The Downside of ADM’s Focus On Biofuels

Even before oil prices collapsed, Patricia A. Woertz had one of the most delicate balancing acts in business. Now things are getting downright precarious.

As chief executive officer of Archer Daniels Midland (NYSE:ADM – News), the world’s largest grain processor, Woertz has watched various parts of her $70 billion-a-year empire gyrate wildly during the past year.

Woertz, a composed and deliberate leader, occasionally reveals the strain she’s under. When skeptical company interns peppered her with questions about ADM’s focus on ethanol during a discussion at headquarters in Decatur, Ill., she responded sharply: “We are not just an ethanol company. I’ll say that again. Everybody hear that? We are not just an ethanol company.”

…With the bankruptcy of leading distributor VeraSun Energy (NYSE:VSE – News) two months ago, ADM has cemented its dubious position as industry titan. That dominance will probably make Woertz and her 27,000-employee company an even more inviting target for environmental groups and other ethanol opponents in industries ranging from food to oil. As if this weren’t enough to worry about, Woertz, 55, will also have to deal with fallout from a Hollywood movie starring Matt Damon due in theaters in September that focuses on ADM’s past price-fixing. Woertz shrugs off the challenges, arguing that she remains focused on “the things we can control.”

Regardless of what happens on the political front, she says she will stick with fuel from corn. Her stance is at odds with several scientific studies that suggest that ethanol contributes to higher greenhouse gas emissions as farmers worldwide clear untouched forest land to feed biofuel demand. She rejects arguments that it’s too costly and inefficient to produce. To the contrary, she says, “mitigating energy prices is…what biofuels do” by enabling fuel distributors to put a lower percentage of crude in gas at the pump. Crude oil may now look relatively cheap, but its volatility underscores the need for alternatives, she argues. As for food shortages, Woertz says that biofuel production has been unfairly blamed: “Longer-term, the abundance of agriculture will be able to fulfill (both food and fuel) needs.”

Business Week