UPDATE: Archer Daniels Midland To Cut 3% Of Work Force

Archer Daniels Midland Co. (ADM) said it would cut 1,000 jobs, highlighting the challenges faced by the agribusiness sector as market volatility cuts into trading profits.

The cuts, which amount to 3% of the company's work force, aim to trim annual expenses by $100 million a year. They are part of what a spokesman said was a broader effort to boost the U.S. group's international competitiveness.

The move announced Wednesday also comes as there is simmering discontent among investors about ADM's performance after a big expansion of its renewable-fuels business under Chief Executive Pat Woertz, a former Chevron executive, and subsequent investment in overseas grain-processing and handling.

"It didn't show appropriate returns on the last capital [program] and basically earnings have flat-lined over the last three or four years," said Diane Geissler, an analyst with CLSA.

While the commodities boom has made agribusiness one of the more resilient sectors of the economy, ADM's action follows last month's announcement by larger rival Cargill Inc. of plans to cut 2,000 jobs, or about 1.5% of its global staff. Tuesday, Cargill announced a sharp slide in fiscal first-quarter profit.

Grain merchandisers generally gain from volatility as their network of traders and sources allows them to capitalize early on market trends through trading.

But that advantage was nullified throughout the fall because price swings were based on the latest news about Europe's crisis, rather than shifts in grain supply-and-demand fundamentals.

Like Cargill, ADM also has suffered from poor soybean-export-processing margins due to U.S. overcapacity and sluggish demand thanks to the weak economy. High corn prices have added to the pressure on ADM the past several months as margins in its corn-processing business eroded.

ADM said the cuts would initially take the form of a voluntary retirement offer to U.S. salaried staff, with job losses overseas following, dependant on how many take the offer.

The company expects to record a pretax charge of $50 million to $75 million in the current fiscal quarter related to these actions. It predicted it would begin benefiting from the cost reductions in the next fiscal quarter, which begins in April, with the full benefit recognized by about March of next year. ADM shares were recently up 1.1% at $29.09.

-By Ian Berry and Joan E. Solsman, Dow Jones Newswires; 212-416-2291; joan.solsman@dowjones.com

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