ADM Pushes Venue Change in Ethanol Case

Green Plains, ADM Tussle Over Venue Change in Ethanol Market Lawsuit

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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A Nebraska court continues to consider a possible change of venue in an ethanol market manipulation case. (DTN file photo)

OMAHA (DTN) -- Archer Daniels Midland argues a Green Plains' lawsuit alleging ethanol-market manipulation should be transferred from a federal court in Nebraska and consolidated with other similar cases in an Illinois court, ADM said in a court brief.

ADM argues in a recent brief filed with the U.S. District Court for the District of Nebraska, Green Plains' case is no different and belongs in the Illinois district.

Omaha-based Green Plains Inc. filed a class-action lawsuit in July alleging ADM conducted a scheme to illegally depress the ethanol cash spot market.

There are two other similar lawsuits filed in the U.S. District Court for the Central District of Illinois, one by Midwest Renewable Energy and another by Swiss company AOT Holdings. Both cases allege ethanol-market manipulation by ADM.

Green Plains argued in a court motion its case was different from the others. The company claims it is the only plaintiff to have lost money on physical ethanol sales as a result of ADM's alleged scheme.

ADM said in its new brief Illinois plaintiff Midwest Renewable Energy has leveled the same accusation in its lawsuit.

"That will come as a terrible surprise to MRE, the plaintiff in one of the two Illinois cases, which alleges as its only injury that it 'incurred losses by receiving less money for the ethanol it sold,'" ADM said.

"MRE seeks to represent a class whose members all lost money selling physical ethanol. In other words, plaintiffs here are members of the MRE proposed class. Plaintiffs cannot avoid a transfer by misrepresenting facts about the other cases."

ADM wants consolidation in all three cases in Illinois where Green Plains, "could take advantage of the discovery already taken, such as the roughly two million pages of documents already produced and share with other plaintiffs -- one of whose complaint they copied -- the cost and work of trying to substantiate their claims.

"There is no need for two different courts to rule repetitively and potentially inconsistently on legal issues and discovery disputes."

FLOODING MARKET

Green Plains and other plaintiff have alleged ADM has flooded the Argo terminal with ethanol to drive down the price, starting in November 2017 and accepted low-priced bids as the dominant seller rather than asking or waiting for a higher price.

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 also has asked the court to dismiss the lawsuit, alleging the law does not allow Green Plains to sue for losses selling a commodity such as ethanol.

Green Plains stated ADM was selling 1 million gallons of ethanol on average near the market closing window. That adversely affected industry-wide prices for ethanol. ADM offset lower prices on its own physical ethanol sales at the Argo terminal by "acquiring short-sided speculative derivative contracts at an unprecedented scale, and then targeting the terminal and pricing mechanism used to determine the price of those derivative contracts," Green Plains stated in its lawsuit.

Derivatives are contracts with values derived from other assets such as stocks, commodities or currencies.

A derivative is a contractual agreement generally between two parties. When one party buys a derivative security, it is said to be long the derivative. When a party is short a derivative, it is a seller of the derivative.

Green Plains alleged that, by executing this strategy with derivatives, ADM used the closing market window to sell approximately 821 million gallons of ethanol, which Green Plains called "a sea change" in ADM's market trading behavior before November 2017.

Green Plains operates 13 ethanol plants across the Midwest, including five in Nebraska. In all, the company has an annual production capacity of about 1.1 billion gallons. ADM operates eight ethanol plants across the Midwest, with about 1.7 billion gallons in annual production capacity.

The lawsuit said ADM used its "size, proximity and relationships to exploit and overwhelm" the Argo terminal and "force a desired, self-serving pricing outcome" on other market participants.

During the time of the alleged scheme, the lawsuit said, ADM had five ethanol plants within 250 miles of Argo with about 1.2 billion gallons of production capacity.

Green Plains said this means ADM had "a greater ability to flood the Argo terminal" with ethanol and sell it at lower prices.

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

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Todd Neeley