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ARCHER DANIELS MIDLAND CO - 10-K - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

February 26, 2014

Company Overview

This MD&A should be read in conjunction with the accompanying consolidated financial statements.

The Company is principally engaged in procuring, transporting, storing, processing, and merchandising agricultural commodities and products. The Company uses its significant global asset base to originate and transport agricultural commodities, connecting to markets in more than 144 countries. The Company also processes corn, oilseeds, wheat and cocoa into products for food, animal feed, chemical and energy uses. The Company uses its global asset network, business acumen, and its relationships with suppliers and customers to efficiently connect the harvest to the home thereby generating returns for our shareholders, principally from margins earned on these activities. The Company's operations are organized, managed and classified into three reportable business segments: Oilseeds Processing, Corn Processing, and Agricultural Services. Each of these segments is organized based upon the nature of products and services offered. The Company's remaining operations are not reportable segments, as defined by the applicable accounting standard, and are classified as Other. The Oilseeds Processing segment includes global activities related to the origination, merchandising, crushing, and further processing of oilseeds such as soybeans and soft seeds (cottonseed, sunflower seed, canola, rapeseed, and flaxseed) into vegetable oils and protein meals. Oilseeds products produced and marketed by the Company include ingredients for the food, feed, energy, and industrial products industries. Crude vegetable oils produced by the segment's crushing activities are sold "as is" or are further processed by refining, blending, bleaching, and deodorizing into salad oils. Salad oils are sold "as is" or are further processed by hydrogenating and/or interesterifying into margarine, shortening, and other food products. Partially refined oils are used to produce biodiesel or are sold to other manufacturers for use in chemicals, paints, and other industrial products. Oilseed protein meals are principally sold to third parties to be used as ingredients in commercial livestock and poultry feeds. In Europe and South America, the Oilseeds Processing segment includes origination and merchandising activities as adjuncts to its oilseeds processing assets. These activities include a network of grain elevators, port facilities, and transportation assets used to buy, store, clean, and transport grains and oilseeds. The Oilseeds Processing segment produces natural health and nutrition products and other specialty food and feed ingredients. The Oilseeds Processing segment is a major supplier of peanuts and peanut-derived ingredients to both the U.S. and export markets. In North America, cottonseed flour is produced and sold primarily to the pharmaceutical industry and cotton cellulose pulp is manufactured and sold to the chemical, paper, and filter markets. In South America, the Oilseeds Processing segment operates fertilizer blending facilities. The Oilseeds Processing segment also includes activities related to the procurement, transportation and processing of cocoa beans into cocoa liquor, cocoa butter, cocoa powder, chocolate, and various compounds in North America, South America, Europe, Asia, and Africa for the food processing industry. The Oilseeds Processing segment also includes the Company's share of the results of its equity investment in Wilmar and its share of results for its Stratas Foods LLC and Edible Oils Limited joint ventures. The Company's Corn Processing segment is engaged in corn wet milling and dry milling activities, with its asset base primarily located in the central part of the United States. The Corn Processing segment converts corn into sweeteners and starches, and bioproducts. Its products include ingredients used in the food and beverage industry including sweeteners, starch, syrup, glucose, and dextrose. Dextrose and starch are used by the Corn Processing segment as feedstocks for its bioproducts operations. By fermentation of dextrose, the Corn Processing segment produces alcohol, amino acids, and other specialty food and animal feed ingredients. Ethyl alcohol is produced by the Company for industrial use as ethanol or as beverage grade. Ethanol, in gasoline, increases octane and is used as an extender and oxygenate. Bioproducts also include amino acids such as lysine and threonine that are vital compounds used in swine feeds to produce leaner animals and in poultry feeds to enhance the speed and efficiency of poultry production. Corn gluten feed and meal, as well as distillers' grains, are produced for use as animal feed ingredients. Corn germ, a by-product of the wet milling process, is further processed into vegetable oil and protein meal. Other Corn Processing products include citric and lactic acids, lactates, sorbitol, xanthan gum, and glycols which are used in various food and industrial products. The Corn Processing segment includes the activities of a propylene and ethylene glycol facility and the Company's Brazilian sugarcane ethanol plant and related operations. This segment also includes the Company's share of the results of its equity investments in Almidones Mexicanos S.A., Eaststarch C.V., and Red Star Yeast Company LLC. 24

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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) The Agricultural Services segment utilizes its extensive U.S. grain elevator, global transportation network, and port operations to buy, store, clean, and transport agricultural commodities, such as oilseeds, corn, wheat, milo, oats, rice, and barley, and resells these commodities primarily as food and feed ingredients and as raw materials for the agricultural processing industry. The Agricultural Services' grain sourcing, handling, and transportation network provides reliable and efficient services to the Company's customers and agricultural processing operations. Agricultural Services' transportation network capabilities include barge, ocean-going vessel, truck, and rail freight services. Agricultural Services segment also includes the activities related to the processing of wheat into wheat flour, the processing and distribution of formula feeds, animal health and nutrition products, and the procurement, processing, and distribution of edible beans. The Agricultural Services segment includes the activities of Alfred C. Toepfer International, an 80% owned global merchant of agricultural commodities and processed products. The Agricultural Services segment also includes the Company's share of the results of its Kalama Export Company LLC joint venture and returns associated with the Company's investment in GrainCorp. Prior to December 2012, the Company had a 23.2% interest in Gruma S.A.B. de C.V. (Gruma), the world's largest producer and marketer of corn flour and tortillas. Additionally, the Company had joint ventures in corn flour and wheat flour mills with and through Gruma. In December 2012, the Company sold its 23.2% interest in Gruma and the Gruma-related joint ventures.



Other includes the Company's remaining operations, primarily its financial business units, related principally to futures commission merchant and insurance activities.

Corporate results principally include the impact of LIFO-related inventory adjustments, unallocated corporate expenses, and interest cost net of investment income. Corporate results also include the after-tax elimination of income attributable to mandatorily redeemable interests in Toepfer except during the calendar year 2012 when the put options related to these interests expired and the results were included in noncontrolling interest.



ADM Cocoa Strategic Review

On June 20, 2013, the Company announced that it was engaged in exploratory discussions with various parties about the potential sale of its cocoa business. As of December 31 and as of the date of this report, no definitive sale agreement had been reached and it remains uncertain if these discussions will result in a transaction to sell all or part of the cocoa business. The Company considered whether all or part of the cocoa business should be classified as held for sale as of December 31, 2013, and determined that the requirements under the applicable authoritative accounting literature for held for sale accounting treatment were not met.



Operating Performance Indicators

The Company's oilseeds processing and agricultural services operations are principally agricultural commodity-based businesses where changes in selling prices move in relationship to changes in prices of the commodity-based agricultural raw materials. Therefore, changes in agricultural commodity prices have relatively equal impacts on both revenues and cost of products sold. Thus, changes in revenues of these businesses do not necessarily correspond to the changes in margins or gross profit. The Company's corn processing operations and certain other food and animal feed processing operations also utilize agricultural commodities (or products derived from agricultural commodities) as raw materials. However, in these operations, agricultural commodity market price changes do not necessarily equal changes in cost of products sold. Thus, changes in revenues of these businesses may correspond to changes in margins or gross profit. The Company has consolidated subsidiaries in 74 countries. For the majority of the Company's subsidiaries located outside the United States, the local currency is the functional currency. Revenues and expenses denominated in foreign currencies are translated into U.S. dollars at the weighted average exchange rates for the applicable periods. For the majority of the Company's business activities in Brazil, the functional currency is the U.S. dollar; however, certain transactions, including taxes, occur in local currency and require conversion to the functional currency. Fluctuations in the exchange rates of foreign currencies, primarily the Euro, British pound, Canadian dollar, and Brazilian real, as compared to the U.S. dollar can result in corresponding fluctuations in the U.S. dollar value of revenues and expenses reported by the Company. 25

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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) The Company measures its performance using key financial metrics including net earnings, segment operating profit, return on invested capital, EBITDA, economic value added, and cost per metric ton. The Company's operating results can vary significantly due to changes in factors such as fluctuations in energy prices, weather conditions, crop plantings, government programs and policies, changes in global demand, general global economic conditions, changes in standards of living, and global production of similar and competitive crops. Due to these unpredictable factors, the Company does not provide forward-looking information in "Management's Discussion and Analysis of Financial Condition and Results of Operations."



