RISK

Classification, Measurement
& Mitigation

Archer Daniels Midland

ADM
Archer Daniels Midland
Founded in 1902
Company
Headquartered in Decatur,
Illinois, USA

ADM is one of the Largest Agricultural Processors in

the world
Worlds Largest Corn Processor
Each Day ADM Processes 66,000 MT of Corn

Fortune 28 Company (US)

Fortune 92 Company (Worldwide)
Fortune Most Admired Food Production Company
(2009,2010, 2011)

ARCHER DANIELS MIDLAND 2

COMPANY

Premier Player in Global Agribusiness

Serving Vital needs throughout the world
Key Facts
FY 12 Net sales:

$89 Bn

Employees:

30,000+

Facilities:

685+

Net Fixed Assets

~$10Bn

Market cap:

~$18 Bn

(10/26/12)

FY12 Segment Operating

Profit
$2.9 Billion
Corn Processing
Oilseeds
Processing

21%

45%

33%
1%

Ag Services

Other

ARCHER DANIELS MIDLAND

ADM Corn

Starch

Corn Syrup, High Fructose Corn

Syrup
Dextrose (Liquid and Crystalline),
Maltodextrin
Xanthan Gum, Citric Acid, Lactic
Acid, Yeast
Sorbitol (Liquid and Crystalline)
Propylene Glycol, Ethylene
Glycol
Isosorbide Pilot Scale

Corn Oil
Gluten
Feed
Gluten
Meal

Lysine, Threonine, Astaxanthin

Fuel Alcohol
Food and Industrial Starches
Ethyl Lactate
Additional Products

ARCHER DANIELS MIDLAND COM PANY

ADM India:

Mangalore
- Packing

HQ & Offices/ Warehouse

Crush Plants
rd
3 Party Packaging - Branded
Branded Oil Depots & Sales Offices

ARCHER DANIELS MIDLAND COM PANY

RISKS - Classification
1. Price Position Risk
2. Currency Risk
3. Credit Risk
4. Counter Party Risk
5. Quality Risk
6. Production & Climate Risk
7. Regulatory Risk
8. Political & Country Risk
9. Fidelity Risk
10.Operational Risk
11.Financial Risk
12.Reputational Risk
ARCHER DANIELS MIDLAND COM PANY

RISKS - Measurement
1. Marked to Market
2. Value At Risk

ARCHER DANIELS MIDLAND COM PANY

Marked to Market
S. Commodit Bought Sold
No
y
A
B
1
2
3
4
5
6
7

Corn
Cocoa
Coffee
Cashew
Rice
Sesame
Wheat
Total

Net
Position
(a-b) = C

Avg
Cost
x

CMP Differenc M 2 M
e
y
(y-x)=z (c ) x (
z)

ARCHER DANIELS MIDLAND COM PANY

Value At Risk
S No.

Risk

Current
Exposure in $

Percent
Volatility

Value at Risk

Price-Position-Sales

Price-Position-Buying

Currency Risk
(Uncovered currency)
Credit Risk

Advance Risk to
Seller
Quality Risk (Sailed
not Received)
Crop Risk
(Qualitative)
Country Risk
(Qualitative)

Total

4
5
6
7
8

ARCHER DANIELS MIDLAND COM PANY

RISKS - Mitigation
1. Price Position Risk Position Limits &
Sheet, Hedging
2. Currency Risk Cover & Forward Cover
3. Credit Risk Credit Assessment, Limits
& Re-insurance
4. Counter Party Risk PG Deposit,
Payment Retention
5. Quality Risk Staff Training, Storage,
Transportation
6. Production & Climate Risk
7. Regulatory Risk Dialogue &
Anticipation
8. Political & Country Risk Historical

ARCHER DANIELS MIDLAND COM PANY

RISKS Global Consolidation

Crop -> Region -> Country

Country -> Region -> Crop -> ADM

International

Risk Management Teams, Risk Officers,

Risk Offices
ARCHER DANIELS MIDLAND COM PANY

Thank You