Mr. Martin L. Andreas
Senior Vice President, Archer Daniels Midland Company
Mr. Martin L. Andreas is Assistant to the Chief Executive and the Director of Corporate Marketing of Archer Daniels Midland Company. ADM is in the business of procuring, transporting, storing, processing and merchandising agricultural products. With consolidated net sales and other operating income amounting to over $20 billion, ADM is one of the world’s largest agricultural processors.
Mr. Andreas joined ADM in 1970 as Executive Vice President of Corn Sweeteners. He served as President of the Corn Division from 1975 to 1986 prior to being appointed to his current position, where he oversees marketing for ADM. Mr. Andreas pays particular attention to the sweeteners and ethanol product lines.
Mr. Andreas devotes time to civic and business interests by serving on the Board of Directors of the Corn Refiners Association, Renewable Fuels Association, American Sugar Alliance, The World Cocoa Foundation, The National Cooperative Business Council, the Illinois Agricultural Leadership Foundation, the Illinois Business Roundtable and Mt. Mercy College. He served as the first Chairman of the U.S.D.A. AARC Center (Alternative Agricultural Research and Commercialization Center) from 1992 through March of 1995.
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Archer Daniels Midland Company (ADM) manufactures a number of products from corn and soybeans that are used in foods, feeds, fuels and other products. Company products in commercial use as well as products in early stages of development were discussed.
ADM started production of fuel ethanol in 1978 when President Carter asked that their beverage ethanol plant be converted to fuel ethanol production as a part of a national program designed to stimulate synthetic fuel production. At that time the U.S. was dependent upon the OPEC cartel for 38 percent of its petroleum products. Since then our dependence on OPEC has increased to 60 percent. Ethanol was the only successful fuel product that emerged from the synthetic fuel program.
Since 1978 ADM and others have invested an estimated $10 billion in ethanol production plants and produce 2 billion gallons of ethanol annually. Ethanol is being used successfully as a gasoline additive in mid-western states. Existing and pending legislation mandate termination of the use of methyl tertiary-butyl ether (MTBE) as a gasoline additive because it has been found to be polluting water supplies. Ethanol is a promising replacement for MTBE. A proposed federal bill would increase annual ethanol production from 2 billion gallons to 5 billion gallons by 2012. If this bill is passed it will greatly stimulate the production of ethanol. Twelve new ethanol plants that will be in production within the next six months and a number of others are in various stages of development or planning.
Ethanol-gasoline blends containing 10 percent ethanol reduce harmful exhaust emissions, provide oxygen for fuel and, of course, while reducing gasoline consumption and petroleum imports. Every major oil company is currently using ethanol-gasoline blends in some areas of the U.S. It is estimated that ethanol usage currently reduces the emission of 3.6 million tons of “greenhouse gases” or the equivalent of the emissions from 520,000 automobiles.
The use of MTBE in gasoline will be banned in California in January 2003. Ethanol-gasoline blends will be used in place of MTBE. This will require an additional 600 million gallons of ethanol annually. Ethanol produced in ADM’s plants in Iowa and Illinois, will be shipped down the Mississippi River by barge and then by tanker through the Panama Canal to California gasoline refineries. Connecticut will ban the use of MTBE in gasoline in 2003 and a New York ban will become effective in 2004. Other states are expected to mandate similar bans. Tests are underway to determine if ethanol can be used effectively and economically as a MTBE substitute in the Northeast and if dependable supplies of ethanol will be available for the purpose. Ethanol-gasoline blends are expected to appear on northeastern market within a year or two.
Brazil has excess supplies of ethanol that they would like to market in Japan and the U.S. The Japanese appear receptive to the idea of using ethanol-gasoline blends and Brazil may develop the market. If Brazil exports ethanol to the U.S., a 50-cent per gallon import tax would be levied but some Caribbean Basin countries may export limited amounts of ethanol to the U.S. duty free.
An ethanol diesel blend is being tested in the U.S. The fuels under test contain 10-20 percent ethanol. Results appear promising but it is expected that 3 – 4 years will be required of secure OEMs from diesel manufactures and the required permits from EPA.
