Edgar Filing: ARCHER DANIELS MIDLAND CO

adm10qfy12q2.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2011

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number 1-44

ARCHER-DANIELS-MIDLAND COMPANY

(Exact name of registrant as specified in its charter)

Delaware	41-0129150
(State or other jurisdiction of incorporation or organization)	(I. R. S. Employer Identification No.)

4666 Faries Parkway Box 1470 Decatur, Illinois (Address of principal executive offices)	62525 (Zip Code)

(217) 424-5200
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer x Accelerated Filer o

Non-accelerated Filer o Smaller reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x.

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Common Stock, no par value – 661,632,896 shares

(January 31, 2012)

PART I - FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

Archer-Daniels-Midland Company

Consolidated Statements of Earnings

(Unaudited)

	Three Months Ended
	December 31,
	2011			2010
	(In millions, except
	per share amounts)

Net sales and other operating income	$	23,306		$	20,930
Cost of products sold		22,493			19,696
Gross Profit		813			1,234

Selling, general, and administrative expenses		423			412
Asset impairment charges and exit costs		352			–
Interest expense		96			115
Equity in earnings of unconsolidated affiliates		(127	)		(138	)
Interest income		(22	)		(41	)
Other (income) expense – net		(30	)		(112	)
Earnings Before Income Taxes		121			998

Income taxes		38			269
Net Earnings Including Noncontrolling Interests		83			729

Less: Net earnings (losses) attributable to noncontrolling interests		3			(3	)

Net Earnings Attributable to Controlling Interests	$	80		$	732

Average number of shares outstanding – basic		666			639

Average number of shares outstanding – diluted		667			641

Basic earnings per common share	$	0.12		$	1.15

Diluted earnings per common share	$	0.12		$	1.14

Dividends per common share	$	0.175		$	0.150

See notes to consolidated financial statements.

Archer-Daniels-Midland Company

Consolidated Statements of Earnings

(Unaudited)

	Six Months Ended
	December 31,
	2011			2010
	(In millions, except
	per share amounts)

Net sales and other operating income	$	45,208		$	37,729
Cost of products sold		43,361			35,687
Gross Profit		1,847			2,042

Selling, general, and administrative expenses		830			793
Asset impairment charges and exit costs		352			–
Interest expense		209			232
Equity in earnings of unconsolidated affiliates		(251	)		(263	)
Interest income		(62	)		(65	)
Other (income) expense – net		(12	)		(115	)
Earnings Before Income Taxes		781			1,460

Income taxes		237			389
Net Earnings Including Noncontrolling Interests		544			1,071

Less: Net earnings (losses) attributable to noncontrolling interests		4			(6	)

Net Earnings Attributable to Controlling Interests	$	540		$	1,077

Average number of shares outstanding – basic		669			639

Average number of shares outstanding – diluted		670			641

Basic and diluted earnings per common share	$	0.81		$	1.68

Dividends per common share	$	0.335		$	0.300

See notes to consolidated financial statements.

Archer-Daniels-Midland Company

Consolidated Balance Sheets

	(Unaudited)
	December 31,			June 30,
	2011			2011
	(In millions)
Assets
Current Assets
Cash and cash equivalents	$	864			$	615
Short-term marketable securities		594				739
Segregated cash and investments		3,451				3,396
Trade receivables		5,093				4,808
Inventories		12,415				12,055
Other current assets		4,807				5,891
Total Current Assets		27,224				27,504

Investments and Other Assets
Investments in and advances to affiliates		3,211				3,240
Long-term marketable securities		352				666
Goodwill		591				602
Other assets		537				681
Total Investments and Other Assets		4,691				5,189

Property, Plant, and Equipment
Land		308				305
Buildings		4,367				4,413
Machinery and equipment		16,169				16,245
Construction in progress		1,059				765
		21,903				21,728
Accumulated depreciation		(12,302	)			(12,228	)
Net Property, Plant, and Equipment		9,601				9,500
Total Assets	$	41,516			$	42,193

Liabilities and Shareholders’ Equity
Current Liabilities
Short-term debt	$	834			$	1,875
Trade payables		4,136				2,581
Accrued expenses and other payables		8,257				8,584
Current maturities of long-term debt		1,602				178
Total Current Liabilities		14,829				13,218

Long-Term Liabilities
Long-term debt		6,762				8,266
Deferred income taxes		897				859
Other		863				1,012
Total Long-Term Liabilities		8,522				10,137

Shareholders’ Equity
Common stock		6,218				6,636
Reinvested earnings		12,322				11,996
Accumulated other comprehensive income (loss)		(563	)			176
Noncontrolling interests		188				30
Total Shareholders’ Equity		18,165				18,838
Total Liabilities and Shareholders’ Equity	$	41,516			$	42,193

See notes to consolidated financial statements.

Archer-Daniels-Midland Company

Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended
	December 31,
	2011			2010
	(In millions)
Operating Activities
Net earnings including noncontrolling interests	$	544		$	1,071
Adjustments to reconcile net earnings to net cash provided by
(used in) operating activities
Depreciation and amortization		414			463
Asset impairment charges		350			–
Deferred income taxes		28			126
Equity in earnings of affiliates, net of dividends		(106	)		(181	)
Gain on Golden Peanut revaluation		–			(71	)
Stock compensation expense		34			36
Pension and postretirement accruals, net		59			47
Deferred cash flow hedges		10			21
Other – net		77			(2	)
Changes in operating assets and liabilities, net of businesses acquired
Segregated cash and investments		(61	)		(875	)
Trade receivables		(741	)		(710	)
Inventories		(480	)		(4,620	)
Other current assets		958			(3,439	)
Trade payables		1,545			1,640
Accrued expenses and other payables		410			2,411
Total Operating Activities		3,041			(4,083	)

