Archer Daniels Midland is a known commodity

Readers of this space know that one of my preferred sectors is agriculture due to the boom in food consumption created by emerging market economic growth. Real incomes are rising in nations in Asia, Latin America and the Middle East, and with it, per capita food consumption is increasing, a trend that benefits Archer Daniels Midland.

Archer Daniels Midland (NYSE: ADM) is one of the world's largest processors of oilseeds, corn and wheat.

The frenzy that accompanied the financial world's realization that bio could represent a renewable energy form, for some energy users, appears to be tapering (thankfully). Still, although the bloom is off the biofuel rose, the key driver here remains in-place: commodities for food use. Demand for wheat, corn, soybean and other food basics is likely to remain strong through at least the end of 2009, propelled by the aforementioned emerging market growth.

Most analysts see accelerating earnings growth on strong corn and soybean demand, with pricing power. Further, given the vagaries of the energy business, it's worth underscoring that ADM is foremost a large, vertically-integrated food commodity company (wheat, corn, soybeans). The Reuters F2008/F2009 EPS consensus estimates for ADM are $2.84/$3.24.

The risks? Declining disposable income is expected to pressure U.S. consumer food budgets in 2008, and analysts expect a slowdown in U.S. revenue from food sources, something that will hurt ADM's domestic results, offset by a superior international performance.

The First Call mean rating for ADM is: Buy [10 firms]. Mean 2008 target: $48 [high: $60, low: $39].

Stock Analysis: Archer Daniels Midland is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than two years should be rewarded from ADM's shares. I'd consider a Sell / Stop Loss at $31.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.