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Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK(Continued)A sensitivity analysis has been prepared to estimate the Company’s exposure to market risk of its daily netcommodity position. The Company’s daily net commodity position consists of inventories, related purchase andsale contracts, and exchange-traded futures contracts, including those contracts used to hedge portions ofproduction requirements. The fair value of such daily net commodity position is a summation of the fair valuescalculated for each commodity by valuing each net position at quoted futures prices. Market risk is estimated as thepotential loss in fair value resulting from a hypothetical 10% adverse change in such prices. Actual results maydiffer.2007 2006Fair Value Market Risk Fair Value Market Risk(In millions)Highest long position $ 703 $ 70 $ 510 $ 51Highest short position 565 57 574 57Average position long (short) 180 18 (203) (20)The change in fair value of the average position for 2007 compared to 2006 was principally a result of changes inthe daily net commodity position and commodity prices.Marketable Equity SecuritiesMarketable equity securities, which are recorded at fair value, have exposure to price risk. The fair value ofmarketable equity securities is based on quoted market prices. Risk is estimated as the potential loss in fair valueresulting from a hypothetical 10% adverse change in quoted market prices. Actual results may differ.2007 2006(In millions)Fair value $ 227 $ 640Market risk 23 64The decrease in fair value for 2007 compared to 2006 resulted primarily from disposals of securities partially offsetby increases in fair market value of certain securities.Limited PartnershipsThe Company is a limited partner in various private equity funds which invest primarily in emerging markets. TheCompany accounts for these limited partnerships using the equity method of accounting. Therefore, the Companyis recording in the consolidated statement of earnings its proportional share of the limited partnerships’ net incomeor loss. The limited partnerships value their investments at fair value. Risk is estimated as the potential loss in fairvalue resulting from a hypothetical 10% adverse change in market prices of the limited partnerships’ investments.Actual results may differ.2007 2006(In millions)Fair value of partnerships’ investments $ 188 $ 210Market risk 19 21The decrease in fair value for 2007 compared to 2006 resulted primarily from returns of capital.36
Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK(Continued)CurrenciesIn order to reduce the risk of foreign currency exchange rate fluctuations, except for amounts permanently investedas described below, the Company follows a policy of entering into currency exchange forward contracts to mitigateits foreign currency risk related to transactions denominated in a currency other than the functional currenciesapplicable to each of its various entities. The instruments used are readily marketable exchange-traded futurescontracts and forward contracts with banks. The changes in market value of such contracts have a high correlationto the price changes in the currency of the related transactions. The potential loss in fair value for such net currencyposition resulting from a hypothetical 10% adverse change in foreign currency exchange rates is not material.The amount the Company considers permanently invested in foreign subsidiaries and affiliates and translated intodollars using the year-end exchange rates is $5.4 billion at June 30, 2007, and $4.5 billion at June 30, 2006. Thisincrease is due to an increase in retained earnings of the foreign subsidiaries and affiliates and appreciation offoreign currency exchange rates. The potential loss in fair value resulting from a hypothetical 10% adverse changein quoted foreign currency exchange rates is $543 million and $454 million for 2007 and 2006, respectively. Actualresults may differ.InterestThe fair value of the Company’s long-term debt is estimated using quoted market prices, where available, anddiscounted future cash flows based on the Company’s current incremental borrowing rates for similar types ofborrowing arrangements. Such fair value exceeded the long-term debt carrying value. Market risk is estimated asthe potential increase in fair value resulting from a hypothetical .5 % decrease in interest rates. Actual results maydiffer.2007 2006(In millions)Fair value of long-term debt $4,927 $ 4,387Excess of fair value over carrying value 110 257Market risk 204 218The increase in fair value of long-term debt in 2007 resulted principally from the Company’s issuance of $1.2billion convertible senior notes partially offset by repayment of $400 million of debentures and other principalpayments of long-term debt.37
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German - ADM

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