Archer Daniels Midland Co.'s (ADM) fiscal second-quarter earnings fell sharply on weakness at its grain-processing and trading businesses and a charge from the shuttering of a bioplastics venture.

The grain processor and merchandiser reported a decline in earnings at its corn-and-oilseed-processing and grain-trading units. The results were hurt by global volatility fueled by Europe's debt crisis and weakness in oilseed processing due to excess plant capacity.

The weak results echoed recent performance by privately held Cargill Inc., and could be a harbinger of difficulty for others in the industry. Bunge Ltd. (BG), another large grain merchandiser, reports earnings Feb. 9.

"It was a tough quarter," Chief Executive Patricia Woertz said. "The operating environment was challenging."

The company's shares were down 4.9% to $28.26 recently Tuesday afternoon as its earnings came in well below analysts' expectation for the quarter.

ADM reported a 63% drop in earnings in its agricultural-services division, which buys, stores and sells grain around the world.

"We haven't seen the opportunities that we have in the past," said Craig Huss, ADM senior vice president and chief risk officer.

Large grain merchandisers typically benefit from some volatility, as it gives them a chance to take advantage of their storage capacity and price differences around the globe. But when price swings are driven by factors such as Europe's debt crisis rather than underlying grain supply and demand fundamentals, merchandisers lose one of their key advantages.

The weakening grain-merchandising results added to the challenges ADM already has been facing with excess oilseed-processing capacity, which has depressed margins across the industry, and higher net corn costs. ADM's oilseed profit fell 22% compared with a year earlier on weak global processing margins, particularly in Europe, while volume rose 4.6%.

The corn-processing business swung to a loss of $133 million, due to a $339 million write-down related to ADM's announcement earlier this month that it was pulling out of an Iowa bioplastics joint venture with Metabolix Inc (MBLX). Chief Operating Officer Juan Luciano said ADM recently concluded that potential returns on the venture, formed in 2006, didn't justify continued investment.

Woertz said she was optimistic the operating environment would improve. But the company said soybean-processing margins aren't likely to rebound soon and ethanol margins, which had been strong early in the second-quarter, are now weak thanks to excess production and reduced exports.

Still, ADM's struggles may be a sign of broader strength in the agricultural economy rather than weakness, according to analysts at Goldman Sachs. They wrote in a note to clients last week that profits for ADM and Bunge typically climb when the farm economy is weak, as processors "benefit from less competition and are better able to flex their scale advantages." Currently, the farm economy is "extremely flush," Goldman Sachs said.

Earlier this month, ADM said it would cut 1,000 jobs, or 3% of its work force, following a similar announcement from Cargill. ADM's job cuts, the company has said, are expected to save about $100 million annually and help boost its international competitiveness.

For the quarter ended Dec. 31, the company posted a profit of $80 million, or 12 cents a share, from $732 million, or $1.14 a share, a year earlier. Revenue increased 11% to $23.31 billion.

Analysts surveyed by Thomson Reuters expected earnings of 76 cents on revenue of $22.82 billion.

Adjusted earnings excluding an accounting method called LIFO and other items fell to 51 cents from $1.20.

-By Ian Berry, Dow Jones Newswires; 312-750-4072

--Ben Fox Rubin contributed to this article.

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