Year Ended December 31, 2013 Compared to Year Ended December 31, 2012 (Unaudited)

During 2012, the Company's fiscal year was changed to begin on January 1 and end on December 31 of each year, starting on January 1, 2013. Previously, the Company's fiscal year was the twelve months ended on June 30. As a result of the change in fiscal year, the required transition period of July 1, 2012 to December 31, 2012 was audited and included in a transition period Form 10-K report. For purposes of preparing this year's management's discussion and analysis, the Company's management believes the calendar year 2012 is the most directly comparable period to calendar year 2013 results. The calendar year ended December 31, 2012 data is unaudited and has been compiled from the Company's quarterly reports for the quarters' ended March 31, 2012, June 30, 2012, September 30, 2012, and December 31, 2012. As an agricultural commodity-based business, the Company is subject to a variety of market factors which affect the Company's operating results. Demand for global protein meal and vegetable oil remained strong and steady. U.S. biodiesel demand saw a modest recovery and, along with the 2013 reinstatement of the blenders' credit, led to improved margins. Steady corn sweetener demand continued to create tight U.S. sweetener industry capacity. Ethanol margins improved amid volatile industry conditions. Following a below-average 2012 harvest in North America, corn, soybean, and certain soft seed supplies were tight, lowering North American export opportunities and driving up nearby prices for agricultural commodities. The large 2012/2013 harvest in South America replenished the global supply chain for agricultural commodities but was slow to reach global markets due to logistical challenges. A large 2013 fall harvest in North America resulted in a significant decline in crop prices late in 2013. Cocoa margins were weak for much of 2013 due primarily to excess cocoa pressing capacity and strong competition, although conditions improved later in the year. Net earnings attributable to controlling interests of $1.3 billion, decreased $33 million. Earnings before income taxes increased by $43 million while income tax expense increased by $81 million. Segment operating profit of $2.7 billion in 2013, declined $60 million. In 2013, segment operating profit included a $155 million write-down related to the Company's GrainCorp investment, a $51 million impairment of certain long-lived assets at its Brazilian sugar mill, and approximately $27 million of other long-lived asset impairment charges principally in the Corn Processing segment. In 2012, segment operating profit included a $62 million gain related to the settlement of total return swap instruments related to the Company's interest in GrainCorp and a $146 million impairment charge related to the Company's disposal of its equity interest in Gruma and the Gruma-related joint ventures. Excluding these items, segment operating profit improved approximately 3% in 2013. Corporate costs of $0.7 billion in 2013 declined by $103 million. In 2013, LIFO inventory reserves declined resulting in pretax LIFO credits to earnings of $225 million compared to LIFO credits of $3 million in 2012. Equity earnings from the Company's investment in CIP decreased by $89 million in 2013 primarily due to mark-to-market affects of underlying investments. In 2013, corporate costs included a $54 million charge related to the settlement of the FCPA matter, $40 million of foreign currency losses related to the Company's planned acquisition of GrainCorp, $21 million of costs related to strategic projects, and $32 million of costs primarily related to asset write-downs and allocations of costs between corporate and the operating segments. In 2012, corporate costs included $71 million of exit costs related primarily to the workforce reduction and $68 million related to pension settlements. Excluding LIFO and these other items, corporate costs increased $22 million, which is primarily due to higher employee benefit-related expenses and costs for IT projects. Partially offsetting the increase were lower interest expense and minority interest income in 2013. The Company's effective tax rate for 2013 was 33.1% compared to 29.7% for 2012. The 2013 rate was negatively impacted by valuation allowances on deferred tax assets and a shift in the geographic mix of earnings, partially offset by favorable discrete income tax benefits related to amounts received from the U.S. government in the form of biodiesel credits. Excluding these factors, the effective tax rate for 2013 was about 30%. 26

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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS

OF OPERATIONS (Continued)

Analysis of Statements of Earnings

Revenues by segment for the years ended December 31, 2013 and 2012 are as follows: (In millions) 2013 2012 Change (Unaudited) Oilseeds Processing Crushing and Origination $ 20,522$ 20,651$ (129 ) Refining, Packaging, Biodiesel, and Other 10,375 10,666 (291 ) Cocoa and Other 3,281 3,509 (228 ) Asia 705 604 101 Total Oilseeds Processing 34,883 35,430 (547 ) Corn Processing Sweeteners and Starches 4,717 4,882 (165 ) Bioproducts 8,422 6,948 1,474 Total Corn Processing 13,139 11,830 1,309 Agricultural Services Merchandising and Handling 36,968 38,729 (1,761 ) Milling and Other 4,284 4,182 102 Transportation 228 248 (20 ) Total Agricultural Services 41,480 43,159 (1,679 ) Other Financial 302 140 162 Total Other 302 140 162 Total $ 89,804$ 90,559$ (755 ) Revenues in 2013 decreased 1% to $89.8 billion, primarily due to lower average selling prices, related to a decrease in underlying commodity costs, partially offset by an approximate $0.8 billion favorable variance from foreign exchange translation. Oilseeds Processing sales decreased 2% to $34.9 billion due principally to lower sales volumes of merchandised soybeans and lower average selling prices of biodiesel and cocoa products. These decreases were partially offset by higher average selling prices of merchandised soybeans. Corn Processing sales increased 11% to $13.1 billion due principally to higher ethanol sales volumes, including merchandised volumes. Agricultural Services sales decreased 4% to $41.5 billion due principally to lower U.S. sales volumes caused in part by drought-related decreased crop availability and lower average selling prices of corn and soybeans. Cost of products sold also decreased 1% to $85.9 billion due principally to lower average commodity costs partially offset by an approximate $0.8 billion increase from foreign exchange translation. Included in 2013 cost of products sold is a credit of $225 million from the effect of decreasing agricultural commodity prices on LIFO inventory valuation reserves compared to a credit of $3 million in 2012. Manufacturing expenses increased $0.2 billion mostly due to higher employee and employee-related costs, higher utilities costs due principally to higher natural gas prices, and higher maintenance costs in part due to enhanced preventative maintenance practices. 27

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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS

OF OPERATIONS (Continued)

Selling, general, and administrative expenses increased $94 million to $1.8 billion. In 2013, selling, general, and administrative expenses include a $54 million charge to settle the FCPA matter and $21 million of costs related to strategic merger and acquisition projects. In 2012, selling, general, and administrative expenses include $68 million of pension settlement charges. Excluding these items, selling, general, and administrative expense increased $87 million principally due to higher bad debt expense, higher employee benefit-related expenses partly due to share-based compensation expenses, and other IT project-related expenses. Asset impairment, exit, and restructuring costs of $259 million was comprised of other-than-temporary impairment charges of $155 million on the Company's GrainCorp investment, asset impairment charges of $51 million related to the Company's Brazilian sugar milling business, and other impairment charges principally for certain property, plant, and equipment assets totaling $53 million. The 2012 charges of $243 million are comprised of the $146 million charge related to the impairment of the Company's equity method investment in Gruma and the Gruma-related joint ventures, charges of $71 million for severance and benefits related to the global workforce reduction, $14 million of charges for facility exit and other related costs primarily for the Walhalla, ND corn plant shutdown, and $12 million related to the other-than-temporary impairment charge for one of the Company's marketable security investments.



Interest expense decreased $32 million, or 7%, to $413 million primarily due to lower average outstanding long-term debt balances during 2013.

