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Analyzing Archer Daniels Midland’s Initiatives for Food Innovation

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Local food innovation center in Decatur

Archer Daniels Midland (ADM) partly funded NFS’s (National Foodworks Services) new headquarters. It made the announcement in a press release on April 19 after its grand opening. It’s a local food innovation center in Decatur, Illinois. It’s founded by local entrepreneurs Jim Milano and Tony Caccomo. It’s a state-of-the-art facility. It aims to provide the highest quality food production. As detailed in the press release, Archer Daniels Midland contributed a sum of $2 million to help NFS develop a 40,000-square-foot manufacturing complex at the former Brush College School in Decatur. This facility is next to Archer Daniels Midland’s James R. Randall Research Center.

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How will this deal work?

NFS is registered in Illinois. It’s a food business incubator. It aims to guide in a new wave of opportunity for entrepreneurs and the community-at-large. Together, Archer Daniels Midland and NFS aim to offer resources, expertise, and facilities to help customers and third parties in innovation based on consumers’ changing preferences.

Impact on the stock price

The announcement was made on April 19. The stock closed 1% higher on the same day at $38.23. It rose another 2% and closed at $38.87 on April 20.

So far in 2016, Archer Daniels Midland gained 8% as of April 20. It rose 3% since the announcement. It was trading 10.2% above its 100-day moving average, 8.7% above its 50-day moving average, and 6.3% above its 20-day moving average.

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CEO’s view of the deal

Archer Daniels Midland’s chairman and CEO, Juan Luciano, mentioned that together they can make Central Illinois a prominent new center for food innovation by spurring economic growth in the region. Management thinks that Archer Daniels Midland has one of the broadest ingredient portfolios in the food and beverage industry, exceptional research and development capabilities, extensive experience in product commercialization, and an unparalleled logistics network. NFS is well-versed in helping smaller entrepreneurs bring bold new ideas to the market.

Peers’ stock performance

So far in 2016, Archer Daniels Midland’s peers such as Ingredion (INGR) and Pinnacle Foods (PF) gained ~15% and 6%. Bunge (BG) fell 11% as of April 20. On April 20, they closed at $106.58, $44.68, and $59.52, respectively. The VanEck Vectors Agribusiness ETF (MOO) invests 6.4% of its holdings in Archer Daniels Midland. It also invests 3.0% in Bunge. On April 20, MOO closed at $48.96. It has gained ~7% year-to-date.

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