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Archer Daniels' Sweetener Weakness: Can Ethanol Offset It?
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Key Takeaways
ADM's Carbohydrate Solutions operating profit rose 22% to $411 million in second-quarter 2026.
Stronger ethanol margins and policy incentives offset persistent weakness in liquid sweetener volumes.
ADM raised its expected 2026 benefit from 45Z to $250 million from $150 million, supporting its outlook.
Archer Daniels Midland Company (ADM - Free Report) is facing continued pressure in its liquid sweeteners business, particularly in North America, where weaker volumes and margins are weighing on performance. Sweeteners are an important part of ADM’s Carbohydrate Solutions segment, which also includes starches and other plant-based ingredients used in food, beverages and industrial applications. Weakness in this business can weigh on segment profitability, particularly when lower selling prices and competitive pressures limit the company’s ability to protect margins.
However, strength in ethanol operations is helping offset these challenges and support the company's Carbohydrate Solutions segment. Ethanol offers a potential source of support through ADM’s agricultural processing operations. Ethanol production benefits from demand for renewable fuels, while profitability depends on factors such as corn costs, ethanol selling prices, co-product values and operating efficiency. Favorable ethanol margins and stronger biofuel demand could help offset some of the pressure from sweeteners.
In the second quarter of 2026, ADM's Carbohydrate Solutions segment reported operating profit of $411 million, up 22% year over year. Operating profit from Starches and Sweeteners increased 7% to $326 million, primarily driven by stronger ethanol margins and policy incentives, which more than offset ongoing weakness in liquid sweetener volumes and margins. Meanwhile, the Vantage Corn Processors subsegment reported operating profit of $85 million, up $52 million from the prior-year quarter, supported by improved ethanol margins, policy incentives and effective risk management.
Hence, ethanol profitability will be critical to sustainability. Continued favorable fuel-market conditions, supportive policy incentives and effective cost management could help offset weak sweetener volumes. Looking ahead, ADM expects ethanol margin strength and policy incentives to continue offsetting softness in liquid sweeteners. Management has raised its expected 2026 benefit from 45Z to roughly $250 million from its previous estimate of $150 million, providing additional support to its outlook.
ADM’s Peers
Dole plc (DOLE - Free Report) is leveraging steady demand for fresh produce, disciplined pricing and operational improvements to support its business performance. DOLE is strengthening its vertically integrated supply chain by investing in farming operations, packing facilities, ripening centers and logistics infrastructure. These efforts are helping improve cost efficiency, maintain product quality and ensure a reliable supply to customers. Additionally, Dole is expanding its presence in high-growth categories, including cherries and citrus, by boosting production capacity and upgrading packing facilities.
Mission Produce, Inc. (AVO - Free Report) is focused on expanding its global produce operations and diversifying into higher-margin prepared food offerings. AVO is also emphasizing operational improvements and disciplined capital allocation to enhance profitability and strengthen cash generation. By leveraging its expanded scale, extensive global sourcing network and integration of Calavo, Mission Produce aims to drive sustainable sales growth, improve margins and generate stronger cash flows.
ADM’s Price Performance, Valuation and Estimates
Archer Daniels shares have gained 23.4% in the past six months compared with the industry’s 5.2% growth.
Image Source: Zacks Investment Research
From a valuation standpoint, ADM trades at a forward price-to-earnings ratio of 14.95X compared with the industry’s average of 12.09X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for ADM’s 2026 and 2027 earnings per share (EPS) indicates year-over-year growth of 60.4% and 1.4%, respectively. The company’s EPS estimate for 2026 and 2027 has increased in the past 30 days.
View the Zacks #1 Rank List
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Archer Daniels' Sweetener Weakness: Can Ethanol Offset It?
Key Takeaways
Archer Daniels Midland Company (ADM - Free Report) is facing continued pressure in its liquid sweeteners business, particularly in North America, where weaker volumes and margins are weighing on performance. Sweeteners are an important part of ADM’s Carbohydrate Solutions segment, which also includes starches and other plant-based ingredients used in food, beverages and industrial applications. Weakness in this business can weigh on segment profitability, particularly when lower selling prices and competitive pressures limit the company’s ability to protect margins.
However, strength in ethanol operations is helping offset these challenges and support the company's Carbohydrate Solutions segment. Ethanol offers a potential source of support through ADM’s agricultural processing operations. Ethanol production benefits from demand for renewable fuels, while profitability depends on factors such as corn costs, ethanol selling prices, co-product values and operating efficiency. Favorable ethanol margins and stronger biofuel demand could help offset some of the pressure from sweeteners.
In the second quarter of 2026, ADM's Carbohydrate Solutions segment reported operating profit of $411 million, up 22% year over year. Operating profit from Starches and Sweeteners increased 7% to $326 million, primarily driven by stronger ethanol margins and policy incentives, which more than offset ongoing weakness in liquid sweetener volumes and margins. Meanwhile, the Vantage Corn Processors subsegment reported operating profit of $85 million, up $52 million from the prior-year quarter, supported by improved ethanol margins, policy incentives and effective risk management.
Hence, ethanol profitability will be critical to sustainability. Continued favorable fuel-market conditions, supportive policy incentives and effective cost management could help offset weak sweetener volumes. Looking ahead, ADM expects ethanol margin strength and policy incentives to continue offsetting softness in liquid sweeteners. Management has raised its expected 2026 benefit from 45Z to roughly $250 million from its previous estimate of $150 million, providing additional support to its outlook.
ADM’s Peers
Dole plc (DOLE - Free Report) is leveraging steady demand for fresh produce, disciplined pricing and operational improvements to support its business performance. DOLE is strengthening its vertically integrated supply chain by investing in farming operations, packing facilities, ripening centers and logistics infrastructure. These efforts are helping improve cost efficiency, maintain product quality and ensure a reliable supply to customers. Additionally, Dole is expanding its presence in high-growth categories, including cherries and citrus, by boosting production capacity and upgrading packing facilities.
Mission Produce, Inc. (AVO - Free Report) is focused on expanding its global produce operations and diversifying into higher-margin prepared food offerings. AVO is also emphasizing operational improvements and disciplined capital allocation to enhance profitability and strengthen cash generation. By leveraging its expanded scale, extensive global sourcing network and integration of Calavo, Mission Produce aims to drive sustainable sales growth, improve margins and generate stronger cash flows.
ADM’s Price Performance, Valuation and Estimates
Archer Daniels shares have gained 23.4% in the past six months compared with the industry’s 5.2% growth.
Image Source: Zacks Investment Research
From a valuation standpoint, ADM trades at a forward price-to-earnings ratio of 14.95X compared with the industry’s average of 12.09X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for ADM’s 2026 and 2027 earnings per share (EPS) indicates year-over-year growth of 60.4% and 1.4%, respectively. The company’s EPS estimate for 2026 and 2027 has increased in the past 30 days.
Image Source: Zacks Investment Research
Archer Daniels currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.