Archer Daniels Midland 2006 Annual Report Download - page 23

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21
Archer Daniels Midland Company / 2006 Annual Report
MANAGING RISK Long-term returns on assets flow from continuous adjust-
ments to changing commodity markets. Effective hedging
and other risk management strategies ensure that opportu-
nities for profitable growth can be realized.
ADM manages commodity risk through a global network
of trading professionals and risk managers who hedge
positions across cash and futures markets and within
ADM’s own order book. Risk management offices on
four continents establish local hedges that are balanced
in a consolidated corporate position. By matching input
costs and product pricing, the Company can lock in its
processing margins on both current and future sales.
Risk management expertise applies, as well, when long-
term investments are considered. While superior insights
into commodity markets help identify attractive oppor-
tunities for asset investment, ADM also engages in joint
ventures, licensing and other risk-sharing mechanisms to
balance opportunity with risk. Joint ventures and other
collaborations with intellectual property partners combine
attractive new technologies with ADM’s proven exper-
tise at large-scale manufacturing—reducing the risk and
increasing the opportunity of success.
As markets increase in size and complexity, effective
hedging of commodities and insightful applications of
capital are key components of risk management strategies
at ADM. Growth in shareholder returns requires consistent
execution for both short-term commodity transactions and
long-term facility investments.
Traders Kenny Bayless
(standing) and
Greg Morris compare
notes on commodity
markets and hedging
strategies at ADM’s
trading floor in
Decatur, Illinois.