WEBVTT 00:00:00.000 --> 00:00:02.819 Welcome to the Deep Dive. Today, we are pulling 00:00:02.819 --> 00:00:06.139 back the curtain on one of the great invisible 00:00:06.139 --> 00:00:08.480 architects of the modern world. That's a great 00:00:08.480 --> 00:00:10.099 way to put it. I mean, this is a company that 00:00:10.099 --> 00:00:12.140 touches literally everything you eat, probably 00:00:12.140 --> 00:00:15.519 the fuel in your car and its massive influences, 00:00:15.599 --> 00:00:18.199 often, you know, completely silent. Right. Until 00:00:18.199 --> 00:00:20.160 it isn't. Until it explodes into a headline. 00:00:20.420 --> 00:00:24.440 We are talking about Archer Daniels Midland, 00:00:24.620 --> 00:00:28.440 or as most people know it, ADM. And if you are 00:00:28.440 --> 00:00:30.620 trying to understand the architecture of the 00:00:30.620 --> 00:00:33.820 global food supply chain, you just have to understand 00:00:33.820 --> 00:00:36.299 ADM. They are not just a player. No. They're 00:00:36.299 --> 00:00:39.909 the bedrock. Billions of meals, gallons of fuel, 00:00:39.969 --> 00:00:41.850 all built on the infrastructure they created. 00:00:42.009 --> 00:00:44.509 Our mission today is to go way beyond the corporate 00:00:44.509 --> 00:00:47.429 description and really define what this agribusiness 00:00:47.429 --> 00:00:49.810 giant does. OK, so let's unpack this for you, 00:00:49.869 --> 00:00:51.729 the listener. This is a Fortune 500 company. 00:00:51.850 --> 00:00:54.630 We're talking number 35 in 2023. And the revenue 00:00:54.630 --> 00:00:57.329 numbers are just staggering. For 2024, it's clocking 00:00:57.329 --> 00:01:01.289 in at, what, $85 .5 billion? Yeah, $85 .5 billion. 00:01:01.509 --> 00:01:03.750 And when we talk about scale, it's not just money. 00:01:03.810 --> 00:01:07.750 It's physical presence. 270 processing plants. 00:01:07.989 --> 00:01:11.430 And over 400 crop procurement facilities all 00:01:11.430 --> 00:01:14.150 over the globe. Scattered everywhere. That isn't 00:01:14.150 --> 00:01:16.569 just a business. That is global infrastructure. 00:01:16.950 --> 00:01:19.930 It really is. Exactly. And their core identity, 00:01:20.049 --> 00:01:22.489 it's this multinational corporation focused on 00:01:22.489 --> 00:01:25.069 food processing and commodities trading. They 00:01:25.069 --> 00:01:27.530 take the essential building blocks. The raw stuff. 00:01:28.030 --> 00:01:30.609 Cereal grains, oil seeds, yeah. And they convert 00:01:30.609 --> 00:01:33.579 them into, I mean. Thousands of different products 00:01:33.579 --> 00:01:36.040 for food, beverages, nutraceuticals, animal feed, 00:01:36.159 --> 00:01:38.640 industrial markets. They're the bridge. A bridge 00:01:38.640 --> 00:01:41.420 between the field and the factory. That's it. 00:01:41.540 --> 00:01:44.140 So our objective today is to move beyond these 00:01:44.140 --> 00:01:47.219 gigantic numbers. We want to understand the history, 00:01:47.400 --> 00:01:50.640 the decisions that turned a tiny, linseed -crushing 00:01:50.640 --> 00:01:53.719 business into a world power. And the product 00:01:53.719 --> 00:01:56.280 portfolio. It's so much more than people think. 00:01:56.670 --> 00:01:59.090 We have to talk about that. From the high fructose 00:01:59.090 --> 00:02:01.750 corn syrup in your soda to the ethanol in your 00:02:01.750 --> 00:02:04.670 gas tank. And we absolutely have to confront 00:02:04.670 --> 00:02:07.590 the long, dark shadow cast by their repeated 00:02:07.590 --> 00:02:09.949 high profile scandals. Which is the real story 00:02:09.949 --> 00:02:12.240 here in a way. I mean, one of these scandals 00:02:12.240 --> 00:02:15.080 was so audacious, so completely wild, it inspired 00:02:15.080 --> 00:02:17.939 a novel and then a major Hollywood film, The 00:02:17.939 --> 00:02:20.199 Informant. And that juxtaposition, that's the 00:02:20.199 --> 00:02:23.439 central narrative of ADM. They are, on one hand, 00:02:23.460 --> 00:02:26.259 completely indispensable to the smooth functioning 00:02:26.259 --> 00:02:29.500 of global food trade. They act as a stabilizing 