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Letter to Shareholders from Juan Luciano

I am pleased to report that in 2015, we made significant progress in all three of these areas within our value chain.

  • In our grain business, we extended our reach to customers in many new geographies by advancing our destination- marketing strategy, and by investing in critical infrastructure to facilitate trade.
  • In our processing businesses, we drove further efficiency in our operations and introduced new products to address evolving consumer needs.
  • And in our new WILD Flavors and Specialty Ingredients business unit, we began offering our food and beverage cus- tomers one of the industry’s broadest portfolios of products, services and fully formulated systems.

Last year was also a time of macroeconomic challenges in our industry. Large global crop supplies, coupled with low prices, resulted in slower commercialization and limited merchandising opportunities; a strong U.S. dollar made U.S. crops less competitive in the global marketplace; and volatility in the energy sector impacted our business.

Our results reflected these conditions. Net earnings were $1.85 billion, compared with $2.25 billion in the previous year. We nonetheless generated an adjusted return on invested capital (ROIC) 70 basis points above our weighted average cost of capital, or WACC, resulting in positive economic value-added (EVA) for the year. At the same time, we captured more than $200 million in annual run-rate cost savings. And, we shed parts of our portfolio that did not match our long-term financial objectives, acquired new businesses and moved into new geographies that will benefit the company going for- ward.

This performance enabled us to return more than $2.7 billion to shareholders while investing $1.1 billion in projects designed to enhance profitability and lay the groundwork for longer-term growth — a balanced approach to capital alloca- tion we intend to maintain.

We believe that, while temporary in nature, the headwinds we faced in 2015 may extend into 2016. As such, we are pulling the levers within our control: managing run-rate costs while reducing invested capital and growing synergies and sales in recently acquired businesses.

We entered 2016 with new growth engines, a streamlined portfolio, a broader geographic footprint and a clear strategy to further improve returns and reduce earnings volatility.

Advancing our strategy in 2015
ADM’s global value chain begins at the farm gate and ends at our customers’ doorsteps. These customers include many of the world’s largest food and energy companies, as well as smaller start-ups and midsized enterprises. We source crops such as corn, oilseeds and wheat from farmers worldwide. We then either resell them or transport them to hundreds of process- ing plants, where we transform the raw materials into a wide variety of food ingredients, animal feeds and feed ingredients, and renewable fuels and chemicals. Finally, we distribute these products to customers, using an extensive global trans- portation fleet comprising railcars, barges, trucks and trailers, and oceangoing vessels.

To maximize the value we create through this integrated model, we have adopted a three-pronged strategy of optimizing our existing businesses; increasing the efficiency of our global operations; and growing strategically, with an emphasis on the higher-value businesses in our portfolio.

Our aim is for all of our businesses to set the competitive standard in their respective industries. We analyze their performance — as well as the competitive landscape and market dynamics — to ensure that each business is capable of meeting our returns objectives. This process drives improvements in our competitive position.

Our strategy has been closely reviewed and endorsed by ADM’s board of directors, and I have shared it with many invest- ors throughout the past year. In 2015, each of our business units made progress in all three areas.

  • To optimize our existing businesses, our Ag Services unit assembled a Global Trade Desk platform — built on the foundation of various international merchandising businesses we have recently integrated — that drove higher mer- chandized volumes. Our Corn Processing team continued to expand the number of products we make from the starch streams at our wet mills. Oilseeds Processing completed the sale of our cocoa and chocolate businesses. And our newest business unit — WILD Flavors and Specialty Ingredients, or WFSI — spent its first year focused on organic sales growth and on cost and revenue synergies, which enabled us to meet our $0.10 per share first-year earnings accretion target for the business.
  • To drive operational efficiencies, teams at our origination and processing facilities made capital improvements and leveraged technology to reduce costs and enhance ADM’s competitive advantage. The majority of these improvements were achieved in our Corn Processing business, though Oilseeds also reduced its energy use in a year of record proc- essing volumes, and our U.S. flour-milling operations achieved their best product yields ever.

    We also carefully managed our selling, general and administrative (SG&A) expenses, including staff costs, while inves- ting in process and IT improvements that will enhance productivity and enable us to grow. In China, we completed the initial phase of our 1ADM business-transformation initiative; we are now focusing the program on our U.S. grain ele- vators and accounting and finance functions as part of the second phase.