Equity in earnings of unconsolidated affiliates decreased $65 million, or 14%, to $411 million primarily due to an $89 million decrease in equity earnings from the Company's investment in CIP due to mark-to-market effects of underlying investments, partially offset by higher equity earnings from the Company's investment in Wilmar. In addition, the Company sold its investment in Gruma and Gruma-related joint ventures in December 2012; and accordingly, the current period excludes equity earnings from these investments compared to $42 million of Gruma-related earnings in 2012. Other income of $53 million decreased $73 million. In 2013, the Company earned $49 million related to the sale of property, plant, and equipment assets and marketable securities. Additionally in 2013, the Company recognized income for the minority interest holder's portion of losses incurred at its less than wholly owned subsidiary, Toepfer. Partially offsetting these gains were losses of $40 million incurred on Australian dollar currency hedges related to the GrainCorp transaction. In 2012, the Company recognized a $62 million gain related to the settlement of total return swap instruments related to its investment in GrainCorp. Additionally in 2012, the Company earned $91 million related to the sale of property, plant, and equipment assets and marketable securities. 28 --------------------------------------------------------------------------------

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)



Operating profit by segment and earnings before income taxes for the year ended December 31, 2013 and 2012 are as follows:

(In millions) 2013 2012 Change (Unaudited) Oilseeds Processing Crushing and Origination $ 835$ 931$ (96 ) Refining, Packaging, Biodiesel, and Other 454 241 213 Cocoa and Other (33 ) 276 (309 ) Asia 217 172 45 Total Oilseeds Processing 1,473 1,620 (147 ) Corn Processing Sweeteners and Starches 492 421 71 Bioproducts 322 (143 ) 465 Total Corn Processing 814 278 536 Agricultural Services Merchandising and Handling 33 477 (444 ) Milling and Other 270 191 79 Transportation 77 111 (34 ) Total Agricultural Services 380 779 (399 ) Other Financial 41 91 (50 ) Total Other 41 91 (50 ) Total Segment Operating Profit 2,708 2,768 (60 ) Corporate (684 ) (787 ) 103 Earnings Before Income Taxes $ 2,024$ 1,981$ 43



Corporate results are as follows:

(In millions) 2013 2012 Change (Unaudited)



LIFO credit (charge) $ 225 $ 3 $ 222 Interest expense - net (408 ) (445 ) 37 Unallocated corporate costs (331 ) (274 ) (57 ) Other charges

(147 ) (144 ) (3 ) Minority interest and other (23 ) 73 (96 ) Total Corporate $ (684 )$ (787 )$ 103 29

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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS

OF OPERATIONS (Continued)

Oilseeds Processing operating profit decreased $147 million to $1.5 billion. Crushing and Origination operating profit decreased $96 million to $835 million as weaker soft seed results were partially offset by improved soybean crushing results. Soft seed crushing results in North America declined due primarily to low seed availability which affected seed basis and production capacity utilization. Soybean crushing results improved in each region even though the Company processed lower volumes due primarily to the tight global crop supplies prior to the 2013 harvests. Improved European rape seed results were due to generally better crop availability in 2013. Refining, Packaging, Biodiesel, and Other results improved $213 million to $454 million as U.S. and European biodiesel margins improved significantly. In 2013, U.S. biodiesel volumes and margins were enhanced as blenders were incentivized to take advantage of tax credits prior to their expiration at the end of December. Cocoa and Other results decreased $309 million to a loss of $33 million due principally to weaker cocoa press margins and an unfavorable variance in net unrealized mark-to-market gains and losses of approximately $86 million. These mark to market gains and losses represent fair value changes related to certain cocoa forward purchase and sales commitments accounted for as derivatives. Cocoa press margins were negatively impacted by excess industry processing capacity and strong competition. Peanut results declined primarily due to lower margins. Asia results improved $45 million to $217 million, principally reflecting the Company's share of the results from its equity investee, Wilmar. Corn Processing operating profit increased $536 million to $814 million primarily due to significant improvement in ethanol margins, lower net corn costs, and strong sweetener demand. The Company recognized net losses from timing effects related to corn hedge ineffectiveness of $15 million in 2013 compared to net losses of $9 million in 2012. In addition, in 2013 the Company recognized $51 million in asset impairment charges related to its Brazilian sugar milling business and $20 million of asset impairment charges related to other long-lived assets. In the prior year, Bioproducts results included a $10 million charge principally due to impairment costs upon closure of the 30 million gallon per year ethanol dry mill in Walhalla, N.D. Excluding timing effects from corn hedges and asset impairment charges, Sweeteners and Starches operating profit increased $90 million. Solid demand for corn sweeteners translated to tight corn sweetener industry capacity. Excluding timing effects from corn hedges, impairment charges on the Brazilian sugar milling business, and other asset impairments, Bioproducts profit in the current year improved $513 million. Overall industry ethanol margins were profitable but volatile in 2013 compared to negative margins in 2012 due principally to supply and demand imbalances. Agricultural Services operating profit decreased $399 million to $380 million. In 2013, Agricultural Services incurred a $155 million asset impairment charge related to the other than temporary impairment of its GrainCorp investment and recognized an insurance gain of approximately $30 million, which is offset by the insurance expense recognized in Other. In 2012, Agricultural Services recorded a $62 million gain related to the total return swaps used to build an investment interest in GrainCorp, $42 million of equity earnings in Gruma, and incurred an asset impairment charge of $146 million related to the disposal of Gruma. Excluding these items Merchandising and Handling operating profit decreased by $257 million due principally to lower 2012 drought-related U.S. origination and export volumes, slower farmer selling of the recent 2013 harvested corn, fewer wheat merchandising opportunities, and lower execution margins in international merchandising. Excluding the 2012 Gruma asset impairment charge and equity earnings, Milling and Other operating profit declined $25 million to $270 million on solid but weaker margins. Earnings from transportation operations declined $34 million to $77 million as lower U.S. exports reduced barge freight utilization. Other financial operating profit decreased $50 million to $41 million mainly due to an approximate $30 million expense which offsets the insurance-related gain reported in the Agricultural Services segment and the absence of prior year gains from the sale of member exchange interests by the Company's futures commission brokerage business. Corporate was a loss of $684 million in 2013 compared to a loss of $787 million in 2012. The effects of changing commodity prices on LIFO inventory valuations resulted in a credit of $225 million in 2013 compared to a credit of $3 million in 2012. Equity earnings from the Company's investment in CIP decreased by $89 million in 2013 primarily due to mark-to-market effects of underlying investments. In 2013, corporate costs included a $54 million charge related to the settlement of the FCPA matter, $40 million of foreign currency losses related to the Company's planned acquisition of GrainCorp, $21 million of costs related to strategic merger and acquisition projects, and $32 million of costs primarily related to asset write-downs and reallocations of costs from the operating segments to corporate. In 2012, corporate costs included $71 million of exit costs related primarily to the workforce reduction and $68 million related to pension settlements. Excluding LIFO and these other items, corporate costs increased $22 million mostly due to higher unallocated corporate costs. Unallocated corporate costs increased due primarily to higher employee benefit-related expenses, in part due to a higher Company stock price, and higher costs for IT projects. Interest-net declined $37 million primarily due to lower outstanding debt balances. In 2013, income attributable to minority shareholders of mandatorily redeemable interests of $35 million was included in minority interest and other. 30

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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)



Six Months Ended December 31, 2012 Compared to Six Months Ended December 31, 2011 (Unaudited)

Net earnings attributable to controlling interests increased $152 million to $692 million. Asset impairment, exit, and restructuring costs in the 2012 period decreased $115 million after tax ($206 million pretax). The 2012 period results also include gains of $49 million after tax related to the Company's interest in GrainCorp and a gain of $24 million after tax related to the sale of certain of the Company's exchange membership interests, partially offset by charges of $44 million after tax related to pension settlements.



Income taxes increased $66 million due to higher earnings before income taxes. The effective income tax rate of 30.4% in 2012 compares to the rate of 30.3% in the prior period.

Segment operating profit in the 2012 period increased $243 million due to a $318 million improvement in operating results in the Oilseeds Processing segment, the absence of the prior period asset impairment charges of $339 million in the Corn Processing segment related primarily to the write-down of assets at its Clinton, IA bioplastics facility, and higher results of the Company's Financial operations of $76 million, in part due to a gain on sale of certain of the Company's exchange membership interests and favorable captive insurance loss reserve adjustments. Partially offsetting these improvements were lower results in the 2012 period in Corn Processing's bioproducts business of $408 million, excluding the Clinton, IA asset impairment charge discussed above, and the 2012 period loss of $146 million in the Agricultural Services segment related to the disposal of Gruma. Corporate expenses were $27 million higher in the 2012 period, due primarily to $68 million of pension settlement charges, partially offset by higher returns on the Company's equity method investment in CIP.