Investing Activities
Purchases of property, plant, and equipment		(852	)		(645	)
Proceeds from sales of property, plant, and equipment		24			45
Net assets of businesses acquired		(206	)		(163	)
Cash divested from deconsolidation		(130	)		–
Purchases of marketable securities		(889	)		(1,051	)
Proceeds from sales of marketable securities		1,084			693
Other – net		35			(20	)
Total Investing Activities		(934	)		(1,141	)

Financing Activities
Long-term debt borrowings		91			35
Long-term debt payments		(173	)		(237	)
Net borrowings (payments) under lines of credit agreements		(1,076	)		5,179
Debt exchange premiums		(32	)		–
Purchases of treasury stock		(427	)		(86	)
Cash dividends		(224	)		(192	)
Acquisition of noncontrolling interest		(19	)		–
Other – net		2			5
Total Financing Activities		(1,858	)		4,704

Increase (decrease) in cash and cash equivalents		249			(520	)
Cash and cash equivalents beginning of period		615			1,046

Cash and cash equivalents end of period	$	864		$	526

See notes to consolidated financial statements.

Archer-Daniels-Midland-Company

Consolidated Statement of Shareholders’ Equity

(Unaudited)

										Accumulated
										Other						Total
	Common Stock						Reinvested			Comprehensive			Noncontrolling			Shareholders’
	Shares			Amount			Earnings			Income (Loss)			Interests			Equity
										(In millions)

Balance June 30, 2011		676		$	6,636		$	11,996		$	176		$	30		$	18,838

Comprehensive income
Net earnings								540						4
Other comprehensive income											(739	)
Total comprehensive income																	(195	)
Cash dividends paid- $0.335 per share								(224	)								(224	)
Treasury stock purchases		(15	)		(427	)											(427	)
Stock compensation expense					34												34
Noncontrolling interests previously associated with mandatorily redeemable instruments								10						172			182
Acquisition of noncontrolling interests					(4	)								(15	)		(19	)
Other		1			(21	)								(3	)		(24	)
Balance December 31, 2011		662		$	6,218		$	12,322		$	(563	)	$	188		$	18,165

See notes to consolidated financial statements.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements

(Unaudited)

Note 1.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the quarter ended December 31, 2011 are not necessarily indicative of the results that may be expected for the year ending June 30, 2012. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended June 30, 2011.

Principles of Consolidation

On September 30, 2011, the Company finalized the sale of the majority ownership interest of Hickory Point Bank and Trust Company, fsb (Bank), a previously wholly-owned subsidiary. As a result, the accounts of the Bank were deconsolidated with no material effect to after-tax earnings for the quarter and six months ended December 31, 2011. The Company accounts for its remaining ownership interest in the Bank under the equity method.

The Company consolidates certain less than wholly-owned subsidiaries for which the minority interest was subject to a put option and considered mandatorily redeemable. The put option expired on December 31, 2011 and as a result, the Company reclassified $172 million of minority interest from other long-term liabilities to noncontrolling interests in shareholders’ equity at that date.

Adoption of New Accounting Standards

Effective July 1, 2011, the Company adopted the second phase of the amended guidance in Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements and Disclosures, which requires the Company to disclose information in the reconciliation of recurring Level 3 measurements about purchases, sales, issuances and settlements on a gross basis, separate for assets and liabilities. The adoption of this amended guidance requires expanded disclosure in the notes to the Company’s consolidated financial statements but does not impact financial results (See Note 4 for the disclosures required by this guidance).

Reclassifications

Other (income) expense – net in prior year’s consolidated statement of earnings has been reclassified to conform to the current year’s presentation with corresponding changes to certain prior year items in Notes 5 and 12. In addition, receivables and accounts payable in the prior year consolidated balance sheet have been reclassified to conform to the current year’s presentation where trade receivables and trade payables are shown separately from other receivables and other payables, respectively. Other receivables and other payables are now included in other current assets and accrued expenses and other payables, respectively. These changes are also reflected in the prior year consolidated statement of cash flows with no impact to total cash provided by (used in) operating, investing, or financing activities.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 1.

Basis of Presentation (Continued)

Last-in, First-out (LIFO) Inventories

Interim period LIFO calculations are based on interim period costs and management’s estimates of year-end inventory levels. Because the availability and price of agricultural commodity-based LIFO inventories are unpredictable due to factors such as weather, government farm programs and policies, and changes in global demand, quantities of LIFO-based inventories at interim periods may vary significantly from management’s estimates of year-end inventory levels.

Note 2.

New Accounting Standards

Effective March 31, 2012, the Company will be required to adopt the amended guidance of ASC Topic 820, Fair Value Measurements and Disclosures, which clarifies or changes certain fair value measurement principles and enhances the disclosure requirements particularly for Level 3 fair value measurements. The adoption of this amended guidance will require expanded disclosure in the notes to the Company’s consolidated financial statements but will not impact financial results.

Effective July 1, 2012, the Company will be required to adopt the amended guidance of ASC Topic 220, Comprehensive Income, which requires the Company to present total comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amended guidance eliminates the option to present components of other comprehensive income as part of the statement of shareholders’ equity. The Company will be required to apply the presentation and disclosure requirements of the amended guidance retrospectively. The adoption of this amended guidance will change financial statement presentation and require expanded disclosures in the Company’s consolidated financial statements but will not impact financial results.

Effective July 1, 2012, the Company will be required to adopt the amended guidance of ASC Topic 350, Intangibles – Goodwill and Other, which changes the process for how entities test goodwill for impairment. The amended guidance permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. Early adoption of this amended guidance is permitted. The Company does not expect any impact on its financial results as a result of the adoption of this amended guidance.

