Green Plains Inc. and its subsidiaries filed a complaint on Monday in the District of Nebraska alleging that Archer Daniels Midland Company (ADM) intentionally lowered the price of ethanol and harmed others manufacturing and selling the product because of the reduced prices.
ADM sells ethanol throughout the United States, including a cash spot market in Argo, Ill. which is the price reference point for almost all ethanol transactions in the world, according to thae complaint. It states that ADM should want the pricing at this market to reflect market prices, as other companies do, but because of a contract they made, this is not the case.
The class action complaint claims that since November 2017 ADM has entered financial derivative contracts that gains value if the ethanol price at the Agro terminal decreases. “As a physical producer of ethanol, ADM should want stable or rising prices so that its physical sales would earn a profit. However, because of the disproportionate size of its derivative financial position, ADM manipulated prices to fall so that its financial derivatives would earn a profit. Instead, ADM sacrificed its profits on physical sales in order to leverage even larger profits on its derivatives contracts,” the complaint claims.
The plaintiffs, represented by DiCello Levitt Gutzler, said that ADM depressed prices by flooding the market at the Agro Terminal with ethanol and accepting low priced bids instead of seeking higher prices. They claim the efforts impacted the price industry-wide. They also said that ADM typically purchases more ethanol at the market than it sells, but beginning in November 2017 the company sold much more than it bought.
“ADM used its size, proximity, and relationships to exploit and overwhelm the Argo terminal and force a desired, self-serving pricing outcome upon other financial and physical market participants. The uneconomic nature of ADM’s trading behavior left other participants in the dark about ADM’s strategy, and even those participants who understood it could not take on the enormous risk required to defend themselves through their own derivatives positions,” the plaintiffs claimed.
They alleged that the actions taken by ADM brought down the price at which ethanol producers could sell their products and harmed producers and traders selling ethanol both within and outside of the Agro Terminal. The companies include in the class anyone who sold ethanol since November 2017 at prices determined by the terminal, except those affiliated with ADM.
The complaint alleges ADM violated the Commodity Exchange Act and “interfered with contractual relations.” It states that ADM’s actions were “unlawful, oppressive, and malicious,” and the company should pay damages and restitution to the class members and be stopped from continuing in its misconduct.