    In addition, we implemented enhanced profitability analytics in several businesses, giving teams access to insightful, real-time data that will help us improve the service we offer our customers and capture appropriate value for our contributions. And in September, we opened a new ADM information technology center in Erlanger, Kentucky, on the WILD Flavors campus. The facility will serve as a hub to support the IT infrastructure needs of our growing global enterprise.
  • Finally, to grow strategically, we established or continued to develop new growth engines we see as key to ongoing value-creation. We executed several acquisitions, and we completed or significantly advanced key projects to expand our origination and basic-processing footprint, our destination-marketing capabilities, and our food- and feed- ingredient portfolios.

    The Ag Services team took steps to grow our port network by acquiring full ownership of export facilities on the Black Sea in Romania — at the mouth of the Danube River — and by embarking on an expansion of our export facilities in Argentina just months before the country’s new government eliminated export taxes on most agricultural products. We also entered into a joint venture to increase the capacity of our Barcarena export terminal in northern Brazil. And, we enhanced our merchandising, logistics and destination-marketing capabilities in the Middle East and North Africa by announcing our plan to purchase a 50 percent stake in Egypt’s Medsofts Group. We consider investments in infra- structure essential to our ability to connect the harvest to the home. As such, we pursue select projects and encourage governments to do the same to facilitate global trade and the efficient flow of goods.

    The Corn Processing business unit completed the acquisition of Eaststarch C.V., whose Central and Eastern European sweetener-production facilities give ADM a strong foothold in the EU marketplace as the artificial cap on cereal-based sweeteners winds down. In February 2016, Corn also agreed to acquire a wet mill in Morocco, further diversifying the global footprint of our sweetener business.

    In Oilseeds, we acquired the Belgian oil bottler AOR N.V., which gives us access to the continental European retail and foodservice markets. And WFSI secured its position as a premier provider of specialty food ingredients through the acquisitions of Eatem Foods Company, a leading developer and producer of premium traditional, natural and organic
    savory flavor systems; Harvest Innovations, a leader in non-GMO, gluten-free and organic ingredients; and a Modesto, California-based tree nut and seed processing facility. At the same time, the team began producing non-GMO lecithin at newly built plants in India and Germany; and we are currently completing construction of a soluble-fiber pro- duction facility in Tianjin, China, and a specialty protein plant in Campo Grande, Brazil.

    Today, WFSI is a key player in the $50 billion, higher-margin specialty ingredients industry. We can address every dimension of new-product development — nutrition, function, texture and taste — with a portfolio that includes natural flavors and colors, specialty proteins, nuts, seeds, ancient grains, edible beans, fiber, and polyols and emulsi- fiers, among other on-trend ingredients. WFSI’s customers range from small start-ups to large, multinational packaged-foods companies. With millions of millennial consumers and seniors alike increasingly interested in natural ingredients and clean labels associated with health and wellness promotion, WFSI is well-positioned to become the innovation partner of choice for the food and beverage industries.

    In 2015, the WFSI team delivered more than $40 million in cost synergies and built a pipeline of more than 750 revenue-synergy projects. And, we are continuing to get closer to our customers. In the first quarter of 2016, we will open a new customer-innovation center in Cranbury, New Jersey, that offers dedicated space for our flavorists, R&D experts, technicians and marketers to collaborate with customers on new products and cost-optimization initiatives.

Six pathways to future value creation
Within the context of our broader strategy, we see six specific areas as keys to further enhancing returns and advancing our growth objectives.

  • In Ag Services, we will continue expanding our destination-marketing capabilities to increase margins, and we will strive to optimize our ownership and utilization of certain storage and transportation assets that currently are used only seasonally.
  • In Corn, our goals are to diversify our product portfolio, maximize the profitability of our Sweeteners and Starches business, and complete a strategic review of our ethanol dry mills to determine how best to improve returns from these assets.
  • The Oilseeds team is focused on improving margins across a number of businesses, strategically expanding crush capacities, and growing our customer base for oils to reduce our dependence on any one segment.
  • And, WFSI will work to grow sales and synergies while integrating recent acquisitions.
  • We also see our ownership stake in Wilmar International Limited, one of Asia’s largest agribusinesses and oilseeds processors, as an important growth engine for ADM. Wilmar is a dominant player in packaged food oils in three of the world’s largest economies, and the company’s complementary footprint and capabilities offer numerous options for collaborations and partnerships. At the end of 2015, we announced that we had agreed to turn Olenex, our companies’ European oils and fats partnership, into a full-fledged joint venture with its own assets — an arrangement that will allow Olenex to operate more efficiently and competitively. We believe the future holds many additional opportunities for collaboration.
  • Finally, continuing to drive operational excellence is a key element of our value-creation efforts. Continuous learn- ing and improvement in cost structure, processes, yields, energy, and procurement are now part of the fabric of our organization, and these efforts are ongoing.

