Archer Daniels Midland Company ADM has formed a 50–50 joint venture (JV) with the Berg family-owned Quality Liquid Feeds Inc., in a stride to expand capabilities of its livestock business and increase profitability. Named as Alliance Liquid Feeds, the joint venture will produce and sell liquid feed supplements for livestock in parts of Western United States.
Under the joint venture, both companies will equally own four liquid feed manufacturing plants and the Loomix brand. The plants are situated in Twin Falls, ID; Billings, MT; Fremont, NE; and Johnstown, CO. These plants were previously owned by Archer Daniels.
Though the JV will supply liquid feed supplements in the Western United States, Quality Liquid Feeds will continue to supply its branded liquid feed products in Midwest, East and Southwest United States through its 12 manufacturing plants.
Archer Daniels’ partnership with Quality Liquid Feeds not only expands the former’s production capabilities but also reduces its capital investments in the liquid feeds business. Moreover, this grouping of resources is expected to help in substantially improving operating efficiencies including capital reduction, enhancement of supply chain and sales/margins growth.
For Quality Liquid Feeds, the joint venture provides an opportunity to enter newer markets, where it has been planning to expand for quite a while. Further, Quality Liquid Feeds expects to gain from Archer Daniels’ remarkable supply of ingredients, its expertise in supply chain management, research and industry connections.
In order to expand its livestock business, Archer Daniels had earlier built a new feed-premix plant in the city of Zhangzhou, China and a new feed plant in Glencoe, MN. Through the China plant, the company seeks to capture the growing demand for safe and high-quality animal feed in the country. The facility will manufacture a variety of animal feed premixes, which when combined with animal rations are likely to support optimal growth and good health. The project is scheduled for completion in the fourth quarter of 2016.
At Glencoe, MN, the company is building a fully automated feed facility, which will serve the inhabitants of Minnesota, Wisconsin and Iowa. With a capacity of 80,000 metric tons per year, this facility will enhance Archer Daniels’ operational efficiencies and enable it to meet the growing demand for swine and cattle feed products. Located near the company’s existing mill, the new facility is expected to be completed by the first quarter of 2016.
Archer Daniels currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same industry include Calavo Growers Inc. CVGW, sporting a Zacks Rank #1 (Strong Buy), and Adecoagro S.A. AGRO, with a Zacks Rank #2 (Buy). Another stock worth considering in the related food industry is Campbell Soup Company CPB, holding a Zacks Rank #2.
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