Iowa, Wisconsin Ethanol Plants Sue ADM

Six Ethanol Companies File New Anti-Trust Lawsuit Against Archer Daniels Midland

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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Six more ethanol companies have sued Archer Daniels Midland, alleging the company manipulated the ethanol market. (ADM logo)

OMAHA (DTN) -- Add six more ethanol companies to the list of plaintiffs suing Archer Daniels Midland, alleging one of the nation's largest ethanol producers manipulated the market.

Wisconsin producers United Wisconsin Grain Producers, Didion Ethanol, Ace Ethanol, Fox River Valley Ethanol, Badger State Ethanol and Iowa producer Pine Lake Corn, filed a new lawsuit on Wednesday in the U.S. District Court for the Central District of Illinois.

There are three other similar lawsuits pending in the same court, including a complaint filed by Omaha-based Green Plains Inc. Earlier this week a federal judge in Nebraska issued an order for a change of venue in the Green Plains case to the Illinois court.

ADM also has been sued by Wisconsin ethanol producer Midwest Renewable Energy as well as AOT Holdings, a Swiss company that owns an energy-trading subsidiary.

The new lawsuit alleges ADM violated a number of state and federal laws, including monopoly provisions of the Sherman Act, and violations of the Illinois Anti-Trust Act, the Illinois Consumer Fraud and Deceptive Business Practices Act, the Wisconsin Deceptive Practices Act, tortious interference with contractual relations under Wisconsin and Iowa law.

"ADM, one of the largest producers of ethanol in the United States, intentionally manipulated and artificially depressed the price of ethanol in the United States," the lawsuit alleges, by "targeting" ethanol sales activity at the Argo terminal.

"By driving down ethanol prices, ADM intended to drive competitors like plaintiffs out of the ethanol market, further entrenching its control over the pricing of ethanol nationwide."

The Argo terminal is the daily location for ethanol trading. The 30-minute trading window at the terminal is considered crucial because it is used to set the daily Chicago benchmark price to determine the value of Chicago ethanol derivatives.

That benchmark price is used to price and settle ethanol derivatives on the New York Mercantile Exchange and the Chicago Board of Trade.

ADM had asked the U.S. District Court for the District of Nebraska to dismiss the lawsuit, alleging the law does not allow Green Plains to sue for losses selling a commodity such as ethanol.

The new lawsuit outlines virtually the same allegations other companies have done.

"An economically rational actor 'buys low and sells high,'" the new lawsuit said.

"Yet ADM displayed the exact opposite approach -- it was a buyer at the Argo terminal when prices and margins were higher (pre-November 2017), and shifted toward becoming a massive seller (and remained one) right as prices and margins declined, including in December 2018 when the Chicago benchmark price hit 15-year lows. This is strong evidence both of ADM having actually engaged in manipulation and of its manipulation having achieved the desired price-depressing effect.

"ADM did not disclose its unlawful scheme to the public or to other participants in the ethanol market. In fact, ADM's scheme could only be effective if it kept the scheme secret because its continued success was reliant, in part, upon other market participants not knowing that the Chicago price indexes did not reflect competitive market prices of ethanol."

The lawsuit said that from 2017 to 2019 ADM controlled 70% of the Argo terminal market and accounted for 90% of ethanol sold during the critical market window.

"ADM's monopoly power in the U.S. ethanol market is evidenced by the fact that, as described above, it controlled U.S. ethanol market prices," the lawsuit said.

"More particularly, ADM actually manipulated and depressed the prices at which ethanol was sold in the U.S. ethanol market through its conduct in the Argo terminal market.

The six companies filing the new lawsuit have a combined annual production capacity of 385 million gallons.

Todd Neeley can be reached at todd.neeley@dtn.com

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Todd Neeley