Archer Daniels Midland Sued Over Ethanol Derivative Contracts Market

On Tuesday, Green Plains Inc. and its subsidiaries filed a complaint in the District of Nebraska against Archer Daniels Midland Company alleging it had manipulated the derivative contracts market and violated the Commodities Exchange Act. 

According to the complaint, the plaintiff, Green Plains Inc., produces and sells over a billion gallons of ethanol each year.

The complaint states Archer Daniels Midland Company is a major producer and seller of ethanol in the United States. The complaint alleges the defendant produces ethanol at multiple bioprocessing stations in the United States and then sells that ethanol into cash spot markets, particularly the Kinder Morgan Argo Terminal in Argo, Ill. 

The complaint purports that the Argo Terminal is the cash spot market that is used as a price reference point for nearly all physical and financial ethanol transactions across the world. Further, the complaint states the overwhelming majority of ethanol sales contracts, including the plaintiffs’, are priced based on the Argo Terminal-based price index. 

According to the plaintiffs, since 2017, the defendant has purposefully manipulated the Argo Terminal-based price index to profit off of financial derivative contracts that increased in value as the price of ethanol at the Argo Terminal decreased. The plaintiffs argue the defendant manipulated the market by “flooding” the Argo Terminal with over a million gallons of ethanol a day and sold it at intentionally low prices to depress the market. Further, according to the plaintiffs, in order to cover the losses from the ethanol sales at the Argo Terminal, the defendant would acquire short-side speculative derivative contracts for a particular terminal at an “unprecedented scale” and then “target” that terminal and the pricing mechanism used to determine the price of those derivative contracts. 

The plaintiffs argue that Archer Daniels Midland used its size, proximity and relationships “to exploit and overwhelm the Argo Terminal and force a desired, self-serving pricing outcome.” 

The plaintiffs’ single cause of action is tortious interference with contractual relations for the defendants manipulation of the derivatives market. The plaintiffs request actual and statutory damages, interest, attorneys’ fees and injunctive relief. The plaintiffs are represented by Domina Law Group and DiCello Levitt Gutzler LLC.