Bio-diesel fuel is a diesel fuel made from vegetable oils. One formulation involves 2 percent soybean oil in conventional diesel fuel. This formulation is used to improve lubricity. Another bio-diesel formulation contains 20 percent soybean oil. EPA has ruled that sulfur content of diesel fuels must be reduced 97 percent by 2006. Sulfur is used in diesel fuels for lubricity and octane value. Soybean oil has been shown to meet both of these requirements. This development may provide an important new market outlet for soybean oil.
The Common Market countries in Europe have proposed that member states adopt legislation mandating the use of diesel fuels containing 2 percent bio-diesel by the year 2005. Thereafter the bio-diesel content would be increased by 0.75 percent annually until diesel fuels contain 7 percent bio-diesel. Canada is also considering expanding the use of bio-diesel fuels. These proposals may profoundly affect the demand for soybean and similar vegetable oils. Supplies of vegetable oils currently exceed market requirements.
About five years ago Germany adopted tax incentives that made it practical to use rapeseed oil as a bio-diesel fuel. ADM and other organizations promptly constructed plants in Germany to extract rapeseed oil. All diesel fuels in Germany currently contain 10 percent bio-diesel derived from rapeseed. The German experiences with bio-diesel fuels indicate that other European countries will quickly accept similar fuels.
There are a number of active research programs in progress designed to increase ethanol production, reduce production cost or develop new uses. Yeast companies are attempting to develop yeast strains that thrive at higher temperatures and accelerate or otherwise improve the fermentation process. Enzyme companies are searching for enzymes to improve the starch conversion process. Studies of this sort have reduced ethanol production cost about 20 percent during the past 10 years.
The federal government has recently promoted research on the development of automobiles powered by fuel cells rather than internal combustion engines. Ethanol is being considered as a hydrogen source for the fuel cells.
A new project partially supported by ADM is underway at the Batelle Institute. The objective of this study is to develop technology to convert the cellulose in corn to fermentable sugars. If this can be achieved it could increase ethanol yields by as much as 50 percent.
For several years the 18 U.S. soybean processing plants operated by ADM had little competition. The production of soybeans in other countries, such as Brazil changed the competitive situation dramatically. In order to deal with these changes ADM constructed soybean-processing plants in Brazil and Europe. This was necessary in order to optimize environmental and economic factors and to provide a reliable supply of soybean products at competitive prices. At present ADM process about 28 percent of the U.S. soybeans, 12 percent of the Brazil soybeans and 40 percent of the soybeans processed in Europe.
The market value of soybean foods last year was $2.8 billion, which represented a 28 percent increase over the previous year. One of the most promising recent developments is the discovery of additional ways to use soybean products in food products. After 31 years of study processes have been developed to make a soybean product with texture and flavor comparable to chicken meat. Products of this sort will expand the use of soybeans in foods. The federal government has been interested in these products for use in their school lunch program.
Extensive studies conducted by the federal government have confirmed the nutritional value of soybean proteins. As a result of these studies food products containing certain levels of soybean proteins may now claim certain health benefits. For example, a new pasta product called Soy-7 contains double the amount of protein found in conventional pasta.
A process has been developed in Japan that alters the disaccharide balance in oils. Clinical studies have shown that patients who used the altered oil in foods for several months were able to lose weight. ADM holds the license to use this process with corn and soybean oil in the U.S. Food products containing the processed oil should be on the market within 6 to 8 months.
The phyto-sterols found in soybeans have been shown to reduce dietary cholesterol in the intestinal tract. Products of this sort will be used in energy bars, beverages and similar products. A related product is currently on the market in margarine. The iso-flavones found in small amounts in soybeans have been found to improve bone density in osteoarthritis patients and to control hot flashes experienced by women during menapause. These uses will not noticeably influence soybean production, however, their discovery indicates that the resources of soybeans and similar crop have not been exhausted.
In an effort to provide wide-ranging views and perspectives regarding the practice of and issues surrounding agriculture, the Philadelphia Society for Promoting Agriculture (PSPA) seeks speakers representing a variety of perspectives. The statements and opinions they present are strictly their own and do not necessarily represent the views of PSPA.