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Letter to Shareholders from CEO and President Juan R. Luciano and Chairman Patricia A. Woertz

To our Shareholders and Colleagues,

In 2014, the ADM team exemplified the concept of changing while winning. Even as we delivered very strong results and improved returns, we completed significant portfolio and organizational actions that are transforming our company into a stronger, more disciplined enterprise, better positioned to capitalize on enduring global trends.

Those trends include the growing global population, which is projected to exceed 9 billion by midcentury. ADM—with our vast origination network in the world’s key crop-producing regions, coupled with our globe-spanning transportation, processing and distribution network will continue to play a vital role feeding this increasing population. At the same time, a growing and more prosperous global middle class which will double by 2030—will demand more varied, more convenient and more protein-sufficient diets. ADM’s core ingredients—particularly protein meals, oils and fats—provide the building blocks livestock producers and global and regional food companies will need to serve this demand.

Supplementing these demographic-based trends is an array of changing consumer preferences that create new opportunities. Young consumers, or Millennials, in both developed and developing countries share an interest in healthier foods, regional foods, clean labels and natural products combined with greater convenience that fits their evolving “snacking as a meal” pattern. At the same time, the global population of people 65 and older—who will soon, for the first time in history, outnumber children under the age of five—will amplify this demand for healthier foods and for nutraceutical ingredients that promote health and wellness. These trends signal exceptional opportunity for ADM as an established leader in vegetable proteins and fiber, and now as a global supplier of natural flavors as well.

Strong earnings on contributions from all businesses
Earnings were up nearly $1 billion from the prior year, and adjusted segment operating profit was up 25 percent, to $3.7 billion, from $3.0 billion in 2013.

By the end of 2014, thanks to an ongoing companywide focus on investor returns, our trailing four-quarter-average adjusted ROIC stood at 9.0 percent—260 basis points above our annual weighted average cost of capital, or WACC, and 240 basis points above the level we attained in the prior year. Our target is to achieve ROIC of 200 basis points above the company’s long-term WACC of 8 percent.

All of our business units contributed to the company’s solid results. Corn Processing showed the value of managing the business for overall results, delivering their best operating profit ever, as our sweeteners and starches business optimized its product mix and our ethanol team executed very well in a positive margin environment. Oilseeds Processing continued its solid performance, demonstrating the strength and diversity of the portfolio, with several of the businesses setting profit and volume records. And Ag Services rebounded from the impacts of the historic North American drought, as the team capitalized on a record harvest and maximized the value of our storage, transportation and logistics networks.

Importantly, these accomplishments came during our safest year on record, in which we achieved all time lows in both total recordable incident rate and lost workday incident rate.

Reflecting our continued strong performance, in the first quarter of 2014, ADM’s board of directors raised our dividend rate by 26 percent, and in the first quarter of 2015, we announced an additional 17 percent increase. In total during 2014, we returned more than $1.8 billion to shareholders through dividends and share repurchases.

We are proud of the work our teams have done to create shareholder value—driving returns while taking actions to dampen the volatility of our earnings. As we look to create additional shareholder value, we
are maximizing the levers under our control: optimizing the core of our business, driving operational efficiencies and investing for strategic growth.

1. Optimizing the core of our business
A key effort in 2014, and an ongoing strategy for improving our returns, entails managing our portfolio—divesting or improving underperforming businesses—to ensure that capital and other resources are concentrated in businesses that satisfy our returns criteria.

In 2014, we reached agreements to sell our chocolate business to Cargill for $440 million, and our cocoa business to Olam International Limited for $1.3 billion. While our teams have done a good job of growing these businesses since ADM entered the cocoa and chocolate industry in 1997, after a thorough analysis, we concluded we could not achieve our financial objectives in these businesses given the sector’s volatility and capital-intensive nature. The same rationale applies to our South American fertilizer business, which we sold to Mosaic for $350 million in December.

We further strengthened our portfolio by taking action to improve our international merchandising business. In June, we acquired the remaining minority stake of Alfred C. Toepfer International, in which we had held an ownership interest since 1983. Coupled with improvement efforts that were already underway, the acquisition helped drive significant improvement in our international merchandising results. The combination of ADM’s integrated supply chain, global origination network and risk management expertise and Toepfer’s strong global marketing and distribution capabilities is already enabling us to better serve our customers around the world, and to do so more profitably.

Optimizing the core of our business also involves rejuvenating our product mix—developing new, value-added products to help us diversify the products we make from corn and oilseeds. To that end, we made an equity investment in a privately held company that develops catalysts and processes that can speed the cost-effective development of renewable chemicals from corn. We also formed a strategic partnership to commercialize Omega-3 DHA—a long-chain fatty acid that has been studied for its role in brain, heart and eye health.

2. Driving operational efficiencies
The second pillar of our value-creation framework is to continue enhancing the efficiency of our operations. In the past two years, we achieved more than $400 million in run-rate cost savings through improvements in maintenance, procurement, energy efficiency and process technology. Now, we are targeting an additional $550 million in incremental run-rate savings over the next five years. We expect to achieve improvements through operational-excellence initiatives, purchasing efficiencies, margin enhancement, new products, and further technology and process improvements.

