Green Plains Renews Legal Battle v. ADM

Green Plains Alleges ADM Ethanol Market Manipulation in New Nebraska Lawsuit

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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Omaha-based Green Plains Inc. has filed a new lawsuit against Archer Daniels Midland, alleging market manipulation. (DTN file photo)

LINCOLN, Neb. (DTN) -- Green Plains Inc. has filed a new lawsuit against Archer Daniels Midland, alleging the company conducted a scheme to illegally depress the ethanol cash spot market beginning in November 2017, allegedly harming Green Plains' business.

The lawsuit, filed this week in U.S. District Court for the District of Nebraska, details how Green Plains believes ADM used the futures market to lower ethanol prices and hurt GP's bottom line.

David Domina, an attorney representing Green Plains, told DTN the new lawsuit differs in a major way from the company's previous lawsuit.

"This case is not a class action," he said. "It asserts injuries only to the Green Plains plants. This case asserts a single legal claim for tortious interference with contractual relations, and particularly the contract related to the Chicago benchmark and how ADM allegedly impacted those contracts."

Unlike the previous lawsuit, Domina said, Green Plains this time is not seeking antitrust damages or non-economic damages.

"It contends that ADM conduct at the marketplace impacts the contracts between Green Plains and other parties in a way that is designed and intended to have an adverse impact on pricing and to force the market to move artificially in response to feigned supply signals or demand signals," he said.

In August 2021, a federal court in Illinois dismissed a Green Plains lawsuit that argued the same claims. The court ruled the company did not have standing to sue under the Commodity Exchange Act.

In the new lawsuit filed in Nebraska, Green Plains said it had "valid contractual relationships" tied to various ethanol-pricing benchmarks.

"ADM was aware of these valid contractual relationships of plaintiffs that were tied to the pricing benchmarks," the lawsuit said, pointing to the period from November 2017 through at least September 2019 as the time of the alleged manipulation.

"In fact, ADM and plaintiffs are parties to contracts with one another in which the price paid and received is tied to the pricing benchmarks. ADM, through its unlawful manipulation, intentionally interfered with these valid contractual relationships of plaintiffs that were tied to the pricing benchmarks."

Green Plains claims it suffered damages through lost profits, a diminishment in future earning capacity, "reputational harm," impairment of business relationships and "consequential" losses.

"During the relevant time period, from November 2017 through at least September 2019, ADM routinely acquired financial derivative contracts that went up in value if the price for ethanol at the Argo terminal went down," the lawsuit said.

Green Plains alleges ADM executed a three-step strategy that included lowering prices at the Argo terminal in Illinois by "flooding" the terminal with ethanol to lower the 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 is used to price and settle ethanol derivatives on the New York Mercantile Exchange and the Chicago Board of Trade.

Second, Green Plains alleges ADM sold on average 1 million gallons of ethanol daily and adversely affected the pricing of more than 32 million gallons of physical ethanol produced industry-wide each day.

"Finally, ADM needed to gain enough leverage to turn its own physical ethanol losses at the Argo Terminal (and associated losses on its plant production), into financial wins at NYMEX and CBOT, which it did 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," the lawsuit said.

"ADM caused the contractual relations of plaintiffs that were tied to the pricing benchmarks to be less profitable, which made their performance more expensive."

Green Plains said ADM's actions were contrary to what most ethanol producers would do based on market conditions.

"As a physical producer of ethanol, ADM should want stable or rising prices so that its physical sales would earn a profit," the lawsuit said.

"However, because of the disproportionate size of its derivative financial position, ADM manipulated prices to fall so that its financial derivatives would earn a profit. Instead, ADM sacrificed its profits on physical sales in order to leverage even larger profits on its derivatives contracts."

Green Plains said starting in November 2017, ADM was a buyer at the Argo Terminal on the market on close, or MOC, window just once at 210,000 gallons. The MOC window is when traders execute trades as close to the closing price as possible.

Green Plains said ADM, however, "was a seller at all other times for a total of approximately 821 million gallons -- a sea change from their pre-November 2017 trading behavior in which ADM was consistently a buyer."

Similar lawsuits filed by AOT Holding AG and six ethanol companies remain on track for a 2024 trial.

In November 2020, Wisconsin producers United Wisconsin Grain Producers, Didion Ethanol, Ace Ethanol, Fox River Valley Ethanol, Badger State Ethanol and Iowa producer Pine Lake Corn filed their lawsuit.

Read more on DTN:

"Green Plains Alleges ADM Manipulation," https://www.dtnpf.com/…

"Court Dismisses Ethanol Market Lawsuits," https://www.dtnpf.com/…

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

Follow him on Twitter @DTNeeley

Todd Neeley