Note 3.

Acquisitions

During the six months ended December 31, 2011, the Company acquired six businesses for a total cost of $206 million and recorded a preliminary allocation of the purchase price related to these acquisitions.

The net cash purchase price for the six acquisitions of $206 million was allocated to working capital, property, plant, and equipment, goodwill, and other long-term assets for $3 million, $160 million, $39 million, and $4 million, respectively.

During the quarter, the Company finalized the purchase price allocation related to the December 31, 2010 acquisition of Golden Peanut Company LLC (“Golden Peanut”). The revised purchase price allocation did not result in material adjustments.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 4.

Fair Value Measurements

The Company determines the fair value of certain of its inventories of agricultural commodities, derivative contracts, and marketable securities based on the fair value definition and hierarchy levels established in the guidance of ASC Topic 820, Fair Value Measurements and Disclosures. Three levels are established within the hierarchy that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 1 assets and liabilities include exchange-traded derivative contracts, U.S. treasury securities and certain publicly traded equity securities.

Level 2: Observable inputs, including Level 1 prices that have been adjusted; quoted prices for similar assets or liabilities; quoted prices in markets that are less active than traded exchanges; and other inputs that are observable or can be substantially corroborated by observable market data.

Level 3: Unobservable inputs that are supported by little or no market activity and that are a significant component of the fair value of the assets or liabilities. In evaluating the significance of fair value inputs, the Company generally classifies assets or liabilities as Level 3 when their fair value is determined using unobservable inputs that individually or when aggregated with other unobservable inputs, represent more than 10% of the fair value of the assets or liabilities. Judgment is required in evaluating both quantitative and qualitative factors in the determination of significance for purposes of fair value level classification. Level 3 amounts can include assets and liabilities whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as assets and liabilities for which the determination of fair value requires significant management judgment or estimation.

In many cases, a valuation technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy. The lowest level of input that is a significant component of the fair value measurement determines the placement of the entire fair value measurement in the hierarchy. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment that may affect the classification of fair value assets and liabilities within the fair value hierarchy levels.

The Company’s policy regarding the timing of transfers between levels, including both transfers into and transfers out of Level 3, is to measure and record the transfers at the end of the reporting period. For the period ended December 31, 2011, the Company had no transfers between Levels 1 and 2.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 4.

Fair Value Measurements (Continued)

The following tables set forth, by level, the Company’s assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2011 and June 30, 2011.

	Fair Value Measurements at December 31, 2011
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(In millions)

Assets:
Inventories carried at market	$	–	$	4,798	$	1,624	$	6,422
Unrealized derivative gains:
Commodity contracts		1,200		737		198		2,135
Foreign exchange contracts		–		288		–		288
Marketable securities		1,790		93		–		1,883
Total Assets	$	2,990	$	5,916	$	1,822	$	10,728

Liabilities:
Unrealized derivative losses:
Commodity contracts	$	1,295	$	755	$	192	$	2,242
Foreign exchange contracts		–		307		–		307
Inventory-related payables		–		425		196		621
Total Liabilities	$	1,295	$	1,487	$	388	$	3,170

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 4.

Fair Value Measurements (Continued)

	Fair Value Measurements at June 30, 2011
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(In millions)

Assets:
Inventories carried at market	$	–	$	5,153	$	762	$	5,915
Unrealized derivative gains:
Commodity contracts		1,198		1,457		112		2,767
Foreign exchange contracts		–		237		–		237
Interest rate contracts		–		3		–		3
Marketable securities		1,628		328		–		1,956
Total Assets	$	2,826	$	7,178	$	874	$	10,878

Liabilities:
Unrealized derivative losses:
Commodity contracts	$	1,317	$	1,193	$	44	$	2,554
Foreign exchange contracts		–		178		–		178
Inventory-related payables		–		278		45		323
Total Liabilities	$	1,317	$	1,649	$	89	$	3,055

The Company uses the market approach valuation technique to measure the majority of its assets and liabilities carried at fair value. Estimated fair values for inventories carried at market are based on exchange-quoted prices, adjusted for differences in local markets, broker or dealer quotations or market transactions in either listed or over-the-counter (OTC) markets. In such cases, the inventory is classified in Level 2. Certain inventories may require management judgment or estimation for a significant component of the fair value amount. In such cases, the inventory is classified as Level 3. Changes in the fair value of inventories are recognized in the consolidated statements of earnings as a component of cost of products sold.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 4.

Fair Value Measurements (Continued)

The Company’s derivative contracts that are measured at fair value include forward commodity purchase and sale contracts, exchange-traded commodity futures and option contracts, and OTC instruments related primarily to agricultural commodities, ocean freight, energy, interest rates, and foreign currencies. Exchange-traded futures and options contracts are valued based on unadjusted quoted prices in active markets and are classified in Level 1. The majority of the Company’s exchange-traded futures and options contracts are cash-settled on a daily basis and, therefore, are not included in the fair value tables. Fair value for forward commodity purchase and sale contracts is estimated based on exchange-quoted prices adjusted for differences in local markets. These differences are generally determined using inputs from broker or dealer quotations or market transactions in either the listed or OTC markets. When observable inputs are available for substantially the full term of the contract, it is classified in Level 2. When unobservable inputs have a significant impact on the measurement of fair value, the contract is classified in Level 3. Based on historical experience with the Company’s suppliers and customers, the Company’s own credit risk and knowledge of current market conditions, the Company does not view nonperformance risk to be a significant input to fair value for the majority of its forward commodity purchase and sale contracts. However, in certain cases, if the Company believes the nonperformance risk to be a significant input, the Company records estimated fair value adjustments, and classifies the contract in Level 3. Except for certain derivatives designated as cash flow hedges, changes in the fair value of commodity-related derivatives are recognized in the consolidated statements of earnings as a component of cost of products sold. Changes in the fair value of foreign currency-related derivatives are recognized in the consolidated statements of earnings as a component of net sales and other operating income, cost of products sold, and other (income) expense – net. The effective portions of changes in the fair value of derivatives designated as cash flow hedges are recognized in the consolidated balance sheets as a component of accumulated other comprehensive income (loss) (AOCI) until the hedged items are recorded in earnings or it is probable the hedged transaction will no longer occur.