Some of these improvements will be advanced through 1ADM, a business-transformation project designed to enable better, faster decision-making by standardizing data, processes and technology throughout our global enterprise. By improving our teams’ access to information and analytics, facilitating the integration of new businesses and systems, and increasing productivity companywide, we will be able to grow our business while preserving our lean organization and our agility.

3. Growing strategically
The enduring trends we discussed—a growing and more prosperous global population with evolving preferences for healthier, more varied and more convenient foods—support the third component of our value creation framework: geographic expansion of our global origination and processing footprint as well as growth of our value-added ingredients business.

Expanding origination and processing gives us a more diversified global footprint that can reduce the earnings impact of extreme weather events in any single region. And, this expansion allows us to serve growing demand for crops and finished products either by processing in-country or by exporting greater volumes to major demand markets. For example, in Brazil’s northern frontier—which is outside protected forest areas—soybean production is growing at a nearly 20 percent annual compound rate. We have invested to expand our network of elevators and barges to better serve the country’s growers and our customers. We have also formed a joint venture to quadruple the export capacity of our Barcarena port from 1.5 million to 6 million metric tons in the coming years. This added capacity will enable Brazil to continue serving high demand for soybean meal and oil from Chin  and other markets. At the same time, to better serve our Asia-Pacific food and beverage customers’ growing need for safe and high quality sweeteners, we opened a sweetener plant in Tianjin, China, our first wholly owned Corn Processing facility outside North America.

With ADM’s global origination, transportation, processing and distribution network as our foundation, we significantly increased our capabilities and our existing portfolio of specialty-ingredients businesses—including specialty proteins, lecithin, edible beans and fiber—through the acquisition of WILD Flavors, one of the world’s leading suppliers of natural ingredients to the food and beverage industry.

WILD’s technical and product-development capabilities, along with its flavor and ingredient systems, enable ADM to offer our food customers a wide range of solutions that address taste, texture, nutrition and function. On Jan. 1, 2015, we launched a new business unit, WILD Flavors and Specialty Ingredients, which brings together WILD Flavors, many of ADM’s specialty businesses, and the operations of the newly acquired Specialty Commodities Inc., a leading originator, processor and distributor of nuts, fruits, seeds, legumes and ancient grains such as chia, quinoa and amaranth.

Our combined product portfolios, stronger customer relationships, deeper R&D expertise and broader global footprint will help us move further downstream to become a leading supplier of higher-value specialty ingredients and a true innovation partner for customers. Already, our teams have made good progress toward our target of €100 million in combined revenue and cost synergies within three years.

Several organic growth projects now underway will help us expand our value-added ingredient business. In Campo Grande, Brazil, we are building a specialty proteins plant that will manufacture a range of functional protein concentrates and isolates to complement ADM’s current North American production. These ingredients will give ADM’s South American customers a variety of high-quality options for adding protein to various food and beverage products. At our Clinton, Iowa, corn-processing facility, we are increasing production capacity for Fibersol® soluble-fiber products to keep pace with growing customer demand; we are also adding a soluble fiber production facility to the complex that houses our new sweetener plant in China. And, we have two projects underway—one in Hamburg, Germany, and a second in Latur, India—to produce non-GMO lecithin. At this writing, all of these projects are projected to be complete by early 2016.

Room for further improvements and growth
While we made considerable progress on our value-creation strategy this year, we are only at the start of this journey. With a focus on returns now deeply embedded in our company culture, we believe that—as we develop our talent base and capabilities, advance our portfolio-management efforts, and implement technologies such as our customer-relationship management platform and customer-profitability tools—there remains significant room for additional improvement in our existing businesses, and a great deal of potential for growth. That is why we have also introduced Economic Value Added, or EVA, as another important metric to help drive profitable growth.

We have outlined a balanced capital allocation philosophy that will see approximately 30 to 40 percent of our operating cash flows directed to value-generating capital projects, with the remainder dedicated to strategic growth initiatives and/or the return of capital to shareholders. With all of the recent actions we have taken, investor confidence in ADM is solid, with our three-year total shareholder return of 94.4 percent outperforming the S&P 500 Index, the S&P Industrials Index and the S&P Consumer Staples Index.

As part of our philosophy, we plan to increase our dividend payout ratio from the historic range of 20 to 25 percent of earnings to a medium-term range of 30 to 40 percent. In addition, in 2015, we are targeting $1.5 to $2.0 billion of share repurchases, subject to strategic capital requirements.

A bright future
As we worked together to execute a seamless leadership transition during the final months of 2014, we were guided by our shared belief in ADM’s extraordinary capabilities, pride in the company’s recent accomplishments, and commitment to ensuring its continued success.

If 2014 was a year of changing while winning, 2015 is all about accelerating progress. The efforts of our 33,000 colleagues this past year demonstrated that we have the right talent, coupled with the right strategy, to take us forward. The goal now is to help them take their efforts—and ADM’s performance—to the next level.


Juan R. Luciano
Chief Executive Officer and President



Patricia A. Woertz
Chairman, Board of Directors

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