Analysis of Statements of Earnings

Revenues by segment for the six months ended December 31, 2012 and 2011 are as follows: Six Months Ended December 31, (In millions) 2012 2011 Change (Unaudited) Oilseeds Processing Crushing and Origination $ 10,784$ 8,927$ 1,857 Refining, Packaging, Biodiesel and Other 5,256 6,218 (962 ) Cocoa and Other 1,746 1,952 (206 ) Asia 266 240 26 Total Oilseeds Processing 18,052 17,337 715 Corn Processing Sweeteners and Starches 2,405 2,316 89 Bioproducts 3,762 4,135 (373 ) Total Corn Processing 6,167 6,451 (284 ) Agricultural Services Merchandising and Handling 20,159 19,061 1,098 Transportation 128 149 (21 ) Milling and Other 2,154 2,154 - Total Agricultural Services 22,441 21,364 1,077 Other Financial 69 56 13 Total Other 69 56 13 Total $ 46,729$ 45,208$ 1,521 31

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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) As an agricultural commodity-based business, the Company is subject to a variety of market factors which affect the Company's operating results. From a demand perspective, protein meal demand continued to increase, particularly for U.S. domestic and export markets. Demand for soybeans was solid. Weaker U.S. gasoline demand and unfavorable global ethanol trade flows resulted in continued excess industry ethanol capacity. From a supply perspective, following below-average harvests in the 2011/2012 crop year in North and South America, corn and soybean supplies were tight and commodity market prices were generally higher. In South America, farmers responded to high crop prices with record soybean plantings for the 2012/2013 crop year. The lower corn harvest in the U.S. due to the drought led to higher corn prices and higher demand for corn from South America. Revenues increased $1.5 billion to $46.7 billion. Higher average selling prices increased revenues by $4.9 billion, primarily due to increases in underlying commodity prices, while lower sales volumes, inclusive of the effects of acquisitions, reduced revenues by $2.4 billion. Changes in foreign currency exchange rates decreased revenues by $1.0 billion. Oilseeds Processing sales increased 4% to $18.1 billion due principally to higher average selling prices of protein meal and soybeans and higher sales volumes of corn, primarily in South America, and protein meal. Corn Processing sales decreased 4% to $6.2 billion due principally to lower average selling prices of ethanol. Agricultural Services sales increased 5% to $22.4 billion, due to higher average selling prices of soybeans and wheat partially offset by lower sales volumes of corn. Cost of products sold increased $1.6 billion to $44.9 billion due principally to higher costs of agricultural commodities partially offset by lower manufacturing costs and $1.1 billion related to the effects of changing foreign currency rates. Manufacturing expenses decreased $102 million or 3%, due principally to lower energy and repairs and maintenance costs, and savings in employee and benefit-related costs.



Selling, general and administrative expenses increased $39 million to $869 million. Included in selling, general, and administrative expenses are pension settlement charges of $68 million for the six months ended December 31, 2012. Excluding these pension settlement charges, selling, general, and administrative expenses declined $29 million or 3% due principally to lower employee and benefit-related costs.

Asset impairment charges in the 2012 period represent impairments of $146 million related to the Company's divestment of its equity method investments in Gruma and Gruma-related joint ventures. The prior year charges relate to the Company's Clinton, IA bioplastics facility. Property, plant, and equipment were written down to estimated fair value resulting in impairment charges of $320 million. In addition, charges of $32 million were recognized for exit activities and to impair other assets. Other income increased $97 million to $109 million due primarily to $62 million of gains related to the Company's interest in GrainCorp and $39 million of gains on the sale of certain of the Company's exchange membership interests. 32 --------------------------------------------------------------------------------

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)



Operating profit by segment and earnings before income taxes for the six months ended December 31, 2012 and 2011 are as follows:

Six Months Ended December 31, (In millions) 2012 2011 Change (Unaudited) Oilseeds Processing Crushing and Origination $ 517$ 227$ 290 Refining, Packaging, Biodiesel, and Other 78 132 (54 ) Cocoa and Other 65 (28 ) 93 Asia 87 98 (11 ) Total Oilseeds Processing 747 429 318 Corn Processing Sweeteners and Starches 191 105 86 Bioproducts (120 ) (51 ) (69 ) Total Corn Processing 71 54 17 Agricultural Services Merchandising and Handling 299 315 (16 ) Transportation 67 81 (14 ) Milling and Other 29 167 (138 ) Total Agricultural Services 395 563 (168 ) Other Financial 93 17 76 Total Other 93 17 76 Total Segment Operating Profit 1,306 1,063 243 Corporate (309 ) (282 ) (27 ) Earnings Before Income Taxes $ 997$ 781$ 216



Corporate results are as follows:

Six Months Ended December 31, (In millions) 2012 2011 Change (Unaudited) LIFO credit (charge) $ 60$ 67$ (7 ) Interest expense - net (219 ) (197 ) (22 ) Unallocated corporate costs (140 ) (155 ) 15 Charges from debt buyback and exchange (5 ) (4 ) (1 ) Pension settlements (68 ) - (68 ) Other 63 7 56 Total Corporate $ (309 )$ (282 )$ (27 ) 33

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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS

OF OPERATIONS (Continued)

Oilseeds Processing operating profit increased $318 million to $747 million. Crushing and Origination operating profit increased $290 million to $517 million as results in North America, Europe and South America improved. The Company's U.S. soybean operations delivered strong results, with high seasonal utilization amid good U.S. and export meal demand. In Europe, rapeseed and soybean crushing earnings improved significantly. In South America, results benefited from improved soybean crushing margins. Refining, Packaging, Biodiesel, and Other results decreased $54 million to $78 million primarily due to weaker European and U.S. biodiesel results. Cocoa and Other results increased $93 million as weaker cocoa press margins were offset by the absence of the prior period's net unrealized mark-to-market losses related to certain forward purchase and sales commitments accounted for as derivatives. Asia results decreased $11 million to $87 million principally reflecting the Company's share of its results from equity investee, Wilmar. Corn Processing operating profit increased $17 million to $71 million. The prior period results include $339 million in asset impairment charges and exit costs related to the Company's Clinton, IA bioplastics facility. Excluding the bioplastics charges and exit costs, Corn Processing operating profit declined $322 million. Sweeteners and Starches operating profit increased $86 million to $191 million, as tight sweetener industry capacity supported higher average selling prices. The prior period Sweeteners and Starches results were negatively impacted by higher net corn costs related to the mark-to-market timing effects of economic hedges. Bioproducts profit decreased $69 million to a $120 million loss. Excluding the $339 million prior year asset impairment charges, Bioproducts profit decreased $408 million. Weak domestic gasoline demand and unfavorable global ethanol trade flows resulted in continued excess industry capacity, keeping ethanol margins negative. Agricultural Services operating profit, including the 2012 period $146 millionGruma asset impairment charge and $62 million gain on the Company's interest in GrainCorp, decreased $168 million to $395 million. Merchandising and Handling earnings decreased $16 million mostly due to weaker U.S. merchandising results impacted by the smaller U.S. harvest. Merchandising and Handling earnings in the 2012 period include the $62 million gain on the Company's interest in GrainCorp. Earnings from transportation operations decreased $14 million to $67 million due to increased barge operating expenses caused by low water on the Mississippi River partially offset by higher freight rates. Milling and Other operating profit decreased $138 million to $29 million due principally to a $146 million impairment charge on the disposal of the Company's equity method investments in Gruma and Gruma-related joint ventures. Milling results remained strong, and the Company's feed business saw improved margins amid stronger demand.



Other financial operating profit increased $76 million to $93 million mainly due to asset disposal gains for certain of the Company's exchange membership interests and improved results of the Company's captive insurance subsidiary.

Corporate expenses increased $27 million to $309 million the 2012 period. The Company incurred $68 million in pension settlement charges related to a one-time window for lump sum distributions in the U.S. and the conversion of a Dutch pension plan to a multi-employer plan. Excluding these pension charges, corporate expenses declined by $41 million. Corporate interest expense - net increased $22 million mostly due to the absence of interest income received in the prior period related to a contingent gain settlement. Unallocated corporate costs were lower by $15 million primarily due to lower employee and employee benefit-related costs. The increase in other income of $56 million is primarily due to improved equity earnings from corporate affiliate investments.



