ADM hopeful on ethanol, may bid on bankrupt plants

By Karl Plume

CHICAGO (Reuters) - U.S. agricultural processor Archer Daniels Midland Co said on Wednesday it was "cautiously optimistic" about the struggling ethanol industry because U.S. law still mandates its use.

The ethanol industry had been worried that the U.S. Environmental Protection Agency would scale back requirements for ethanol use in a new draft Renewable Fuels Standard this month, but it left its annual blend targets intact.

"We do know that the RFS fuel standard will increase to 12 billion gallons in 2010," Steve Mills, chief financial officer at ADM, said at the BMO Capital Markets' Agriculture, Protein, and Fertilizer conference in New York.

He was referring to the mandated increase to 12 billion gallons of current generation biofuels for blending into gasoline in 2010 from 10.5 billion gallons in 2009.

The law requires 36 billion gallons of biofuels to be used in 2022, most of it next-generation biofuels made from non-food sources.

ADM did not comment on a potential increase in the amount of ethanol which can be safely blended into gasoline without harming car engines, which could bolster the struggling industry by boosting demand.

Ethanol supporters have petitioned the EPA for an ethanol blend rate increase to 15 percent, up from the current 10 percent.

The EPA said in April it would take a year to complete government testing on whether a higher blend rate would harm car engines. It is seeking public comment on the issue.