ADM to Stop Making Additive Cited in 1990s Price-Fixing Case

(Bloomberg) -- Archer-Daniels-Midland Co., one of the world’s largest agricultural commodity traders, plans to end some production of an amino acid that was at the center of a price-fixing case in the late 1990s.

The Chicago-based company will stop making dry lysine, an additive used in animal feed, in the first half of 2021 after the global industry expanded faster than demand, Pierre Joseph Paoli, ADM’s president of feed ingredients and additives, said Thursday in a statement. The company will focus instead on customer needs for liquid and encapsulated lysine products.

“Market conditions for dry lysine have eroded, as global industry capacity has expanded faster than demand,” Paoli said in a statement. “We’ve received great feedback as we’ve worked closely with producers to transition them to our liquid lysine products and delivery systems, as well as to our innovative new encapsulated lysine products.”

Lysine prices and production margins have come under pressure as China expanded its capacity throughout the 2000s, turning into a net exporter of the product. The feed additive was once part of a price-fixing case that later became the basis of the 2009 film “The Informant!”, starring Matt Damon. ADM pleaded guilty to the price-fixing charges in 1996.

Refocusing Business

ADM has been refocusing its business to reduce reliance on volatile commodity markets. The company has been expanding its nutrition business in both the animal and human sectors, having spent billions to acquire Wild Flavors -- a maker of flavors and colors for the food and beverage industries -- as well as animal-feed maker Neovia.

Chief Financial Officer Ray Young said at an investment conference in September that ADM probably wouldn’t grow margins at its animal nutrition business at the same rate as the human side due to products such as lysine.

“Lysine is a part of our animal nutrition services, it’s probably more commodity like in terms of its margin structure,” Young said. “Chinese players are major participants in the lysine markets around the world and hence they do have an impact in terms of the pricing environment.”

Throughout 2020, ADM has worked with pork and chicken producers to shift them to liquid lysine, installing equipment in their plants. ADM said it continues to introduce new lysine products for dairy cows and will work with customers to ensure a smooth transition before ending production of dry lysine. A company spokeswoman confirmed that the majority of its production is of the liquid variety.

“This is another example of ADM continuing to shift their business based on where they see opportunity and conversely, exiting less- or unprofitable businesses,” said Seth Goldstein, an analyst at Morningstar Inc. in Chicago. “It’s in line with how management continues to transform the business over time.”

In 1996, ADM also pleaded guilty to a price-fixing conspiracy in the citric acid market. The company was sentenced to paying $100 million for its role in the two scandals, at the time the highest ever antitrust fine in corporate America.

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