Oligopoly profile: Archer Daniels Midland
If you think you are standing up against big business and big agriculture by chowing down on a soy burger washed down with a glass of soy milk, think again. More likely than not, that soy burger and that soy milk have been based on textured protein processed by agribusiness giant Archer Daniels Midland (ADM), a $500 billion a year company.
ADM's motto is "The Shape of What's to Come." While the term doubtless refers to the company's cutting-edge technologies, it also indicates the future of agriculture through the world, and that future consists of a relentless set of all-controlling oligonomies. The world's #1 grain and corn syrup company, ADM has been repeatedly brought to court by its customers and by governments because for price fixing.
ADM pretty much flies under the radar for most people because it has no real retail presence. But as a powerful oligonomy, ADM squeezes farmers and its customers (food processing and chemical companies) ruthlessly. It wields enormous political power as well, thanks to a major program of political donations to both parties, and has become a corporate "welfare queen".
As a report of the libertarian Cato Institute puts it, "The Archer Daniels Midland Corporation (ADM) has been the most prominent recipient of corporate welfare in recent U.S. history. ADM and its chairman Dwayne Andreas have lavishly fertilized both political parties with millions of dollars in handouts and in return have reaped billion-dollar windfalls from taxpayers and consumers."
Funded as a linseed crushing company in 1902, ADM has added new divisions on a regular basis. After a combination of acquisitions and organic expansion is now a world leader in processing and making products from soybeans, corn, cocoa, wheat, peanuts, rice, canola, barley, sunflower seeds and cottonseed. The company has over 270 processing plants. Among the products they resell are lecithin, corn sweeteners, gasohol, paint solvents, and animal feed, all based on the rendering of agricultural products like soybeans and corn.
The company has a worldwide presence, with recent acquisitions in China, Brazil, Turkey, and Bolivia. (Incidentally, ADM has a major stake in Mexican tortilla maker Gruma). The company has its own major storage and transportation resources, with over 2,000 barges, 800 tractor-trailers and 19,500 railcars. It is also a leader in commodity trading in a variety of crop products.
ADM is a major innovator two basic technologies:
- Separation technology, rendering raw materials like soy into a variety of different products for both food and industrial uses.
- Fermentation, which is used, for example, to turn corn into ethanol, lactic acids, and other products.
Products
We can divide ADM products into three basic areas: food, feed, and industry, even though many ADM plants used the same materials to produce products for all three areas.
Food products
- Acidulants -- lactic acid and citric acid are used for a wide range of food products for adjusting acid balance and killing bacteria
- Baking aids -- for industrial bakers, ADM provides sweeteners, baking powder, yeast foods, dough conditioners, dry honey and molasses, and other baking products.
- Cocoa -- ADM is the largest cocoa processor in the world (beating out Cargill).
- Emulsifiers and stabilizers -- Like lecithin, starches, and xanthan gum, which are used by food manufacturers to adjust texture and freshness
- Flour -- custom milled flours for manufacturing breads, cakes, tortilla, etc. ADM is the #1 milling company in the US.
- Nutritional additives -- Vitamin E, choline, soy dietary supplements (isoflavones), and soluble fiber
- Oils and fats -- ADM is the #1 cooking oil company in the world, and makes shortening, and margarine.
- Proteins -- Soy and wheat proteins, which are added to a number of food products, used in meat substitutes, soymilk, protein bars, and other foods.
- Sweeteners -- Corn syrups, maltodextrin, dextrose, fructose, and others used in food manufacturing (#1 over Cargill)
Animal feed
ADM Alliance Nutrition sells feeds for everything from cows and horses to deer, goats, and game birds. The Alliance Nutrition group was formed in 2002 thanks to ADM's roll-up of a number of well-known feed companies, including MoorMan's, Consolidated Nutrition, Supersweet, Master Mix, and Tindle Feeds, most of which were founded in the 1800s.
ADM also produces raw materials for other animal feed companies.
Industrial products (all made from agricultural products)
- Gasohol from ethanol and bio diesel
- Non-petroleum oils for wood treatment, paints, coatings, and printer's ink
- Solvents and emulsifiers for household cleaning, raw materials for chemistry companies
- Plastics and other materials, including non-petroleum based polymers
- Starches for paper manufacturing, wallboards, etc,
Complaints against ADM (from corporatewatch.com)
Activities by ADM have resulted in criminal convictiosn of certain principals, fines (usually wrist slaps), and major lawsuits from its customers.
Subsidies
ADM benefits from corn subsidies, from restrictions on sugar growing and importation (a big plus for its corn syrups), and major subsidies for ethanol-based fuels, of which it is the main producer. ADM scoops up large amounts of federal R&D money as well.
Price-fixing
In 1996, the company pleaded guilty of conspiring with Japanese and Korean companies to fix the price of lysine (used as for livestock feed) and citric acid.
ADM was sued in 2002 for fixing the price of high-fructose corn syrup along with rivals Cargill and A. E. Staley Manufacturing. The plaintiffs, thousands of food companies including Coca Cola and Pepsico, claim that they were overcharged by $1.4 billion.
The company is facing over two dozen civil suits for price fixing the above materials and others.
Arrogance
In 1995, former ADM CEO Dwayne Andreas is famously quoted as having stated to a reporter, "There isn't one grain of anything in the world that is sold in a free market. Not one! The only place you see a free market is in the speeches of politicians. People who are not in the Midwest do not understand that this is a socialist country."
Whether he precisely said it or not (the reporter was the only witness), the sentiments do reveal the truth about the power of large corporations to dictate their own terms at the expense of consumers, suppliers, and, eventually, taxpayers.
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