The Company’s marketable securities are comprised of U.S. Treasury securities, obligations of U.S. government agencies, corporate and municipal debt securities, and equity investments. U.S. Treasury securities and certain publicly traded equity investments are valued using quoted market prices and are classified in Level 1. U.S. government agency obligations, corporate and municipal debt securities and certain equity investments are valued using third-party pricing services and substantially all are classified in Level 2. Security values that are determined using pricing models are classified in Level 3. Unrealized changes in the fair value of available-for-sale marketable securities are recognized in the consolidated balance sheets as a component of AOCI unless a decline in value is deemed to be other-than-temporary at which point the decline is recorded in earnings.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 4.

Fair Value Measurements (Continued)

The following table presents a reconciliation of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended December 31, 2011.

	Level 3 Fair Value Asset Measurements at December 31, 2011
	Inventories Carried at Market			Commodity Derivative Contracts Gains			Total Assets
	(In millions)

Balance, September 30, 2011	$	1,348		$	270		$	1,618
Total increase (decrease) in unrealized gains included in cost of products sold		28			138			166
Purchases		959			–			959
Sales		(963	)		–			(963	)
Settlements		–			(185	)		(185	)
Transfers into Level 3		306			34			340
Transfers out of Level 3		(54	)		(59	)		(113	)
Ending balance, December 31, 2011	$	1,624		$	198		$	1,822

The following table presents a reconciliation of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended December 31, 2011.

	Level 3 Fair Value Liability Measurements at December 31, 2011
	Inventory- related Payables			Commodity Derivative Contracts Losses			Total Liabilities
	(In millions)

Balance, September 30, 2011	$	134		$	244		$	378
Total increase (decrease) in unrealized losses included in cost of products sold		4			136			140
Purchases		4			–			4
Sales		(6	)		–			(6	)
Settlements		–			(158	)		(158	)
Transfers into Level 3		60			4			64
Transfers out of Level 3		–			(34	)		(34	)
Ending balance, December 31, 2011	$	196		$	192		$	388

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 4.

Fair Value Measurements (Continued)

The following table presents a reconciliation of assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended December 31, 2010.

	Level 3 Fair Value Measurements at December 31, 2010
	Inventories Carried at Market, Net			Commodity Derivative Contracts, Net			Total
	(In millions)

Balance, September 30, 2010	$	371		$	35		$	406
Total gains (losses), realized or unrealized, included in earnings before income taxes*		(27	)		62			35
Purchases, issuances and settlements		43			1			44
Transfers into Level 3		2			(1	)		1
Transfers out of Level 3		(83	)		(5	)		(88	)
Ending balance, December 31, 2010	$	306		$	92		$	398

*Includes gains of $122 million that are attributable to the change in unrealized gains or losses relating to Level 3 assets and liabilities still held at December 31, 2010.

The following table presents a reconciliation of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the six months ended December 31, 2011.

	Level 3 Fair Value Asset Measurements at December 31, 2011
	Inventories Carried at Market			Commodity Derivative Contracts Gains			Total Assets
	(In millions)

Balance, June 30, 2011	$	762		$	112		$	874
Total increase (decrease) in unrealized gains included in cost of products sold		(18	)		335			317
Purchases		1,095			4			1,099
Sales		(1,224	)		–			(1,224	)
Settlements		–			(244	)		(244	)
Transfers into Level 3		1,073			84			1,157
Transfers out of Level 3		(64	)		(93	)		(157	)
Ending balance, December 31, 2011	$	1,624		$	198		$	1,822

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 4.

Fair Value Measurements (Continued)

The following table presents a reconciliation of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the six months ended December 31, 2011.

	Level 3 Fair Value Liability Measurements at December 31, 2011
	Inventory- related Payables			Commodity Derivative Contracts Losses			Total Liabilities
	(In millions)

Balance, June 30, 2011	$	45		$	44		$	89
Total increase (decrease) in unrealized losses included in cost of products sold		4			306			310
Purchases		(2	)		1			(1	)
Sales		(4	)		–			(4	)
Settlements		–			(139	)		(139	)
Transfers into Level 3		153			19			172
Transfers out of Level 3		–			(39	)		(39	)
Ending balance, December 31, 2011	$	196		$	192		$	388

The following table presents a reconciliation of assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the six months ended December 31, 2010.

	Level 3 Fair Value Measurements at December 31, 2010
	Inventories Carried at Market, Net			Derivative Contracts, Net			Total
	(In millions)

Balance, June 30, 2010	$	427		$	13		$	440
Total gains (losses), realized or unrealized, included in earnings before income taxes*		4			98			102
Purchases, issuances and settlements		114			3			117
Transfers in to Level 3		8			–			8
Transfers out of Level 3		(247	)		(22	)		(269	)
Ending balance, December 31, 2010	$	306		$	92		$	398

* Includes gains of $169 million that are attributable to the change in unrealized gains or losses relating to Level 3 assets and liabilities still held at December 31, 2010.