00:02:29.500 --> 00:02:31.719 force. Right, especially during crises. But on 00:02:31.719 --> 00:02:34.199 the other hand, they are just consistently entangled 00:02:34.199 --> 00:02:36.800 in these really serious... ethical and legal 00:02:36.800 --> 00:02:39.400 controversies. And it's not new. Oh, not at all. 00:02:39.439 --> 00:02:40.960 Stretches back over a century. They started in 00:02:40.960 --> 00:02:43.680 1902 in Minneapolis, Minnesota, eventually moved 00:02:43.680 --> 00:02:46.419 their headquarters to Chicago in 2014. And their 00:02:46.419 --> 00:02:49.379 whole history reveals this constant tension between 00:02:49.379 --> 00:02:53.860 being an indispensable necessity and, well, alleged 00:02:53.860 --> 00:02:57.139 misconduct. To really grasp the modern behemoth 00:02:57.139 --> 00:02:59.460 that ADM is today, we have to start at the seed. 00:03:00.300 --> 00:03:03.680 Literally. Let's trace that path from crushing 00:03:03.680 --> 00:03:08.000 linseed oil to, well, global dominance. The foundation 00:03:08.000 --> 00:03:10.840 was laid in the early 20th century. It all begins 00:03:10.840 --> 00:03:14.479 with one man, John W. Daniels, and his linseed 00:03:14.479 --> 00:03:16.819 crushing business in Minneapolis back in 1902. 00:03:17.159 --> 00:03:20.219 Okay, so for context, what was linseed oil even 00:03:20.219 --> 00:03:22.080 for? It's not something you see on the grocery 00:03:22.080 --> 00:03:24.840 shelf. No, not for eating. It was a critical 00:03:24.840 --> 00:03:27.460 industrial input. It comes from flaxseed and 00:03:27.460 --> 00:03:30.150 is used extensively in... paints, varnishes, 00:03:30.250 --> 00:03:32.889 and especially linoleum flooring. Yeah, linoleum. 00:03:32.909 --> 00:03:35.110 So it was essential for the industrial expansion 00:03:35.110 --> 00:03:37.229 happening all across the U .S. at the time, a 00:03:37.229 --> 00:03:39.169 foundational product. And the partnership that 00:03:39.169 --> 00:03:41.270 actually formed the company name, that came pretty 00:03:41.270 --> 00:03:44.050 quickly after. Very quickly. George A. Archer 00:03:44.050 --> 00:03:47.689 joins the operation in 1903, and by 1905, they 00:03:47.689 --> 00:03:49.870 officially become the Archer Daniels Linceed 00:03:49.870 --> 00:03:52.469 Company. They were focused, but you could already 00:03:52.469 --> 00:03:54.090 see they were thinking about diversification. 00:03:54.430 --> 00:03:56.590 And the move that really cemented their footprint 00:03:56.590 --> 00:04:00.379 in the industry came in 1923. Yes, the acquisition 00:04:00.379 --> 00:04:03.960 of Midland Linseed Products Company. This is 00:04:03.960 --> 00:04:06.060 the moment the name solidifies into the one we 00:04:06.060 --> 00:04:09.280 know today, the Archer Daniels Midland Company. 00:04:09.979 --> 00:04:12.219 But this wasn't just a name change, right? This 00:04:12.219 --> 00:04:15.120 was a massive step toward market dominance. A 00:04:15.120 --> 00:04:18.100 huge step. I mean, how big? Post -acquisition, 00:04:18.100 --> 00:04:21.579 the new ADM commanded assets over $11 million. 00:04:22.000 --> 00:04:24.699 Which was enormous money back then. Enormous. 00:04:24.819 --> 00:04:27.180 And more importantly, they controlled about 35 00:04:27.180 --> 00:04:30.019 % of the entire linseed mill capacity in the 00:04:30.019 --> 00:04:33.000 United States. 35%, just like that. Overnight. 00:04:33.389 --> 00:04:35.189 They went from being a large regional player 00:04:35.189 --> 00:04:38.410 to a true national tower in industrial oil. And 00:04:38.410 --> 00:04:40.750 from there, the expansion just accelerated. It 00:04:40.750 --> 00:04:43.189 did. They listed on the New York Stock Exchange 00:04:43.189 --> 00:04:46.230 in 1924, which gave them the capital they needed 00:04:46.230 --> 00:04:49.550 for even more growth. And by 1927, they'd established 00:04:49.550 --> 00:04:51.870 their dedicated grain division. So they recognized 00:04:51.870 --> 00:04:53.629 they needed to control the sourcing of the raw 00:04:53.629 --> 00:04:56.089 materials, not just the crushing part. Exactly. 