Archer Daniels Adds 2 Feed Plants; Buys European Terminal - Analyst Blog

In a bid to meet the growing needs of livestock producers worldwide, Archer Daniels Midland CompanyADM announced plans to build a new feed-premix plant in the city of Zhangzhou, China and a new feed plant in Glencoe, MN. In a separate development, the company has taken a step forward toward its plans to strengthen its European origination and transportation network with the acquisition of an export terminal along the Black Sea.

Coming back to the new feed-premix plant in China, the company seeks to capture the growing demand for safe and high-quality animal feed in China through this plant. The facility will manufacture a variety of animal feed premixes, which when combined with animal rations are likely to support optimal growth and good health.

Located in southern China, the facility will cater to the expanding demand of swine, poultry and aquaculture industries in four provinces including Fujian, Guangdong, Guangxi and Hainan. At the Zhangzhou facility, the company estimates producing about 30,000 metric tons of premix products every year, along with an additional capacity to produce 80,000 metric tons of complete feeds and concentrates.

Scheduled to be completed in the fourth quarter of 2016, this will be Archer Daniels' fourth premix plant in China and will harmonize with its existing plants in Dalian and Tianjin, in northern China; and a facility under construction in Nanjing, in eastern China. The plant will employ nearly 150 people.

At Glencoe, MN, the company is building a fully automated feed facility, which will serve the inhabitants of Minnesota, Wisconsin and Iowa. With a capacity of 80,000 metric tons per year, this facility will enhance Archer Daniels' operational efficiencies and enable it to meet the growing demand for swine and cattle feed products. Located near the company's existing mill, the new facility is expected to be completed by the first quarter of 2016.

Apart from plant expansions, Archer Daniels remains focused on spreading out its trade and origination networks. For this purpose, the company has agreed to acquire 100% ownership of North Star Shipping and Minmetal, which will add export facilities at the Romanian Port of Constanta on the Black Sea to its assets.

Earlier, through its minority stake in North Star and 50% stake in Minmetal, a 50-50 joint venture between Archer Daniels and North Star, Archer Daniels held 45% stake in the Constanta assets.

The operations of North Star and Minmetal include handling grain elevators and bulk commodity storage and warehousing along with port services, stevedoring operations and a shipping agency at the entrance of the Danube River.

Located on the banks of Black Sea and at the gateway of Danube River, the Port of Constanta is strategically located to serve as a major entry and exit point for trade of bulk commodities from and to Romania, Bulgaria, Serbia and Hungary.

This acquisition will not only enhance Archer Daniels' origination, logistics and export capabilities in Eastern Europe but will also expand its reach to customers around the world. The company has been expanding its capacity around the Danube River since 2011. Till date, the company has eight elevators on the Danube, while two more are under construction; two inland origination facilities; shallow water port facilities in Braila; and 50 barges and six tug boats.

Archer Daniels currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the same industry is Adecoagro S.A. AGRO , with a Zacks Rank #2 (Buy). Other stocks worth considering in the related food industry include SUPERVALU Inc. SVU and Boulder Brands Inc. BDBD , also sporting a Zacks Rank #2.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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