Citing 'poor margins' the US agri-giant announced its plant in Tres Passos, Rio Grande do Sul will shut down immediately.
The plant, which crushes soybeans and refines and bottles soybean oil, has a capacity to process 1,000 tonnes of beans a day.
The Rio Grande do Sul region is suffering from a severe drought that more than halved its soybean output this season.
ADM cited 'poor margins' as the key reason for closing the plant. Transporting grains to feed the crusher from other states further north in Brazil or from Paraguay can bring high freight costs and inter-state taxes.
Despite the knock to Brazilian soybean stocks, global inventories continue to rise after last year's price-spiking draw-down, with oilseed production for 2004-05 projected to reach 390.2 million tonnes, providing a 'comfort-zone' for inventory levels.
The world stocks-to-use ratio for soybeans rose in February by about 3 per cent to 115 days of forward cover, according to figures from the US department of agriculture.
Soybeans represent the starting point for a range of food ingredients - oil, proteins, isoflavones, even milk; products that are enjoying growing popularity on the back of consumer demand for health-positioned food products.
This small increase in ratio will contribute to less price volatility for soy, that witnessed 15-year highs in recent years.
Investment bank Goldman Sachs predicts the high inventory levels will limit any 'upside price' for soybeans in the near term, despite indications that production may suffer over the next few years.
The bank cites the recently discovery of soy rust in the US, and early indications that the Brazilian 2005/2006 crop may fail expectations, as vulnerabilities to global production.
"However, the record high level of global soybean stocks suggests it would take several years of bad harvests to run down inventories to the point where prices would be significantly pressured to the upside," says Goldman Sachs.
Soy oil and palm oil are, currently, the two most popular vegetable oils on the global food market. Palm oil, second only to soybean oil in terms of global demand, accounts for 28 per cent of total edible oil sales.