and electronic trading facilities.

If we remember back to the last earnings release we remember the huge results in the Agricultural Services Division.

Results were driven by an almost sevenfold increase in profits at ADM’s Agricultural Services division, from $46 million to $366 million. The division includes the company’s grain-trading, -transporting and -handling businesses.

The Iowa purchase is just adding revenues and customers to that business. When you consider the amount of grain ADM handles and stores, further expansion into trading in the current environment is a natural and very profitable move. To fully see the scope of what we are talking about here, look at this map.

Commodity markets have exploded and with them has the trading in them. As a leading clearer of trades, ADM stands to profit no matter what the markets do, as long as there is action.

Disclosure (“none” means no position):Long ADM

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