In 2016, maintaining focus on the levers under our control
To help ourselves in a challenging environment, we have set three ambitious new goals for the year and established incentives for our colleagues to reach them. They are:

  • Achieving an additional $275 million in run-rate cost savings;
  • Monetizing $500 million in invested capital with the goal of improving asset-utilization, enhancing returns and driving accretion; and
  • Realizing a $700 million year-over-year increase in revenues from recent acquisitions and new projects.

While these are stretch goals that will require us to rethink some of our current processes and practices, I am confident we will be able to deliver on these commitments. Success in these areas will help ensure that when some of the near-term headwinds subside, we will see stronger earnings and returns.

This confidence in our future prospects was reflected in our Board of Directors’ decision this past February to approve a quarterly cash dividend of $0.30 per share, an increase of more than 7 percent from our previous quarterly rate. This dividend increase was consistent with our balanced approach to capital allocation, which is to invest between 30 and 40 percent of our operating cash flows in the business to execute our strategic plan, while leaving a healthy 60 to 70 per- cent available to capitalize on M&A opportunities, if the right ones arise, or to return directly to shareholders in the form of dividends and share buybacks.

Building a sustainable enterprise for the ages
While we are committed to meeting or exceeding our financial goals each quarter, we will remain focused on executing our longer-term strategy. I believe this is part of the reason why we were named the Most Admired Company in the Food Pro- duction Industry by Fortune magazine in both 2015 and 2016. As we work to build the world’s most successful and endur- ing global agribusiness and food-ingredient provider, we are mindful that creating a company for the ages requires more than just an effective strategy and outstanding execution.

By working to keep our colleagues safe, minimize our environmental impact, improve the integrity of our supply chain, develop the capabilities of our people, strengthen our communities, and act with integrity, we are creating the human capi- tal, cultural infrastructure and reputation needed for ADM to thrive for generations to come.

I am particularly proud of the fact that 2015 was the safest year in ADM’s history, as we achieved records in all our key performance indicators. This was a tribute to our team’s focus, dedication and vigilance, and a testament to our ability to set a bold goal — in this case, getting to zero incidents and zero injuries — and move aggressively to reach it. A tremendous job by our entire team. Of course, we know success in safety is never final. We are committed to continuing to work toward zero incidents, zero injuries, with strong leadership and discipline.

In the areas of social and environmental responsibility, we became the first major global agribusiness to adopt and begin implementing a comprehensive No-Deforestation policy covering both our palm and soy supply chains — a clear demon- stration of our commitment to developing traceable, transparent agricultural supply chains that protect forests worldwide.

And in May 2015, we announced that through the implementation of hundreds of efficiency projects and operational improvements, we had reduced water use per unit of production nearly 20 percent since 2008, and energy use per unit of production had declined 17.3 percent since 2010.

Both of these figures put us ahead of our original goal of achieving a 15 percent reduction in each area by the years 2018 and 2020, respectively. We also reduced our carbon dioxide emissions intensity by 8.6 percent between 2010 and 2015. We still have work to do on reducing waste companywide, so we are accelerating these efforts. We have completed an ini- tial pilot project and collected data on our global waste footprint. The findings from these exercises will enable us to move toward our goal of a waste-to-landfill rate of 15 percent or less.

Our people — ADM’s greatest competitive advantage
As I reflect on our teams’ extraordinary range of 2015 accomplishments, I am encouraged by growing capabilities and values in our organization — qualities I want our leaders to continue to nurture and model, and qualities that serve invest- ors especially well.

Increasingly, our company is characterized by outstanding teamwork, leanness, an owner’s mindset and a strong customer orientation. While our great scale and global reach are formidable strengths, we believe that agility—the ability to adjust to changes in the marketplace — is key to capitalizing on opportunities ahead. We have for decades been a trusted source of high-quality products; now, we are moving to the forefront of food innovation, with a vast portfolio of products serving every segment of the food, beverage and feed industries. And as we adapt and add more and greater capabilities, we are fulfilling our role of delivering better nutrition to a growing, changing world.

The work we’ve done in recent years has positioned ADM to address key trends defining and shaping the world around us. Today, we have the right assets and capabilities to capitalize on a growing population that is demanding more and better food, as well as a cleaner environment and more renewable, sustainable products. We have put in place a variety of new growth engines, made continuous improvements in our operations, and further developed our customer relationships in ways that will serve ADM — and, ultimately, you, our stockholders — very well going forward. I am proud of the dedication and commitment my 32,000 colleagues showed throughout 2015 in connecting the harvest to the home. Together, we will work to continue creating value and earning your confidence in months and years to come.

Juan R. Luciano
Chief Executive Officer and President

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