Image source: Nicholas A. Tonelli/Flickr.

Everyone knows how the food system works. Farmers grow food that magically appears in supermarkets and on the list of ingredients for your favorite snacks and beverages. OK, so it's a bit more complicated than that, but Archer Daniels Midland (NYSE:ADM) does take care of the "magical" part of the equation. The company has mastered the logistics of moving agricultural raw materials from the field, to storage facilities, processing plants, and even into supermarkets. In fact, it's one of the largest food processing companies in the world.

More interesting for investors is what's going on behind the scenes. Management is hard at work optimizing assets, exploiting market trends, and acquiring and developing premium margin products to distance the company from volatile commodity markets. There is work left to do, but here are three things Archer Daniels Midland Company wants you to know.

Ethanol demand remains strong
There was supposed to be a lot of uncertainty in biofuels markets this year thanks to a sharp reduction in obligated production volumes, but first generation ethanol demand remains a key piece of the nation's transportation fuel industry. That's good news for Archer Daniels Midland Company, which is among the nation's top two ethanol producers each and every year. Strong ethanol demand in the third quarter pushed the company's Bioproducts operating profit 157% higher compared to the year-ago period and accounted for 20% of the company's overall adjusted operating profit. More good news: the party may not be ending anytime soon.

What we see for 2015 is pretty much something relatively similar to what we saw in 2014, because we've seen actually about the same amount of export capacity, so in the range of 800 million gallons to maybe 1 billion gallons. And then about the same domestic demand, so maybe 13.5 billion gallons; something in that range. So we expect 14.3 billion gallons or something in that range for total [domestic] production on an estimated capacity out there, something in the range of 14.5-14.7 billion gallons depending on how much that capacity is actually running.

Ethanol will be an important product for Archer Daniels Midland Company in 2015 because it can create big profits on big volumes -- exactly the operating environment investors want to see.

Focused on higher margin product growth
When you deal with corn, soy, and other agricultural raw materials, your business is inherently exposed to volatile and unpredictable commodity markets that are rarely associated with consistent, healthy margins. Although measures are in place to hedge against volatility and adjust to changes in the market from year to year, the exposure has been a negative for investors.

Luckily, the company has a great plan to mitigate such risks and protect companywide margins. The recently announced acquisitions of WILD Flavors and Specialty Commodities will provide a great starting point for growth and premium products.

In the area of managing our portfolio, we completed the acquisition of WILD Flavors adding to our offering, one of the world's leading suppliers of natural ingredients to the food and beverage industries. Our new business unit, WILD Flavors and Specialty Ingredients, will begin reporting on January 1.

We further expanded our specialty ingredients portfolio with an agreement to purchase Specialty Commodities Incorporated, a leading originator processor and distributor of healthy ingredients including nuts, fruits, seeds, legumes, and ancient grains.

My interest is particularly piqued by the acquisition of WILD Flavors. As many investors know, Archer Daniels Midland Company is a leader in industrial fermentation both in terms of knowledge and deployable assets. Couple that with its massive holdings and access to potential fermentation feedstocks (sugars, glycol, and other waste streams) and it's easy to see why there's been an increased interest in utilizing synthetic biology to create higher margin products.

In addition to producing its own branded products via fermentation, Archer Daniels Midland Company is manufacturing cultured products with Solazyme, Synthetic Genomics, and several others. It will only be a matter of time before cultured products are produced in company-owned assets for WILD Flavors and Specialty Ingredients.

Building capacity for in-demand products
While optimizing product mix with high-margin products will be important for growth and protecting profits, the company is also building global capacity for in-demand products. Quite rapidly, too.

Construction continues in our sweetener and fiber plants in Tianjin, China; our feed premix plant in Nanjing, China; and our specialty protein complex in Campo Grande, Brazil. The expansion of our Fibersol production capacity in Clinton, Iowa is on schedule to be operational in mid-2015.

As part of the consolidation and efficiency plan, we opened an addition to our flour mill at Beech Grove, Indiana, making that facility the third largest flour mill in the United States. This addition replaced less-efficient capacity that we have shuttered. [Meanwhile,] our non-GMO lecithin project in Hamburg, Germany and Latur, India should be operational in April and July, respectively.

For those of you keeping score at home, that's eight new production and processing facilities or expansions being built or brought online. And they're all addressing demand for supply challenged markets. In other words, investors should begin to reap the benefits of expanded capacity in the next few years with top and bottom line growth.

What does it mean for investors?
Archer Daniels Midland Company is making real, substantiated progress to optimize its existing assets, insulate the company's overall performance with premium products, and supply in-demand products throughout the world, especially in high-growth regions such as Asia. There will always be heightened exposure to commodity volatility, but management is keen to extract maximum value from transporting and storing agricultural raw materials. There's certainly a good deal of growth on the table -- it's up to management to execute on its plans to seize it.

Maxx Chatsko has no position in any stocks mentioned. Check out his personal portfolioCAPS pageprevious writing for The Motley Fool, or his work with SynBioBeta to keep up with developments in the synthetic biology field.

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