Transfers into Level 3 of assets and liabilities previously classified in Level 2 were due to the relative value of unobservable inputs to the total fair value measurement of certain products and derivative contracts rising above the 10% threshold. Transfers out of Level 3 were primarily due to the relative value of unobservable inputs to the total fair value measurement of certain products and derivative contracts falling below the 10% threshold and thus permitting reclassification to Level 2.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 5.

Derivative Instruments and Hedging Activities

The Company recognizes all of its derivative instruments as either assets or liabilities at fair value in its consolidated balance sheets. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. The majority of the Company’s derivatives have not been designated as hedging instruments. For those derivative instruments that are designated and qualify as hedging instruments, a reporting entity must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, a cash flow hedge, or a hedge of a net investment in a foreign operation. As of December 31, 2011 and June 30, 2011, the Company has certain derivatives designated as cash flow hedges. Within the Note 5 tables, zeros represent minimal amounts.

Derivatives Not Designated as Hedging Instruments

The Company generally follows a policy of using exchange-traded futures and exchange-traded and OTC options contracts to manage its net position of merchandisable agricultural commodity inventories and forward cash purchase and sales contracts to reduce price risk caused by market fluctuations in agricultural commodities and foreign currencies. The Company also uses exchange-traded futures and exchange-traded and OTC options contracts as components of merchandising strategies designed to enhance margins. The results of these strategies can be significantly impacted by factors such as the volatility of the relationship between the value of exchange-traded commodities futures contracts and the cash prices of the underlying commodities, counterparty contract defaults, and volatility of freight markets. Exchange-traded futures, exchange-traded and OTC options contracts, and forward cash purchase and sales contracts of certain merchandisable agricultural commodities accounted for as derivatives are stated at fair value. Inventories of certain merchandisable agricultural commodities, which include amounts acquired under deferred pricing contracts, are stated at market value. Inventory is not a derivative and therefore is not included in the tables below. Changes in the market value of inventories of certain merchandisable agricultural commodities, forward cash purchase and sales contracts, exchange-traded futures, and exchange-traded and OTC options contracts are recognized in earnings immediately. Unrealized gains and unrealized losses on forward cash purchase contracts, forward foreign currency exchange (FX) contracts, forward cash sales contracts, and exchange-traded and OTC options contracts represent the fair value of such instruments and are classified on the Company’s consolidated balance sheets as other current assets and accrued expenses and other payables, respectively.

At March 31, 2010, the Company de-designated and discontinued hedge accounting treatment for certain interest rate swaps, which were related to the anticipated remarketing of the long-term debt. At the date of de-designation of these hedges, $21 million of after-tax gains were deferred in AOCI. In March 2011, these interest rate swaps were terminated upon the remarketing of the long-term debt. The $21 million gains deferred in AOCI are being amortized over 30 years. The Company recognized in earnings pre-tax gains from these interest rate swaps of $55 million and $24 million during the quarter and six months ended December 31, 2010, respectively.

The following table sets forth the fair value of derivatives not designated as hedging instruments as of December 31, 2011 and June 30, 2011.

	December 31, 2011				June 30, 2011
	Assets		Liabilities		Assets		Liabilities
	(In millions)				(In millions)

FX Contracts	$	288	$	307	$	237	$	178
Interest Contracts		–		–		3		–
Commodity Contracts		2,135		2,240		2,766		2,553
Total	$	2,423	$	2,547	$	3,006	$	2,731

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 5.

Derivative Instruments and Hedging Activities (Continued)

The following table sets forth the pre-tax gains (losses) on derivatives not designated as hedging instruments that have been included in the consolidated statements of earnings for the quarter and six months ended December 31, 2011 and 2010.

	Three months ended December 31,
	2011			2010
	(In millions)
Interest Contracts
Interest expense	$	0		$	0
Other income (expense) – net		–			55

FX Contracts
Net sales and other operating income	$	17		$	27
Cost of products sold		18			5
Other income (expense) – net		(63	)		(4	)

Commodity Contracts
Cost of products sold	$	(624	)	$	(1,158	)
Total gain (loss) recognized in earnings	$	(652	)	$	(1,075	)

	Six months ended December 31,
	2011			2010
	(In millions)
Interest Contracts
Interest expense	$	0		$	0
Other income (expense) – net		–			24

FX Contracts
Net sales and other operating income	$	33		$	(7	)
Cost of products sold		(116	)		64
Other income (expense) – net		(69	)		32

Commodity Contracts
Cost of products sold	$	(4	)	$	(1,807	)
Total gain (loss) recognized in earnings	$	(156	)	$	(1,694	)

Derivatives Designated as Cash Flow Hedging Strategies

For derivative instruments that are designated and qualify as cash flow hedges (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of AOCI and reclassified into earnings in the same line item affected by the hedged transaction and in the same period or periods during which the hedged transaction affects earnings. The remaining gain or loss on the derivative instrument that is in excess of the cumulative change in the cash flows of the hedged item, if any (i.e., the ineffective portion), hedge components excluded from the assessment of effectiveness, and gains and losses related to discontinued hedges are recognized in the consolidated statement of earnings during the current period.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 5.

Derivative Instruments and Hedging Activities (Continued)

For each of the commodity hedge programs described below, the derivatives are designated as cash flow hedges. The changes in the market value of such derivative contracts have historically been, and are expected to continue to be, highly effective at offsetting changes in price movements of the hedged item. Once the hedged item is recognized in earnings, the gains/losses arising from the hedge will be reclassified from AOCI to either net sales and other operating income, cost of products sold, interest expense or other income (expense) – net, as applicable. As of December 31, 2011, the Company has $7 million of after-tax gains in AOCI related to gains and losses from commodity cash flow hedge transactions. The Company expects to recognize all of these after-tax gains in its consolidated statement of earnings during the next 12 months.

