Archer Daniels Midland

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The Archer Daniels Midland Company (NYSE: [ADM]), based in Decatur, Illinois, operates more than 270 plants worldwide, where cereal grains and oilseeds are processed into numerous products used in food, beverage, nutraceutical, industrial and animal feed markets worldwide.

ADM also provides agricultural storage and transportation services. Company divisions include: ADM Cocoa, ADM Corn Processing, ADM Food Additives, ADM Lecithin, ADM Milling, ADM Monoglycerides, ADM Vitamin E, ADM Protein Specialties, ADM Food Oils. The American River Transportation Company is a subsidiary of ADM. ADM's revenues for fiscal 2005 (ending June 30, 2005) were US $35,943.8 millions.

Contents

1 Products
2 History

2.1 Price Fixing Investigation

3 Critiques of ADM
4 References
5 External Links

Products

Typical products include oils and meal from soybeans, cottonseed, sunflower seeds, canola, peanuts, flaxseed and corn germ, syrup, starch, glucose, dextrose, crystalline dextrose, high-fructose sweeteners, ethyl alcohol, and wheat flour. End uses are consumption by people and livestock, and fuel additives.

History

In 1902, George A. Archer and John W. Daniels began a linseed crushing business. In 1923, Archer-Daniels Linseed Company acquired Midland Linseed Products Company, and the Archer-Daniels-Midland Company was formed. Every decade since its corporate inception, ADM has added at least one major profit center to its agribusiness: milling, processing, specialty feed ingredients, specialty food ingredients, cocoa, nutrition, and more.

Price Fixing Investigation

In 1996, ADM was the subject of a price fixing investigation by the U.S. Justice Department. Senior ADM executives were indicted on criminal charges for engaging in price-fixing within the international lysine market. Three of ADM's top officials, including vice chairman Michael Andreas, were eventually sentenced to federal prison in 1999. Moreover, the company was fined $100 million, the largest antitrust fine in U.S. history.Hunter-Gault, Charlayne. "ADM: Who's Next?" MacNeil/Lehrer Newshour. PBS. October 15, 1996. See transcript here [link] In addition, according to ADM's 2005 annual report a settlement was reached under which ADM paid $400 million in 2005 to settle a class action antitrust suit.Archer Daniels Midland Company. 2005 Annual Report. p. 52, note 15. See report at [link] Kurt Eichenwald wrote a non-fiction book The Informant describing the investigation.

Using the investigation as an example, Ronald W. Cotterill of the Food Marketing Policy Center at the University of Connecticut shows that 100 percent or more of overcharges resulting from price fixing are passed through to consumers. Cotterill, Ronald W. "Estimation of Cost Pass Through to Michigan Consumers in the ADM Price Fixing Case". University of Connecticut. 1998. See paper at [link]

Howard Buffett, son of billionaire Warren Buffett, served at one time as an ADM vice president and as a member of the Board of Directors. However, Buffett resigned as VP in the wake of the FBI price fixing investigation. In addition, he has since resigned his seat on the board.

Critiques of ADM

ADM's receipt of federal agribusiness subsidies have come under criticism. According to the Cato Institute, a Libertarian think tank, "ADM has cost the American economy billions of dollars since 1980 and has indirectly cost Americans tens of billions of dollars in higher prices and higher taxes over that same period. At least 43 percent of ADM's annual profits are from products heavily subsidized or protected by the American government. Moreover, every $1 of profits earned by ADM's corn sweetener operation costs consumers $10, and every $1 of profits earned by its ethanol operation costs taxpayers $30."Bovard, James. "Archer Daniels Midland: A Case Study In Corporate Welfare". Cato Policy Analysis No. 241. CATO Institute. September 26, 1995. See study at [link]

Prudential Securities analyst John McMillin estimated that ADM's $746 million in profits in fiscal year 1995 (ending June 30) was derived as follows:

corn sweeteners, 39 percent (or $290,940,000),
total oilseed, 25 percent,
flour milling, 12 percent,
biochemicals, 5 percent,
ethanol, 4 percent (or $29,840,000), and
other, 15 percent.(136)

According to this study, at least 43 percent of ADM's annual profits are from products heavily subsidized or protected by the U.S. government. This figure could be higher because the gain derived by ADM from various domestic crop support programs and export subsidies is difficult to quantify.

ADM's lobbying and campaign contributions have encouraged the continuation of the United States federal sugar program (of trade barriers and price supports) by Congress, costing US consumers roughly $3 billion a year.^{[[Citing sources citation needed]]} ADM also lobbied to create and perpetuate federal ethanol subsidies. Some commentators have concluded that the ADM experience demonstrates the need for campaign finance reform.^{[[Citing sources citation needed]]}

ADM advertises extensively on national television, which is unusual for a company that does not sell to consumers. According to the company, its ["Resourceful by Nature"] 2006 television advertising campaign is intended to demonstrate "...[the] relationship between ADM and the farmer — and its importance to the [US] economy and [US] way of life."

References

External Links

[Archer Daniels Midland website]
[Archer Daniels Midland: A Case Study In Corporate Welfare]
[Archer Daniels Midland: Price Fixer to the World]
[Former Top ADM Executives, Japanese Executive, Indicted In Lysine Price Fixing Conspiracy] - United States Department of Justice press release
[Chocolate Worker Slavery]
[ADM Forex Affiliate]
[This American Life piece on ADM price-fixing]

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