Year Ended June 30, 2012 Compared to Year Ended June 30, 2011

As an agricultural commodity-based business, the Company is subject to a variety of market factors which affect the Company's operating results. From a demand perspective, global protein meal consumption has continued to grow although at a slower rate. Excess industry crushing production capacity has pressured oilseeds margins, and the Company has adjusted production rates regionally to balance supply with current market demand. Biodiesel markets supported global demand for refined and crude vegetable oils. In the U.S., high biodiesel inventories associated with the December 31, 2011, expiration of blender's incentives dampened margins in the second half of the fiscal year. U.S. corn sweetener exports continue to support sales volumes and margins. Ethanol sales volumes were supported by favorable gasoline blending economics in the U.S. However, excess industry production of ethanol, together with recently reduced U.S. ethanol export demand, has negatively impacted ethanol margins. From a supply perspective, crop supplies in certain key growing regions at the beginning of fiscal 2012, including South America and the Black Sea region, were adequate, but a smaller-than-normal harvest in North America in the fall of 2011 resulted in low U.S. carryover stocks for corn and soybeans. Because of the smaller than expected South American harvest, global supplies of corn and soybeans were more dependent on the North American harvest. While plantings of corn increased in the U.S. during fiscal 2012, the drought conditions late in the fiscal year decreased expectations for the size of the harvest. These factors, combined with concerns about the European debt situation and ongoing geopolitical uncertainties, contributed to volatile commodity market price movements during fiscal 2012. 34 --------------------------------------------------------------------------------

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Net earnings attributable to controlling interests decreased $0.8 billion to $1.2 billion. Segment operating profit declined $1.6 billion to $2.5 billion amid more challenging conditions generally affecting all reportable segments. Segment operating profit in fiscal 2012 included $349 million of asset impairment charges and exit costs comprised of $335 million to exit the Company's Clinton, IA, bioplastics plant and $14 million to shut down its Walhalla, ND, ethanol dry mill. Earnings before income taxes included a credit of $10 million from the effect on LIFO inventory valuation reserves, including the liquidation of LIFO inventory layers, partially offset by increasing agricultural commodity prices, compared to charges of $368 million in the prior year. Fiscal 2012 unallocated corporate expenses included $71 million of charges related to the Company's global workforce reduction program. Income taxes decreased $0.5 billion due to lower earnings before income taxes and a lower effective income tax rate. The Company's effective income tax rate declined to 29.6% compared to 33.1% in the prior year primarily due to income tax benefits associated with foreign currency re-measurement of non-monetary assets partially offset by a geographic mix of earnings that shifted more to foreign jurisdictions.



Analysis of Statements of Earnings

Revenues by segment are as follows:

2012 2011 Change (In millions) Oilseeds Processing Crushing and Origination $ 18,794$ 16,518$ 2,276 Refining, Packaging, Biodiesel, and Other 11,628 9,476 2,152 Cocoa and Other 3,715 3,652 63 Asia 578 262 316 Total Oilseeds Processing 34,715 29,908 4,807 Corn Processing Sweeteners and Starches 4,793 3,766 1,027 Bioproducts 7,321 6,142 1,179 Total Corn Processing 12,114 9,908 2,206 Agricultural Services Merchandising and Handling 37,631 36,852 779 Transportation 269 222 47 Milling and Other 4,182 3,676 506 Total Agricultural Services 42,082 40,750 1,332 Other Financial 127 110 17 Total Other 127 110 17 Total $ 89,038$ 80,676$ 8,362 Revenues increased $7.0 billion due to higher average selling prices, primarily related to higher underlying commodity costs, and $2.1 billion due to increased sales volumes, including sales volumes from acquisitions, partially offset by changes in foreign currency exchange rates of $0.7 billion. Oilseeds Processing sales increased 16% to $34.7 billion due principally to higher average selling prices of vegetable oils, merchandised commodities, protein meal, and biodiesel and increased sales volumes of biodiesel, protein meal, and peanuts, in part due to the acquisition of Golden Peanut in December 2010. Corn Processing sales increased 22% to $12.1 billion due principally to higher average selling prices of ethanol and sweeteners as well as higher sales volumes of sugar and ethanol. Agricultural Services sales increased 3% to $42.1 billion, due to higher average selling prices of corn and wheat flour partially offset by lower sales volumes, in part due to lower export volumes from the U.S. 35 --------------------------------------------------------------------------------



Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS

OF OPERATIONS (Continued)

Cost of products sold increased 12% to $85.4 billion due principally to higher costs of agricultural commodities and, to a lesser extent, increased sales volumes. Changes in foreign currency exchange rates reduced fiscal 2012 cost of products sold by $0.7 billion. Manufacturing expenses increased $0.2 billion due to higher costs for maintenance, employee and benefit-related expenses, energy, and chemicals. These higher costs were primarily due to higher production volumes, acquisitions, and higher unit costs for fuels and certain chemicals. Partially offsetting these higher costs was lower depreciation expense, in part due to the Company's change in estimated service lives for machinery and equipment during the second quarter of fiscal 2011. Selling, general, and administrative expenses remained steady at $1.6 billion. Loss provisions mainly due to an unfavorable arbitration award in the Company's Agricultural Services operating segment were partially offset by lower overhead expenses. Asset impairment, exit, and restructuring costs of $449 million were comprised of $349 million in the Corn Processing segment related to the Company's exit from its Clinton, IA, bioplastics business and ethanol dry mill in Walhalla, ND, $71 million in Corporate for the global workforce reduction, and $29 million in Corporate for investment write-downs and other facility exit-related costs. Interest expense decreased 9% to $441 million primarily due to lower long-term debt balances, higher interest expense capitalized on construction projects in progress, and lower interest expense related to uncertain income tax positions. Equity in earnings of unconsolidated affiliates decreased 13% to $472 million principally due to decreased equity earnings from the Company's equity investee, Gruma, which included a $78 million gain in the prior year related to Gruma's disposal of certain assets.



Interest income declined 18% to $112 million primarily related to the sale and deconsolidation of the Hickory Point Bank and Trust Company, fsb, effective September 30, 2011.

Other income - net declined $101 million to $17 million due primarily to the absence of income recognized in the prior year period of $71 million for the Golden Peanut Gain and $30 million for gains on interest rate swaps. 36 --------------------------------------------------------------------------------

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)



Operating profit by segment is as follows:

2012 2011 Change (In millions) Oilseeds Processing Crushing and Origination $ 641$ 925$ (284 ) Refining, Packaging, Biodiesel, and Other 295 342 (47 ) Cocoa and Other 183 240 (57 ) Asia 183 183 - Total Oilseeds Processing 1,302 1,690 (388 ) Corn Processing Sweeteners and Starches 335 330 5 Bioproducts (74 ) 749 (823 ) Total Corn Processing 261 1,079 (818 ) Agricultural Services Merchandising and Handling 493 807 (314 ) Transportation 125 117 8 Milling and Other 329 399 (70 ) Total Agricultural Services 947 1,323 (376 ) Other Financial 15 39 (24 ) Total Other 15 39 (24 ) Total Segment Operating Profit 2,525 4,131 (1,606 ) Corporate (see below) (760 ) (1,116 ) 356 Earnings Before Income Taxes $ 1,765$ 3,015$ (1,250 )



Corporate results are as follows:

2012 2011 Change (In millions) LIFO credit (charge) $ 10$ (368 )$ 378 Interest expense - net (423 ) (445 ) 22 Unallocated corporate costs (360 ) (326 ) (34 )



Charges on early extinguishment of debt (4 ) (8 ) 4 Gains (losses) on interest rate swaps -

30 (30 ) Other 17 1 16 Total Corporate $ (760 )$ (1,116 )$ 356 37

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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS

OF OPERATIONS (Continued)

