Agro-giant Archer Daniels Midland (NYSE:ADM) makes its living by pressing, squeezing, grinding, and otherwise wringing new products out of basic agricultural ingredients such as grain, soybeans, and cocoa. It looks like those poor kernels, beans, and nibs finally got a bit of revenge; higher input prices put the squeeze on ADM's second-quarter growth.

Sales for the quarter were down 1%, and reported segment operating profit was down 2%. Earnings per share (after stripping out gains, losses, and other debris) came in at $0.41 -- up from a similarly cleaned-up number of $0.37 in the year-ago period.

Business should be looking up, though. Since peaking in mid-2004, prices for corn have dropped by roughly 40%, and soybean prices have been essentially cut in half. So while the December quarter was hit by the legacy of high commodities prices, that effect should taper off as the company moves cheaper grains and beans into the process. To that end, management seems to believe that they can return to double-digit returns on capital in 2005.

Fools must remember, though, that there will always be a certain amount of volatility and variability in agriculture. It's just the nature of the beast that droughts, floods, disease, and planting decisions will always cause price oscillations.

This stock had been on a tear in the last quarter of 2004, rising almost 40%. It seems as though even management thought this was a bit overdone, though; the company repurchased no shares during the quarter (despite an authorization to buy back up to 100 million shares).

ADM also proved in December that it knows a thing or two about squeezing as much as it can out of both agricultural products and its financial structure. The company has generated roughly $1.3 billion in free cash flow over the past 12 months and reduced debt by more than $1 billion.

Though the trailing P/E of about 22 is a bit high, the EV-to-FCF is a more reasonable 14. While not terribly high, the company's long-term historical structural free cash flow growth rate is only about 1%. Though there's no doubt that world demand for food products is only going to increase, I think companies such as Sanderson Farms (NASDAQ:SAFM), Fresh Del Monte (NYSE:FDP), or even Sara Lee (NYSE:SLE) offer better ways to play that theme.

Hungry for more food stocks?

Fresh Del Monte is a Motley Fool Hidden Gems recommendation, and Sara Lee is an Income Investor recommendation.

Fool contributor Stephen Simpson, CFA, owns shares of Fresh Del Monte.