The Company, from time to time, uses futures or options contracts to fix the purchase price of anticipated volumes of corn to be purchased and processed in a future month. The objective of this hedging program is to reduce the variability of cash flows associated with the Company’s forecasted purchases of corn. The Company’s corn processing plants currently grind approximately 77 million bushels of corn per month. During the past 12 months, the Company hedged between 1% and 100% of its monthly anticipated grind. At December 31, 2011, the Company has designated hedges representing between 13% and 21% of its anticipated monthly grind of corn for the next 12 months.

The Company, from time to time, also uses futures, options, and swaps to fix the purchase price of the Company’s anticipated natural gas requirements for certain production facilities. The objective of this hedging program is to reduce the variability of cash flows associated with the Company’s forecasted purchases of natural gas. These production facilities use approximately 3.75 million MMbtus of natural gas per month. During the past 12 months, the Company hedged between 21% and 50% of the quantity of its anticipated monthly natural gas purchases. At December 31, 2011, the Company has designated hedges representing between 8% and 30% of its anticipated monthly natural gas purchases for the next 9 months.

The Company, from time to time, also uses futures, options, and swaps to fix the sales price of certain ethanol sales contracts. The objective of this hedging program is to reduce the variability of cash flows associated with the Company’s sales of ethanol under sales contracts that are indexed to unleaded gasoline prices. During the past 12 months, the Company hedged between 10 million to 19 million gallons of ethanol per month under this program. At December 31, 2011, the Company has designated hedges representing between 2 million to 14 million gallons of contracted ethanol sales per month over the next 6 months.

To protect against fluctuations in cash flows due to foreign currency exchange rates, the Company from time to time will use forward foreign exchange contracts as cash flow hedges. Certain production facilities have manufacturing expenses and equipment purchases denominated in non-functional currencies. To reduce the risk of fluctuations in cash flows due to changes in the exchange rate between functional versus non-functional currencies, the Company will hedge some portion of the forecasted foreign currency expenditures. At December 31, 2011, the Company has $2 million of after-tax losses in AOCI related to foreign exchange contracts designated as cash flow hedging instruments. The Company will recognize the $2 million of losses in its consolidated statement of earnings over the life of the hedged transactions.

The Company, from time to time, uses treasury-lock agreements and interest rate swaps in order to lock in the Company’s interest rate prior to the issuance or remarketing of its long-term debt. Both the treasury-lock agreements and interest rate swaps were designated as cash flow hedges of the risk of changes in the future interest payments attributable to changes in the benchmark interest rate. The objective of the treasury-lock agreements and interest rate swaps was to protect the Company from changes in the benchmark rate from the date of hedge designation to the date when the debt was actually issued. At December 31, 2011, AOCI included $22 million of after-tax gains related to treasury-lock agreements and interest rate swaps, of which, $20 million relates to the interest swaps that were de-designated at March 31, 2010 as discussed earlier in Note 5.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 5.

Derivative Instruments and Hedging Activities (Continued)

The Company will recognize the $22 million of gains in its consolidated statement of earnings over the terms of the hedged items, which range from 10 to 30 years.

The following tables set forth the fair value of derivatives designated as hedging instruments as of December 31, 2011 and June 30, 2011.

	December 31, 2011				June 30, 2011
	Assets		Liabilities		Assets		Liabilities
	(In millions)				(In millions)

Commodity Contracts	$	0	$	2	$	1	$	1
Total	$	0	$	2	$	1	$	1

The following table sets forth the pre-tax gains (losses) on derivatives designated as hedging instruments that have been included in the consolidated statements of earnings for the three and six months ended December 31, 2011 and 2010.

		Three months ended
	Consolidated Statement of	December 31,
	Earnings Locations	2011			2010
		(In millions)
Effective amounts recognized in earnings
FX Contracts	Other income/expense – net	$	(1	)	$	0
Interest Contracts	Interest expense		0			0
Commodity Contracts	Cost of products sold		11			156
	Net sales and other operating income		6			(2	)
Ineffective amount recognized in earnings	Cost of products sold		40			16
Total amount recognized in earnings		$	56		$	170

		Six months ended
	Consolidated Statement of	December 31,
	Earnings Locations	2011			2010
		(In millions)
Effective amounts recognized in earnings
FX Contracts	Other income/expense – net	$	(1	)	$	0
Interest Contracts	Interest expense		0			0
Commodity Contracts	Cost of products sold		11			221
	Net sales and other operating income		8			4
Ineffective amount recognized in earnings	Cost of products sold		39			33
Total amount recognized in earnings		$	57		$	258

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 5.

Derivative Instruments and Hedging Activities (Continued)

The following tables set forth the changes in AOCI related to derivatives gains (losses) for the three and six months ended December 31, 2011 and 2010.

	Three months ended
	December 31,
	2011			2010
	(In millions)
Balance at September 30	$	30		$	56
Unrealized gains		16			135
Losses (gains) reclassified to earnings		(16	)		(154	)
Tax effect		0			6
Balance at December 31	$	30		$	43

	Six months ended
	December 31
	2011			2010
	(In millions)
Balance at June 30	$	29		$	30
Unrealized gains		22			247
Losses (gains) reclassified to earnings		(19	)		(225	)
Tax effect		(2	)		(9	)
Balance at December 31	$	30		$	43

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 6.