Oilseeds Processing operating profit decreased $0.4 billion to $1.3 billion. Crushing and Origination operating profit decreased $284 million to $641 million primarily due to weaker results in European softseeds, lower results in North American softseeds, and lower North American positioning results. Partially offsetting these lower results, were higher grain origination results in South America driven by higher volumes and favorable positioning. Poor European softseed results were driven by a small prior year rapeseed crop, positioning losses, and weaker demand for protein meal and oils. North American softseed results declined primarily as a result of lower margins generated from a tight cottonseed supply. Refining, Packaging, Biodiesel, and Other results declined $47 million to $295 million due primarily to declines in biodiesel margins in South America and Europe and lower margins for specialty fats and oils in Europe. These declines were partially offset by improved North American protein specialties and natural health and nutrition results due to higher margins and volumes. Cocoa and Other results declined $57 million to $183 million. Fiscal 2012 results in Cocoa and Other were reduced by $100 million for net unrealized mark-to-market losses related to certain forward purchase and sales commitments accounted for as derivatives. The prior year included $9 million of net unrealized mark-to-market losses. Excluding these timing effects, cocoa results improved in fiscal 2012 driven by improved press margins caused by strong cocoa powder demand. The prior year included the $71 million Golden Peanut Gain which was partially offset in fiscal 2012 by higher earnings in the Company's peanut business in part due to the first full year of consolidated results for Golden Peanut being reported by the Company in fiscal 2012. Asia results remained steady at $183 million, principally reflecting the Company's share of its results from equity investee, Wilmar. Corn Processing operating results decreased $818 million to $261 million due principally to poor ethanol margins and $349 million in asset impairment charges and exit costs. Excluding the asset impairment and exit costs related to the Company's bioplastics business and Walhalla, ND, ethanol dry grind facility, Corn Processing operating profit of $610 million in fiscal 2012 represented a decline of $469 million compared to the prior year. Processed volumes were up 5 percent while net corn costs increased compared to the prior year. Sweeteners and Starches operating profit increased $5 million to $335 million, as higher average selling prices more than offset higher net corn costs. Bioproducts profit decreased $823 million to a loss of $74 million, including the $349 million asset impairment and exit charges. Lower ethanol margins were caused by excess supply as previously offline production restarted while industry demand declined, in part due to slowing export demand. Prior year bioproducts results were enhanced by favorable corn ownership positions, which lowered net corn costs in that period. Bioproducts results in the prior year were negatively impacted by startup costs of $94 million related to the Company's new dry-grind ethanol, bioplastics, and glycol plants. Agricultural Services operating profits decreased $376 million to $947 million. Merchandising and Handling earnings decreased primarily due to lower results from U.S. operations. Lower sales volumes were principally the result of the relatively higher cost of U.S. grains and oilseeds in the global market due to lower stocks caused by a smaller U.S. harvest in 2011. This relatively weaker position led to reduced U.S. grain exports. In the prior year, Merchandising and Handling results were positively impacted by higher quantities of U.S. grain exports by the Company. In addition, fiscal 2012 included $40 million of increased loss provisions mainly due to an unfavorable arbitration award. Earnings from Transportation were steady. Prior year's operating results in Milling and Other operations included a $78 million gain related to Gruma's disposal of certain assets. Other financial operating profit decreased $24 million to $15 million mainly due to higher loss provisions at the Company's captive insurance subsidiary related to property and crop risk reserves. Corporate expenses declined $356 million to $760 million in fiscal 2012. The effects of a liquidation of LIFO inventory layers partially offset by increasing commodity prices on LIFO inventory valuations resulted in a credit of $10 million in fiscal 2012 compared to a charge of $368 million in the prior year primarily due to higher prices. Corporate interest expense decreased $22 million primarily due to lower interest expense on lower long-term debt balances. Unallocated corporate costs include $71 million of costs related to the global workforce reduction program. Excluding these costs, unallocated corporate costs declined $37 million due primarily to lower administrative costs. Corporate other income increased due to higher investment income partially offset by $29 million for investment writedown and facility exit-related costs. Also, in the prior year the Company recognized $30 million of gains on interest rate swaps. 38

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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)



Liquidity and Capital Resources

A Company objective is to have sufficient liquidity, balance sheet strength, and financial flexibility to fund the operating and capital requirements of a capital intensive agricultural commodity-based business. The Company's strategy involves expanding the volume and diversity of crops that it merchandises and processes, expanding the global reach of its core model, and expanding its value-added product portfolio. The Company depends on access to credit markets, which can be impacted by its credit rating and factors outside of the Company's control, to fund its working capital needs and capital expenditures. The primary source of funds to finance the Company's operations, capital expenditures, and advancement of its growth strategy is cash generated by operations and lines of credit, including a commercial paper borrowing facility. In addition, the Company believes it has access to funds from public and private equity and debt capital markets in both U.S. and international markets. Cash provided by operating activities was $5.2 billion for 2013 compared to $2.3 billion in 2012. Working capital changes increased cash by $2.9 billion in the current year and decreased cash by $85 million in the prior year. Inventories declined approximately $2.4 billion at December 31, 2013 compared to December 31, 2012, as lower prices reduced inventories by approximately $2.0 billion and lower quantities reduced inventories by $0.4 billion. Cash used by investing activities was $0.6 billion this year compared to $1.2 billion last year. Capital expenditures and net assets of businesses acquired were $1.0 billion this year compared to $1.3 billion last year. Cash used in financing activities was $3.2 billion this year compared to $0.3 billion last year. In the current year, net borrowings, principally commercial paper borrowings, decreased mostly due to decreased working capital requirements. At December 31, 2013, the Company had $3.6 billion of cash, cash equivalents, and short-term marketable securities and a current ratio, defined as current assets divided by current liabilities, of 1.8 to 1. Included in working capital is $7.5 billion of readily marketable commodity inventories. At December 31, 2013, the Company's capital resources included shareholders' equity of $20.2 billion and lines of credit totaling $6.9 billion, of which $6.6 billion was unused. The Company's ratio of long-term debt to total capital (the sum of long-term debt and shareholders' equity) was 21% at December 31, 2013 and 25% at December 31, 2012. This ratio is a measure of the Company's long-term indebtedness and is an indicator of financial flexibility. The Company's ratio of net debt (the sum of short-term debt, current maturities of long-term debt, and long-term debt less the sum of cash and cash equivalents and short-term marketable securities) to capital (the sum of net debt and shareholders' equity) was 14% at December 31, 2013 and 27% at December 31, 2012. Of the Company's total lines of credit, $4.0 billion support a commercial paper borrowing facility, against which there was no commercial paper outstanding at December 31, 2013. The Company reduced its commercial paper borrowing facility from $6.0 billion at December 31, 2012 to $4.0 billion at December 31, 2013 due to the Company's improved liquidity position and lower forecasted future borrowing needs. The Company has focused its efforts on achieving improvements in generating or conserving cash in its operations. During the years ended December 31, 2013 and 2012, the Company freed up cash by monetizing non-strategic equity investments and assets, using alternative forms of financing for margin requirements of futures transactions, maximizing cash flows from its joint ventures, and reducing certain agricultural commodity inventories. As of December 31, 2013, the Company had $0.4 billion of cash held by foreign subsidiaries whose undistributed earnings are considered permanently reinvested. Due to the Company's historical ability to generate sufficient cash flows from its U.S. operations and unused and available U.S. credit capacity of $4.0 billion, the Company has asserted that these funds are permanently reinvested outside the U.S. Since March 2012, the Company has an accounts receivable securitization program ( the "Program") with certain commercial paper conduit purchasers and committed purchasers (collectively, the "Purchasers"). The Program provides the Company with up to $1.1 billion in funding against accounts receivable transferred into the Program and expands the Company's access to liquidity through efficient use of its balance sheet assets. Under the Program, certain U.S.-originated trade accounts receivable are sold to a wholly-owned bankruptcy-remote entity, ADM Receivables, LLC ("ADM Receivables"). ADM Receivables in turn transfers such purchased accounts receivable in their entirety to the Purchasers pursuant to a receivables purchase agreement. In exchange for the transfer of the accounts receivable, ADM Receivables receives a cash payment of up to $1.1 billion and an additional amount upon the collection of the accounts receivable (deferred consideration). ADM Receivables uses the cash proceeds from the transfer of receivables to the Purchasers and other consideration to finance the purchase of receivables from the Company and the ADM subsidiaries originating the receivables. The Company acts as master servicer, responsible for servicing and collecting the accounts receivable under the Program. The Program terminates on June 28, 2014, unless extended (see Note 20 in Item 8 for more information and disclosures on the Program). 39

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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) At December 31, 2013, the Company had outstanding $1.15 billion principal amount of convertible senior notes. As of December 31, 2013, none of the conditions permitting conversion of these notes had been satisfied. The Company has purchased call options and warrants intended to reduce the potential shareholder dilution upon future conversion of the notes. On February 18, 2014, the convertible senior notes were repaid with available funds. On November 5, 2009, the Company's Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to 100,000,000 shares of the Company's common stock during the period commencing January 1, 2010 and ending December 31, 2014. The Company has acquired approximately 34.4 million shares under this program, resulting in remaining approval to acquire 65.6 million shares. In December 2013, the Company announced it expected to acquire 18 million of its outstanding shares by the end of 2014 under this program. The Company expects capital expenditures of $1.4 billion during 2014. In 2014, dividends and the 18 million share buy-back, assuming market prices for the Company's common stock comparable to market prices at the end of January 2014, is expected to result in an additional total cash outlay of approximately $1.4 billion. The Company's credit facilities and certain debentures require the Company to comply with specified financial and non-financial covenants including maintenance of minimum tangible net worth as well as limitations related to incurring liens, secured debt, and certain other financing arrangements. The Company is in compliance with these covenants as of December 31, 2013.



