Company Information

Archer-Daniels-Midland (ADM) Company is largely involved in the first stage of the supply chain of many food products, but is also involved in most all parts of the supply chain. They “procure, transport, store, process, and merchandise agricultural commodities, products and ingredients in the US and internationally.” ADM features three segments: Ag Services and Oilseeds, Carbohydrate Solutions, and Nutrition. As CEO Juan Luciano states, “ADM’s ability to provide value through the entire supply chain — from origination to processing to transportation to ingredients and solutions — is what sets us apart from others in the industry.” Domestically, ADM has more than 160 ingredient manufacturing facilities and more than 300 crop procurement facilities spread across 29 states. Net sales for 2019 were $65B. ADM boasts having the most or second-most market share in their many segments. ADM is an established company within the agricultural products industry and the food products industry.

Executive Summary

Investment Thesis:

ADM’s focuses on sustainability and nutrition has opened new doors for the company and will be a strong driver for growth and revenue especially since their Q3 2020 earnings report for their Nutrition segment grew this past quarter and has been growing rapidly and very consistently.

Investment Merits:

ADM has been working on their Strive 35 sustainability goal, recently announced a collaboration with Spiber to help produce their Brewed Protein polymers for use in clothing and other consumer goods, also recently announced plans to launch PlantPlus with company Marfrig that will focus on delivering sustainable, plant-based food to consumers in the growing plant-based meat market, and also recently announced plans to build a probiotics facility in Valencia, Spain that will use innovative technology to deliver probiotics and postbiotics that help with health and wellness. Additionally, recent Q3 earnings reports showed strong performance in all three of ADM’s segments, but specifically the Nutrition segment, which is where ADM is focusing a lot of their attention now.

Investment Risks:

The Phase-One U.S.-China trade agreement could mean a loss in revenue for U.S. agricultural companies such as ADM. Additionally, the U.S. presidential election could cause changes in ethanol production, which is directly related to ADM’s corn farmers.

Investment Catalysts:

The projects that ADM has been involved in have only just been announced last month in October 2020.

Recommendation:

We recommend that ADM is a Buy at its current price.