Marketable Securities and Cash Equivalents

				Unrealized		Unrealized			Fair
	Cost			Gains		Losses			Value
	(In millions)
December 31, 2011

United States government obligations
Maturity less than 1 year		$	541	$	–	$	–		$	541
Maturity 1 to 5 years			103		–		–			103
Government–sponsored enterprise obligations
Maturity 1 to 5 years			2		–		–			2
Corporate debt securities
Maturity 1 to 5 years			60		–		–			60
Other debt securities
Maturity less than 1 year			432		–		–			432
Maturity 1 to 5 years			4		–		–			4
Equity securities
Available-for-sale			136		26		(3	)		159
Trading			24		–		–			24
		$	1,302	$	26	$	(3	)	$	1,325

				Unrealized		Unrealized			Fair
	Cost			Gains		Losses			Value
		(In millions)
June 30, 2011

United States government obligations
Maturity less than 1 year		$	753	$	–	$	–		$	753
Maturity 1 to 5 years			72		1		–			73
Government–sponsored enterprise obligations
Maturity less than 1 year			20		–		–			20
Maturity 1 to 5 years			54		–		–			54
Maturity 5 to 10 years			5		–		–			5
Maturity greater than 10 years			218		8		–			226
Corporate debt securities
Maturity less than 1 year			1		–		–			1
Maturity 1 to 5 years			35		1		–			36
Other debt securities
Maturity less than 1 year			215		–		–			215
Maturity 1 to 5 years			3		–		–			3
Maturity 5 to 10 years			7		–		–			7
Equity securities
Available-for-sale			159		83		(4	)		238
Trading			24		–		–			24
		$	1,566	$	93	$	(4	)	$	1,655

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 6.

Marketable Securities and Cash Equivalents (Continued)

All of the $3 million in unrealized losses at December 31, 2011 arose within the last 12 months and is related to the Company’s investment in one security. The market value of the available-for-sale equity security that has been in an unrealized loss position for less than 12 months is $31 million. The Company evaluated the near-term prospects of the issuer in relation to the severity and duration of the impairment. Based on that evaluation and the Company’s ability and intent to hold this investment for a reasonable period of time sufficient for a forecasted recovery of fair value, the Company does not consider this investment to be other-than-temporarily impaired at December 31, 2011.

In December 2011, the Company recorded a $13 million other-than-temporary impairment related to its available-for-sale equity security investment in Metabolix, Inc. (see Note 14 for additional information). The impairment charge is included in asset impairment charges and exit costs in the consolidated statements of earnings.

Note 7.

Other Current Assets

Other current assets consist of the following:

	December 31,		June 30,
	2011		2011
	(In millions)

Unrealized gains on derivative contracts	$	2,423	$	3,007
Other current assets		2,384		2,884
	$	4,807	$	5,891

Note 8.

Accrued Expenses and Other Payables

Accrued expenses and other payables consist of the following:

	December 31,		June 30,
	2011		2011
	(In millions)

Unrealized losses on derivative contracts	$	2,549	$	2,732
Accrued expenses and other payables		5,708		5,852
	$	8,257	$	8,584

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 9.

Debt and Financing Arrangements

The Company has outstanding $1.15 billion principal amount of convertible senior notes (the Notes) due in 2014. As of December 31, 2011, none of the conditions permitting conversion of the Notes had been satisfied. Therefore, no share amounts related to the conversion of the Notes or exercise of the warrants sold in connection with the issuance of the Notes were included in diluted average shares outstanding. For further information on the Notes, refer to Note 8 “Debt and Financing Arrangements” in the consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended June 30, 2011.

The Company also has outstanding $1.4 billion principal amount of floating rate notes due on August 13, 2012. Interest on the notes accrues at a floating rate of three-month LIBOR reset quarterly plus 0.16% and is paid quarterly. As of December 31, 2011, the interest rate on the notes was 0.61%.

On September 26, 2011, the Company issued $528 million of 4.535% senior Debentures due in 2042 (the New Debentures) in exchange for $404 million of its previously issued and outstanding 6.45%, 6.625%, 6.75%, 6.95%, 7% and 7.5% debentures. The Company paid $32 million of debt premium to certain bondholders associated with these exchanges. The discount on the New Debentures is being amortized over the life of the New Debentures using the effective interest method.

At December 31, 2011, the fair value of the Company’s long-term debt exceeded the carrying value by $1.5 billion, as estimated using quoted market prices or discounted future cash flows based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements.

At December 31, 2011, excluding the accounts receivable securitization facility discussed below, the Company had lines of credit totaling $7.0 billion, of which $6.2 billion was unused. Of the Company’s total lines of credit, $4.6 billion support a commercial paper borrowing facility, against which $130 million of commercial paper was outstanding at December 31, 2011.

On July 1, 2011, the Company entered into a 364-day accounts receivable securitization facility. The facility provides the Company with up to $1.0 billion in liquidity. Under the facility, the Company’s U.S.-originated trade accounts receivables are sold to a wholly-owned, bankruptcy-remote entity which then sells an undivided interest in the receivables as collateral for any borrowings under the facility. Receivable balances related to this facility will continue to be reported as trade receivables in the Company’s consolidated balance sheets based upon the Company’s continuing involvement with these assets. Any borrowings under the facility will be classified as secured borrowings. The Company has no outstanding borrowings under the facility as of December 31, 2011.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 10.

Income Taxes

The Company’s effective tax rate for the quarter and six months ended December 31, 2011 was 31.4% and 30.3%, respectively, compared to 27% for the quarter and six months ended December 31, 2010 and 33% for the full fiscal year 2011. The changes in the Company’s quarterly and year-to-date effective tax rates were primarily due to changes in the forecasted geographic mix of pretax earnings.