The three major credit rating agencies have put the Company's credit rating on stable outlook.

Contractual Obligations In the normal course of business, the Company enters into contracts and commitments which obligate the Company to make payments in the future. The following table sets forth the Company's significant future obligations by time period. Purchases include commodity-based contracts entered into in the normal course of business, which are further described in Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," energy-related purchase contracts entered into in the normal course of business, and other purchase obligations related to the Company's normal business activities. The following table does not include unrecognized income tax benefits of $66 million as of December 31, 2013 as the Company is unable to reasonably estimate the timing of settlement. Where applicable, information included in the Company's consolidated financial statements and notes is cross-referenced in this table. Payments Due by Period Item 8 Contractual Note Less than 1 - 3 3 - 5 More than Obligations Reference Total 1 Year Years Years 5 Years (In millions) Purchases Inventories $ 15,519$ 14,621$ 827$ 67 $ 4 Energy 855 355 216 86 198 Other 191 111 66 10 4 Total purchases 16,565 15,087 1,109 163 206 Short-term debt 358 358 Long-term debt Note 10 6,512 1,165 34 1,014 4,299 Estimated interest payments 6,005 330 616 556 4,503 Operating leases Note 15 1,050 243 366 214 227 Estimated pension and other postretirement plan contributions (1) Note 16 161 52 22 23 64 Total $ 30,651$ 17,235$ 2,147$ 1,970$ 9,299 40

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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) (1) Includes pension contributions of $41 million for fiscal 2014. The Company is unable to estimate the amount of pension contributions beyond fiscal year 2014. For more information concerning the Company's pension and other postretirement plans, see Note 16 in Item 8. At December 31, 2013, the Company estimates it will spend approximately $1.5 billion through fiscal year 2018 to complete currently approved capital projects which are not included in the table above.



The Company also has outstanding letters of credit and surety bonds of $795 million at December 31, 2013.

The Company has entered into agreements, primarily debt guarantee agreements related to equity-method investees, which could obligate the Company to make future payments. The Company's liability under these agreements arises only if the primary entity fails to perform its contractual obligation. The Company has collateral for a portion of these contingent obligations. At December 31, 2013, these contingent obligations totaled approximately $37 million.



Off Balance Sheet Arrangements

Accounts Receivable Securitization Program

Since March 2012, the Company has an accounts receivable securitization program (the "Program") with certain commercial paper conduit purchasers and committed purchasers (collectively, the "Purchasers"). Under the Program, certain U.S.-originated trade accounts receivable are sold to a wholly-owned bankruptcy-remote entity, ADM Receivables, LLC ("ADM Receivables"). ADM Receivables in turn transfers such purchased accounts receivable in their entirety to the Purchasers pursuant to a receivables purchase agreement. In exchange for the transfer of the accounts receivable, ADM Receivables receives a cash payment of up to $1.1 billion and an additional amount upon the collection of the accounts receivable (deferred consideration). ADM Receivables uses the cash proceeds from the transfer of receivables to the Purchasers and other consideration to finance the purchase of receivables from the Company and the ADM subsidiaries originating the receivables. The Company accounts for these transfers as sales. The Company has no retained interests in the transferred receivables, other than collection and administrative responsibilities and its right to the deferred consideration. At December 31, 2013 and 2012, the Company did not record a servicing asset or liability related to its retained responsibility, based on its assessment of the servicing fee, market values for similar transactions and its cost of servicing the receivables sold. The Program terminates on June 28, 2014, unless extended. As of December 31, 2013, the fair value of trade receivables transferred to the Purchasers under the Program and derecognized from the Company's consolidated balance sheet was $1.9 billion. In exchange for the transfer, the Company received cash of $1.1 billion and recorded a $0.8 billion receivable for deferred consideration included in other current assets. Cash collections from customers on receivables sold were $39.8 billion, $30.8 billion, $21.9 billion, and $8.9 billion for the years ended December 31, 2013 and 2012, the six months ended December 31, 2012, and the year ended June 30, 2012, respectively. All of the cash collections were applied to the deferred consideration. Deferred consideration is paid to the Company in cash on behalf of the Purchasers as receivables are collected; however, as this is a revolving facility, cash collected from the Company's customers is reinvested by the Purchasers daily in new receivable purchases under the Program. The Company's risk of loss following the transfer of accounts receivable under the Program is limited to the deferred consideration outstanding. The Company carries the deferred consideration at fair value determined by calculating the expected amount of cash to be received and is principally based on observable inputs (a Level 2 measurement under applicable accounting standards) consisting mainly of the face amount of the receivables adjusted for anticipated credit losses and discounted at the appropriate market rate. Payment of deferred consideration is not subject to significant risks other than delinquencies and credit losses on accounts receivable transferred under the program which have historically been insignificant. Transfers of receivables under the Program during the years ended December 31, 2013 and 2012, the six months ended December 31, 2012, and the year ended June 30, 2012, resulted in an expense for the loss on sale of $4 million, $8 million, $4 million, and $4 million, respectively, which is classified as selling, general, and administrative expenses in the consolidated statements of earnings. The Company reflects all cash flows related to the Program as operating activities in its consolidated statement of cash flows because the cash received from the Purchasers upon both the sale and collection of the receivables is not subject to significant interest rate risk given the short-term nature of the Company's trade receivables. 41

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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)



Synthetic Leasing Program

The Company is a party to lease agreements under synthetic leasing programs for certain of its U.S. barge and trucking assets for periods ranging from 5 to 7 years. As of December 31, 2013, outstanding lease balances including the value of the underlying assets of $145 million, were off-balance sheet. These agreements provide the Company with the right to use these assets for specified periods in exchange for an obligation to make rental payments. The agreements are accounted for as operating leases, such that the rent expense is recorded in the consolidated statement of earnings. The future lease payments pertaining to these lease agreements are included in the contractual obligations table in Item 7. These leasing programs are utilized primarily to diversify funding sources and to retain flexibility. The Company recorded $3 million of rent expense pertaining to synthetic lease payments for the year ended December 31, 2013. The rent expense for the year ended December 31, 2012 was immaterial.



Critical Accounting Policies

The process of preparing financial statements requires management to make estimates and judgments that affect the carrying values of the Company's assets and liabilities as well as the recognition of revenues and expenses. These estimates and judgments are based on the Company's historical experience and management's knowledge and understanding of current facts and circumstances. Certain of the Company's accounting policies are considered critical, as these policies are important to the depiction of the Company's financial statements and require significant or complex judgment by management. Management has discussed with the Company's Audit Committee the development, selection, disclosure, and application of these critical accounting policies. Following are the accounting policies management considers critical to the Company's financial statements.



