On a conference call back in early November, Archer Daniels Midland Chief Executive Patricia Woertz sounded like an ethanol bull on the prowl for a bargain.
With ethanol supply outstripping demand and its price falling, an analyst asked her if ADM, one of the world's ethanol's top producers, was on the lookout for failing competitors' plants it could buy up cheap.
"We're actively engaged in this market all the time, and we know where every plant location is," Woertz said. "But it would have to be a real value and scale and fit with our network."
A few weeks later, ethanol rival VeraSun Energy Corp. pulled the trigger on a $686 million buyout of US BioEnergy Corp. that, when it closes next month, will make VeraSun the top ethanol producer in the country.
ADM is still waiting — a decision experts say underscores the uncertainty of an industry struggling with a supply glut and a decision by the government to cap just how much it will contribute to ethanol producers who make their product from corn. The crop is the primary source for American ethanol.
"It was tough a couple of years ago to not make money producing ethanol; now it's a lot easier to not make money," said Pat Westhoff, an agricultural economist at the University of Missouri. "We expect there to be a lot of volatility in returns to ethanol producers over the next 10 years."
Just this week, Cargill Inc., another big ethanol maker, suspended plans for a $200 million ethanol plant near Topeka, Kan., because of poor market conditions.
Both ADM and Cargill, unlike almost all their competitors, are diversified enough to wait out the uncertain market.
"It seems that (ADM is) really continuing to stay the course and not to get big just to stay No. 1 in the industry just for the sake of staying No. 1," said Rick Kment, an ethanol industry analyst with agriculture-market information company DTN.
ADM can produce nearly 1.1 billion of the roughly 6.5 billion gallons the country currently produces, more than any other company, according to Renewable Fuels Association industry group. ADM in the past few years, in fact, has used ethanol and soy-based biodiesel to reposition itself to investors as an energy company. It hired Woertz in 2006 from Chevron Corp.
But ADM counts on ethanol for only about one-tenth of its total sales. It still makes most of its money by processing soybeans and corn for animal feed, oil and other food products.
Experts say the Decatur, Ill.-based company is big enough and diversified enough to wait out whatever lies ahead for ethanol. ADM doesn't have to buy plants or act in any other way to improve the health of the industry.
"I don't think so, unless they are really, really cheap," Morningstar analyst Ann Gilpin said. "Quite frankly, if you have some smaller guys go out of business that would solve some of the problems."
Added Kment, "It will be interesting long term on where ADM really focuses in the ethanol industry."
What he's talking about is inevitable change ahead for ethanol makers.
Ethanol in the United States is made almost entirely from corn because it's plentiful, relatively easy to turn into fuel and backed by government incentives.
And right now, the market for ethanol is set purely by government mandates and incentives. Ethanol sells mainly because the government pays for it to be blended into gasoline.
That government-set market has driven corn prices to record highs the past couple of years, and last year funneled almost a quarter of the American corn crop into ethanol.
But in the latest energy bill, the government capped the amount of corn-based ethanol it's willing to subsidize at 15 billion gallons a year — a level the country could reach by the end of next year, according to Kment. The government wants another 21 billion gallons of ethanol production a year by 2022 from non-grain crops, raising the possibility of turning more to imports.
"I think that's really the biggest challenge," Kment said. "Where do we come up with that other 21 billion gallons?"
When Woertz talked last fall about possible acquisitions, she also talked about diversifying the raw materials the company uses to make ethanol, potentially making more use of sugar or other feedstocks.
But some analysts see the industry focused on cellulosic ethanol, an as-yet economically unviable product of grasses, corn stalks, wood and agricultural waste. ADM has said it is working with Purdue University on making cellulosic ethanol commercially viable.
Corn-based ethanol produces only slightly more energy than is required to make it, according to Agriculture and Energy department researchers. Sugar-based ethanol produces up to eight times the energy required to produce it, and research suggests cellulosic ethanol could produce far more than either sugar or corn.
ADM has been an ethanol producer for a long time but has looked to the fuel additive the past few years to boost its stock price.
"ADM was kind of mired in a trading range for a number of years," Wells Fargo & Co. economist Michael Swanson said. "Then they suddenly popped out of it by saying, 'Look, we're going to position ourselves (as an energy company).'"
ADM's stock traded at just over $9 a share at the beginning of 2000 and just over $21 by the end of 2004. Since Woertz came on board, shares have flirted with $50 on a couple of occasions and have held steady above $40 since late last year.
But some experts who watch the company believe ADM's energy-company pitch and stock-price success may create pressure to act fast rather than wait to see how the ethanol business shakes out.
"I think if you look at the stock prices of all energy companies in general over the past several months, you can see that these investors are pretty fickle," said Motley Fool analyst Joe Magyer. "They've made a pretty substantial bet on it."
Others, like Kment, don't see ADM moving based on any pressure of the moment.
"They're really going to focus on long-term viability of the market," he said.