Another Lawsuit Alleges ADM Manipulated Ethanol Prices

Archer Daniels Midland Company (ADM) has been hit with another class action complaint arising from allegations that closely track those complained of by Green Plains, Inc. earlier this month. Like Green Plains, Inc., plaintiff Midwest Renewable Energy, LLC, accuses ADM of manipulating the Chicago ethanol derivatives market, comprised of ethanol futures contracts and options contracts traded on the Chicago Mercantile Exchange (CME) but brings causes of action under Section 2 of the Sherman Antitrust Act, rather than the Commodity Exchange Act.

The filing also dovetails on the success enjoyed by the ethanol derivatives trader plaintiff in AOT Holding AG v. Archer Daniels Midland Co., where the same Central District of Illinois court denied “in substantial part AMD’s [sic] motion to dismiss.” Contrastingly, the putative class in the present case seeks relief on behalf of fellow ethanol producers and “first level sellers,” who lost revenue due to ADM’s purportedly anti-competitive tactics.

The complaint’s allegations center on ADM’s intentional, “uneconomical[]” actions to divert and move large quantities of ethanol into a terminal located in Argo, Illinois, thereby flooding that location with a huge supply. With monopolistic control of Argo’s supply, nearly 90-95% according to the complaint, ADM sold the Argo ethanol well below market price, for “less than ADM could have received from readily available alternatives elsewhere, [and] less than ADM’s variable cost to produce or obtain the ethanol.”

Midwest Renewable Energy points out the irrationality of ADM’s behavior when it came to off-loading ethanol at rock bottom prices. “Instead of transporting its ethanol to other terminals to earn higher cost-adjusted revenues, or selling at higher prices in non-terminal private sales, ADM achieved a monopoly in [market-on-close] sales at lower cost-adjusted prices that it was simultaneously pushing down through its own selling activity.”

Ultimately, the practice allegedly drove ethanol’s price and corresponding formula prices downwards. The plaintiff claims that, in addition, the defendant engaged in other anticompetitive conduct like establishing “extremely large short positions in Chicago Ethanol Derivatives on the CME,” thereby generating, “substantial gains for ADM on the short position it established in Chicago Ethanol Derivatives.”

The upshot, the plaintiff contends is lost revenue on first level sales and contracts depending on the artificially low formula price, antitrust injury, and it as well as other similarly situated ethanol producers hope to remediate through litigation. The proposed class period runs from November 2017 to September 2019. The plaintiff seeks both declaratory judgment and treble damages.

Lovell Stewart Halebian Jacobson, Graber Law Office, and Miller Law represent Midwest Renewable Energy, LLC.