The Company is subject to income taxation in many jurisdictions around the world. The Company is subject to routine examination by domestic and foreign tax authorities and frequently faces challenges regarding the amount of taxes due. These challenges include positions taken by the Company related to the timing, nature and amount of deductions and the allocation of income among various tax jurisdictions. Resolution of the related tax positions, through negotiation with relevant tax authorities or through litigation, may take years to complete. Therefore, it is difficult to predict the timing for resolution of tax positions. In its routine evaluations of the exposure associated with various tax filing positions, the Company recognizes a liability, when necessary, for estimated potential additional tax owed by the Company in accordance with ASC 740, Income Taxes. However, the Company cannot predict or provide assurance as to the ultimate outcome of these ongoing or future examinations.

The Company’s wholly-owned subsidiary, ADM do Brasil Ltda. (ADM do Brasil), received three separate tax assessments from the Brazilian Federal Revenue Service (BFRS) challenging the tax deductibility of commodity hedging losses and related expenses for the tax years 2004, 2006 and 2007 in the amounts of $465 million, $19 million, and $80 million, respectively (adjusted for interest and variation in currency exchange rates). ADM do Brasil’s tax return for 2005 was also audited and no assessment was received. The statute of limitations for 2005 has expired. If the BFRS were to challenge commodity hedging deductions in tax years after 2007, the Company estimates it could receive additional claims of approximately $97 million (as of December 31, 2011 and subject to variation in currency exchange rates).

ADM do Brasil enters into commodity hedging transactions that can result in gains, which are included in ADM do Brasil’s calculations of taxable income in Brazil, and losses, which ADM do Brasil deducts from its taxable income in Brazil. The Company has evaluated its tax position regarding these hedging transactions and concluded, based upon advice from Brazilian legal counsel, that it was appropriate to recognize both gains and losses resulting from hedging transactions when determining its Brazilian income tax expense. Therefore, the Company has continued to recognize the tax benefit from hedging losses in its financial statements and has not recorded any tax liability for the amounts assessed by the BFRS.

ADM do Brasil filed an administrative appeal for each of the assessments. During the second quarter of fiscal 2011, a decision in favor of the BFRS on the 2004 assessment was received and a second level administrative appeal has been filed. In January of 2012, ADM do Brasil received an unfavorable decision on its first level administrative appeal of the 2006 and 2007 assessments and plans to file a second level administrative appeal for these assessments. If ADM do Brasil continues to be unsuccessful in the administrative appellate process, further appeals are available in the Brazilian federal courts. While the Company believes its consolidated financial statements properly reflect the tax deductibility of these hedging losses, the ultimate resolution of this matter could result in the future recognition of additional payments of, and expense for, income tax and the associated interest and penalties. The Company intends to vigorously defend its position against the current assessments and any similar assessments that may be issued for years subsequent to 2007.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)


Note 11.	Comprehensive Income

The components of comprehensive income, net of related tax, are as follows:

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2011			2010			2011			2010
	(In millions)

Net earnings including noncontrolling interests	$	83		$	729		$	544		$	1,071
Unrealized gain (loss) on investments		18			(9	)		(41	)		13
Deferred gain (loss) on hedging activities		–			(13	)		1			13
Pension liability adjustment		2			11			8			(2	)
Foreign currency translation adjustment		(209	)		(65	)		(707	)		424
Comprehensive income		(106	)		653			(195	)		1,519
Less: Comprehensive income (loss) attributable to noncontrolling interests		3			(3	)		4			(6	)
Comprehensive income attributable to controlling interests	$	(109	)	$	656		$	(199	)	$	1,525

Note 12.

Other (Income) Expense - Net

The following tables set forth the items in other (income) expense:

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2011			2010			2011			2010
	(In millions)

Gain on Golden Peanut revaluation	$	–		$	(71	)	$	–		$	(71	)
Unrealized gains on interest rate swaps		–			(55	)		–			(24	)
Other – net		(30	)		14			(12	)		(20	)
Other (Income) Expense - Net	$	(30	)	$	(112	)	$	(12	)	$	(115	)

The $71 million gain on Golden Peanut revaluation was recognized as a result of revaluing the Company’s previously held investment in Golden Peanut in conjunction with the acquisition of the remaining 50 percent interest (“Golden Peanut Gain”) based on the guidance of ASC Topic 805, Business Combinations.

Note 13.

Segment Information

The Company is principally engaged in procuring, transporting, storing, processing, and merchandising agricultural commodities and products. The Company’s operations are organized, managed, and classified into three reportable business segments: Oilseeds Processing, Corn Processing, and Agricultural Services. Each of these segments is organized based upon the nature of products and services offered. The Company’s remaining operations, which include wheat processing, cocoa processing, and its financial business units, are not reportable segments, as defined by ASC Topic 280, Segment Reporting, and are classified as Other.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 13.

Segment Information (Continued)

Intersegment sales have been recorded at amounts approximating market. Operating profit for each segment is based on net sales less identifiable operating expenses, including an interest charge related to working capital usage. Also included in segment operating profit is equity in earnings of affiliates based on the equity method of accounting. Certain Corporate items are not allocated to the Company’s reportable business segments. Corporate results principally include the impact of LIFO-related inventory adjustments, unallocated corporate expenses, unallocated net interest costs, and the after-tax elimination of income attributable to mandatorily redeemable interests in consolidated subsidiaries.

Prior year sales to external customers by segment and intersegment sales have been reclassified to conform to the current year’s presentation resulting in reclassified net sales at the segment level with no impact to total net sales or operating profit by segment.

For detailed information regarding the Company’s reportable segments, see Note 16 to the consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended June 30, 2011.

	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2011		2010		2011		2010
	(In millions)

Sales to external customers
Oilseeds Processing	$	7,513	$	5,848	$	15,839	$	11,939
Corn Processing		3,158		2,449		6,451		4,604