Fair Value Measurements - Inventories and Commodity Derivatives

Certain of the Company's inventory and commodity derivative assets and liabilities as of December 31, 2013 are valued at estimated fair values, including $6.1 billion of merchandisable agricultural commodity inventories, $0.9 billion of derivative assets, $0.6 billion of derivative liabilities, and $0.7 billion of inventory-related payables. Commodity derivative assets and liabilities include forward fixed-price purchase and sale contracts for agricultural commodities. Merchandisable agricultural commodities are freely traded, have quoted market prices, and may be sold without significant additional processing. Management estimates fair value for its commodity-related assets and liabilities based on exchange-quoted prices, adjusted for differences in local markets. The Company's inventory and derivative commodity fair value measurements are mainly based on observable market quotations without significant adjustments and are therefore reported as Level 2 within the fair value hierarchy. Level 3 fair value measurements of approximately $2.1 billion of assets and $0.3 billion of liabilities represent fair value estimates where unobservable price components represent 10% or more of the total fair value price. For more information concerning amounts reported as Level 3, see Note 3 in Item 8. Changes in the market values of these inventories and commodity contracts are recognized in the statement of earnings as a component of cost of products sold. If management used different methods or factors to estimate market value, amounts reported as inventories and cost of products sold could differ materially. Additionally, if market conditions change subsequent to year-end, amounts reported in future periods as inventories and cost of products sold could differ materially.



Derivatives - Designated Hedging Activities

The Company, from time to time, uses derivative contracts designated as cash flow hedges to fix the purchase price of anticipated volumes of commodities to be purchased and processed in a future month, to fix the purchase price of the Company's anticipated natural gas requirements for certain production facilities, and to fix the sales price of anticipated volumes of ethanol. These designated hedging programs principally relate to the Company's Corn Processing operating segment. Assuming normal market conditions, the change in the market value of such derivative contracts has historically been, and is expected to continue to be, highly effective at offsetting changes in price movements of the hedged item. Gains and losses arising from open and closed hedging transactions are deferred in other comprehensive income, net of applicable income taxes, and recognized as a component of cost of products sold and revenues in the statement of earnings when the hedged item is recognized. If it is determined that the derivative instruments used are no longer effective at offsetting changes in the price of the hedged item, then the changes in the market value of these exchange-traded futures and exchange-traded and over-the-counter option contracts would be recorded immediately in the statement of earnings as a component of cost of products sold. See Note 4 in Item 8 for additional information. 42

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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)



Investments in Affiliates

The Company applies the equity method of accounting for investments over which the Company has the ability to exercise significant influence, including its 16.4% investment in Wilmar. These investments in affiliates are carried at cost plus equity in undistributed earnings and are adjusted, where appropriate, for amortizable basis differences between the investment balance and the underlying net assets of the investee. Generally, the minimum ownership threshold for asserting significant influence is 20% ownership of the investee. However, the Company considers all relevant factors in determining its ability to assert significant influence including but not limited to, ownership percentage, board membership, customer and vendor relationships, and other arrangements. If management used a different accounting method for these investments, then the amount of earnings from affiliates the Company recognizes may differ.



Income Taxes

The Company accounts for its income tax positions in accordance with the applicable accounting standards. These standards prescribe a minimum threshold a tax position is required to meet before being recognized in the consolidated financial statements. The Company recognizes in its consolidated financial statements tax positions determined more likely than not to be sustained upon examination, based on the technical merits of the position. The Company frequently faces challenges from U.S. and foreign tax authorities regarding the amount of taxes due. These challenges include questions regarding the timing and amount of deductions and the allocation of income among various tax jurisdictions. In evaluating the exposure associated with various tax filing positions, the Company records reserves for estimates of potential additional tax owed by the Company. For example, the Company has received tax assessments from tax authorities in Brazil and Argentina challenging income tax positions taken by subsidiaries of the Company. The Company evaluated its tax positions for these matters and concluded, based in part upon advice from legal counsel, that it was appropriate to recognize the tax benefits of these positions (see Note 14 in Item 8 for additional information). Deferred tax assets represent items to be used as tax deductions or credits in future tax returns, and the related tax benefit has already been recognized in the Company's income statement. The realization of the Company's deferred tax assets is dependent upon future taxable income in specific tax jurisdictions, the timing and amount of which are uncertain. The Company evaluates all available positive and negative evidence including estimated future reversals of existing temporary differences, projected future taxable income, tax planning strategies, and recent financial results. Valuation allowances related to these deferred tax assets have been established to the extent the realization of the tax benefit is not likely. During 2013, the Company increased valuation allowances by approximately $150 million primarily related to net operating loss carryforwards and capital losses. To the extent the Company were to favorably resolve matters for which valuation allowances have been established or be required to pay amounts in excess of the aforementioned valuation allowances, the Company's effective tax rate in a given financial statement period may be impacted. Undistributed earnings of the Company's foreign subsidiaries and the Company's share of the undistributed earnings of affiliated corporate joint venture companies accounted for on the equity method amounting to approximately $7.5 billion at December 31, 2013, are considered to be permanently reinvested, and accordingly, no provision for U.S. income taxes has been provided thereon. If the Company were to receive distributions from any of these foreign subsidiaries or affiliates or determine the undistributed earnings of these foreign subsidiaries or affiliates to not be permanently reinvested, the Company could be subject to U.S. tax liabilities which have not been provided for in the consolidated financial statements. 43

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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)



Property, Plant, and Equipment and Asset Abandonments and Write-Downs

The Company is principally engaged in the business of procuring, transporting, storing, processing, and merchandising agricultural commodities and products. This business is global in nature and is highly capital-intensive. Both the availability of the Company's raw materials and the demand for the Company's finished products are driven by factors such as weather, plantings, government programs and policies, changes in global demand, changes in standards of living, and global production of similar and competitive crops. These aforementioned factors may cause a shift in the supply/demand dynamics for the Company's raw materials and finished products. Any such shift will cause management to evaluate the efficiency and cash flows of the Company's assets in terms of geographic location, size, and age of its facilities. The Company, from time to time, will also invest in equipment, technology, and companies related to new, value-added products produced from agricultural commodities and products. These new products are not always successful from either a commercial production or marketing perspective. Management evaluates the Company's property, plant, and equipment for impairment whenever indicators of impairment exist. Assets are written down to fair value after consideration of the ability to utilize the assets for their intended purpose or to employ the assets in alternative uses or sell the assets to recover the carrying value. If management used different estimates and assumptions in its evaluation of these assets, then the Company could recognize different amounts of expense over future periods. During the years ended December 31, 2013 and 2012, the six months ended December 31, 2012 and 2011, and the years ended June 30, 2012 and 2011, impairment charges for property, plant, and equipment were $84 million, $30 million, $0, $337 million, $367 million, and $2 million, respectively (see Note 19 in Item 8 for additional information).



Goodwill and Other Intangible Assets

Goodwill and intangible assets deemed to have indefinite lives are not amortized but are subject to annual impairment tests. The Company evaluates goodwill for impairment at the reporting unit level annually on October 1 or whenever there are indicators that the carrying value of the assets may not be fully recoverable. For fiscal years ended on June 30, 2012 and prior, the Company performed its annual goodwill impairment test on April 1 (see Note 1 in Item 8 for additional information regarding this change in accounting policy). Definite-lived intangible assets are amortized over their estimated useful lives and are reviewed for impairment whenever there are indicators that the carrying value of the assets may not be fully recoverable. If management used different estimates and assumptions in its impairment tests, then the Company could recognize different amounts of expense over future periods.



Employee Benefit Plans

The Company provides substantially all U.S. employees and employees at certain international subsidiaries with retirement benefits including defined benefit pension plans and defined contribution plans. The Company provides eligible U.S. employees who retire under qualifying conditions with access to postretirement health care, at full cost to the retiree (certain employees are "grandfathered" into subsidized coverage while others are provided with Health Care Reimbursement Accounts. In order to measure the expense and funded status of these employee benefit plans, management makes several estimates and assumptions, including interest rates used to discount certain liabilities, rates of return on assets set aside to fund these plans, rates of compensation increases, employee turnover rates, anticipated mortality rates, and anticipated future health care costs. These estimates and assumptions are based on the Company's historical experience combined with management's knowledge and understanding of current facts and circumstances. Management also uses third-party actuaries to assist in measuring the expense and funded status of these employee benefit plans. If management used different estimates and assumptions regarding these plans, the funded status of the plans could vary significantly, and the Company could recognize different amounts of expense over future periods. See Note 16 in Item 8 for additional information.


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Source: Edgar Glimpses


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