Commodities giant Archer Daniels Midland has said it is continuing to increase its investment outside the US in light of the country’s drought pushing corn prices up.

ADM COO Juan Luciano told analysts yesterday (31 July) the company has reduced its allocation of capital in order to be “prudent going forward”, given the elevated working capital demands the higher corn prices have placed on the firm.

He added: “We continue to increase our investment outside the US to balance our global footprint. In terms of Ag Services, per se, we are implementing a set of contingency plans, just to make sure we match our cost position with maybe a reduced volume for the year. So several things are being put in place right now.”

Drought conditions have continued to move across around two-thirds of the US where extreme weather conditions have caused corn prices to spike. The US Department of Agriculture has warned the drought will reduce corn yields this year, prompting fears of a spike in prices of the commodity and pressure on feed costs.

ADM, which converts corn, oilseeds, wheat and cocoa into products for food, animal feed, industrial and energy uses yesterday booked a drop in full-year profits as corn prices hit earnings in the fourth quarter.

Craig Huss, ADM’s chief risk officer told analysts on the firm’s earnings call the company was “certainly concerned” about the quality of the corn crop being turned out this year. “You’re always concerned when there is heat on a crop like this. We are making all kinds of plans of alternatives that we can do.”

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While the drought has reduced the potential size of the US corn crop, president and CEO Pat Woertz said ADM is tracking the development of other crops in North America and Europe.

“While US crop carryouts are expected to be low, we have an exceptional and experienced business team to manage through this environment. Conditions like these demonstrate the vital role of our global agra business. As weather has regional effects on crops, we respond by working with our customers to provide the best alternatives to meet their needs from all growing regions of the world.

“With our solid balance sheet, we are prepared to handle an environment of higher commodity prices. Even with the recent surge in commodity prices, we still have about $3bn of available credit capacity globally.”

CFO Ray Young said fixed-price contracts for its corn sweeteners were locked-in for the 2012 financial year, with contracts for 2013 not yet negotiated.

“We will get into the negotiation towards the end of the calendar year, and we will look at the market at that point in time and we will negotiate with the customers, in terms of arriving at contract prices reflective of market conditions.”