Archer Daniels Midland: A Giant Agribusiness Finds Itself Back In The Dock
ADM is once again besieged - by Hollywood stars and green campaigners
When Matt Damon, star of the Bourne trilogy, sat down for lunch a
few months ago at the Hog Trough Too, a restaurant in the village of
Moweaqua in central Illinois, it may have sent a shiver down the spine
of executives at Archer Daniels Midland (ADM), the giant US
Damon was filming a scene for his latest movie -
The Informant - which recounts how the whistle was blown on ADM's
price-fixing tactics in the 1990s. The Hog Trough Too had been recast
as a 90s diner - the Cat & Griddle - and old ADM hands could recall
the traumatic events 15 years earlier that put the company at the heart
of what was then the US's biggest price-fixing scandal.
worked hard over the past decade to recover from a scandal that saw
some of its senior executives jailed and earned it a then record $100m
(£55m) antitrust fine. Far from being dragged down by the scandal, ADM
has prospered. It remains one of the most influential food companies in
the world with recently announced annual sales of $70bn and a wide
product range that lurks anonymously among the groceries that grace
supermarket shelves around the world.
"We've moved on, and today
ADM is a leader in the results we achieve and the way that we achieve
those results," an ADM spokesman said. "ADM has a robust ethics
program, with practices and policies that align our actions with our
But in the 90s not everyone at ADM embraced those
values. According to Mark Whitacre, the unofficial mantra at that time
was: "The competitor is our friend and the customer is our enemy."
Whitacre was at that time a rising ADM star, head of the company's
bioproducts division and, unbeknown to his colleagues, an FBI
informant. For nearly three years he secretly taped the meetings at
which ADM and other companies fixed the price of lysine, a food
additive. The evidence he gathered was to be crucial in the antitrust
case against the company.
will be portrayed by Damon in the movie, which is scheduled for release
next year. Although hailed as a national hero, Whitacre ultimately
spent nearly nine years in a federal prison after it emerged that not
only was he working for the FBI but at the same time stealing $9m from
his employers. Whitacre suffered from bipolar disorder during his work
for the FBI.
The residents of Moweaqua, where Whitacre lived in
the village's most luxurious home, have enjoyed rubbing shoulders with
the stars. But not everyone is excited at the prospect of an awkward
truth being revisited. In Decatur, a 20-mile drive north of Moweaqua
and home to ADM, some residents argue that the film will reflect badly
on the community by glorifying Whitacre.
The company does not
share that view. Although it did not allow filming at its plant on
safety grounds, ADM cooperated with the film production team. It is
more concerned with looking to the future than dwelling on the past.
1995, ADM was a company made up of close to 15,000 people," a spokesman
said. "All but a very few were responsible hardworking people who went
to work every day to do an honest day's work. The success of our
company then and now is due to the efforts of our people."
more concerned to rebut the arguments of modern-day activists than
explain the actions of past executives, because although ADM has worked
hard to improve its corporate ethics, the company is never far from
controversy. It has been accused of endangering the Amazon rainforest
and encouraging the trafficking of child labour in Africa. The
allegations are denied by ADM, which points to a business code of
conduct providing the framework that allows the company to operate in a
manner consistent with the highest social and environmental standards.
care deeply about human rights and the responsible, sustainable
development of agriculture and bioenergy throughout the world," the ADM
spokesman said. But though ADM is happy to counter the activists'
concerns, the company is less voluble on another contentious issue
relating to the benefit it receives directly and indirectly from US
farm subsidies and tax credits.
As a food processor ADM has a
pivotal position between farmers and food producers. It takes corn,
wheat, cocoa, soya beans, rapeseed, sunflower seeds, palm, cotton,
peanuts, coconut and subjects them to a variety of pressings and
processing to provide oils, flour, beans, ethanol, meals, sweeteners
and a host of other ingredients that end up in soft drinks, cereals,
chocolate, jam, margarines, snacks, dressings and biofuels.
is the world's largest corn processor and has the largest market share
in two corn-based products: high-fructose corn syrup, a sweetener, and
ethanol, which has enflamed the controversy over biofuels. The switch
by the big agribusiness companies to process increasing amounts of corn
for fuel rather than food has become the subject of heated debate. The
green credentials of biofuels are being questioned and there are
genuine fears that corn prices are inflated by the quest to match
government targets for corn-based fuels.
ActionAid, the activist
charity, suggested that the drive for increased use of biofuels by
developed countries had been a major factor in pushing 760 million
people closer to hunger. "The rise of biofuel production and the
increasing impact of climate change coupled with an unparalleled
decrease in agricultural aid are creating a triple whammy for poor
countries," said Tom Sharman, policy officer at ActionAid.
The Environmental Working Group (EWG), which campaigns to protect public health and the environment, is also critical.
Drunk on ethanol
are driving drunk on ethanol," said Sandra Schubert, EWG director of
government affairs. "When the push for increased ethanol production was
mandated by the US government it was based on good intentions. But what
we are seeing now is that this push for ethanol is not having the
desired effects. We are seeing some disturbing side effects from
ethanol production and we believe it is time to step back, suspend the
mandate which calls for 9bn gallons of ethanol to be produced this
year, and examine whether ethanol is a truly renewable fuel."
is not a view shared by ADM. It is regarded as one of ethanol's main
cheerleaders. The company is expanding its ethanol capacity to 1.65bn
gallons a year.
"ADM believes a retreat from these biofuels would
be shortsighted," a spokesman said. "It would undercut the investment,
the momentum and the commitment needed to make second-generation
biofuels a reality. And it would result in even higher gas prices.
retreat from biofuels would also undercut development of advanced seed
and farming technologies, which can greatly increase crop yields in the
US and globally. Long term, the best solution to rising food demand and
prices is the development of more crops that provide more food and more
Schubert also points out that ADM is a major indirect beneficiary of the US subsidies for corn and ethanol.
is our country's most heavily subsidised crop and has received $56bn
from the government over the last 12 years," she said. "Ethanol gives
the blender a tax credit of 45 cents a gallon - just reduced from 51
cents. I would have thought ADM is in a good place."
ADM would not answer questions on subsidies.
any benefit the company may receive directly or indirectly from
subsidies is doing little to help its share price. In April, the
company's stock hit a 52-week high of $48.95. Since then, the share
price has headed steadily south as investors fretted about the price of
corn, which hit an all-time high in the summer amid reports of stock
shortages. But while corn prices began to retreat, the ethanol backlash
gathered pace. Last month, ADM's share price hit a 52-week low of
$24.40 after disappointing results that left analysts worrying about
the longer-term outlook and the US government's commitment to ethanol.
results confirmed that for ADM rising commodity prices have been a
double-edged sword. In the year to June 2008, ADM's sales rose by 59%
to $69.8bn. Of that $25.8bn uplift, about 90% was attributable to
higher commodity prices. But higher selling prices also mean higher
costs and some analysts who tuned into the results conference felt ADM
was hinting at tougher times ahead.
Patricia Woertz, ADM's chairwoman and chief executive, saw it differently.
faced changing market dynamics with very fluid and very diverse
conditions," she said. "Now we see a very different set of
opportunities and we remain very optimistic."