00:04:56.209 --> 00:04:59.050 Vertical integration right from the start. And 00:04:59.050 --> 00:05:01.899 diversification wasn't limited to just oil. In 00:05:01.899 --> 00:05:04.339 1930, they made another huge move. This was the 00:05:04.339 --> 00:05:06.899 flour milling. The flour milling. They bought 00:05:06.899 --> 00:05:09.019 control of the Commander Larrabee Corporation, 00:05:09.439 --> 00:05:11.959 which instantly made them a major force there. 00:05:12.040 --> 00:05:15.040 Yeah. They had the capacity to produce 32 ,000 00:05:15.040 --> 00:05:17.560 barrels of flour every single day. Incredible. 00:05:17.579 --> 00:05:21.480 But the real game changer, the technical innovation 00:05:21.480 --> 00:05:24.199 that really dictated ADM's entire trajectory 00:05:24.199 --> 00:05:27.579 for the rest of the 20th century, that came a 00:05:27.579 --> 00:05:30.730 few years later. In 1934. And you're absolutely 00:05:30.730 --> 00:05:33.129 right. You're talking about the shift away from 00:05:33.129 --> 00:05:35.829 linseed and toward the new king of agriculture, 00:05:36.149 --> 00:05:39.529 the soybean. Precisely. In Chicago, they started 00:05:39.529 --> 00:05:41.550 operating the first continuous solvent extraction 00:05:41.550 --> 00:05:45.170 plant. Before this, oil extraction was a messy 00:05:45.170 --> 00:05:47.129 mechanical process. So squeezing it out with 00:05:47.129 --> 00:05:49.329 presses. High -pressure mechanical presses, yeah. 00:05:49.389 --> 00:05:51.970 It was a slower batch -based process, and it 00:05:51.970 --> 00:05:53.970 left a lot of valuable oil behind in the meal. 00:05:54.410 --> 00:05:56.529 It was just inefficient. So explain this new 00:05:56.529 --> 00:05:59.610 process for us. How did continuous solvent extraction 00:05:59.610 --> 00:06:01.829 change the game? Well, think of it like this. 00:06:01.970 --> 00:06:04.389 Instead of just squeezing the oil out with physical 00:06:04.389 --> 00:06:06.930 pressure, they introduced a chemical solvent, 00:06:07.050 --> 00:06:10.569 usually hexene. And this solvent completely dissolves 00:06:10.569 --> 00:06:13.329 the oil out of the crushed seed. The process 00:06:13.329 --> 00:06:17.720 runs nonstop. Continuously. And it is just far, 00:06:17.740 --> 00:06:20.560 far more efficient. It pulls out much more oil 00:06:20.560 --> 00:06:23.000 and it leaves behind a cleaner, higher protein 00:06:23.000 --> 00:06:25.519 meal. Which is valuable in itself for animal 00:06:25.519 --> 00:06:28.139 feed. Hugely valuable. It created two valuable 00:06:28.139 --> 00:06:30.689 product streams from one input. That sounds like 00:06:30.689 --> 00:06:32.870 a complete industrial revolution for agriculture. 00:06:33.170 --> 00:06:35.529 It really was. The source material calls this 00:06:35.529 --> 00:06:38.069 a turning point because it made the large scale 00:06:38.069 --> 00:06:40.230 production of soybean oil, which was quickly 00:06:40.230 --> 00:06:43.730 becoming this popular, cheap, edible oil, incredibly 00:06:43.730 --> 00:06:46.050 cost effective. So this technology basically 00:06:46.050 --> 00:06:48.769 created the modern soybean industry. It fueled 00:06:48.769 --> 00:06:51.319 it. This technological mastery fundamentally 00:06:51.319 --> 00:06:54.319 altered the American agricultural landscape and 00:06:54.319 --> 00:06:56.660 drove the rapid expansion of soybean farming 00:06:56.660 --> 00:06:59.259 across the entire Midwest. And building on this 00:06:59.259 --> 00:07:01.639 foundation of soy processing, they kept innovating. 00:07:01.740 --> 00:07:04.600 By 1965, they registered the original patent 00:07:04.600 --> 00:07:08.620 for textured vegetable protein, TVP. TVP, yeah. 00:07:08.990 --> 00:07:12.310 They started producing it in 1966. And this shows 00:07:12.310 --> 00:07:14.470 they were already looking for these high -value 00:07:14.470 --> 00:07:17.389 applications for their processed materials long 00:07:17.389 --> 00:07:20.569 before plant -based protein became the huge trend 00:07:20.569 --> 00:07:23.009 it is today. They were decades ahead of the curve. 00:07:23.209 --> 00:07:25.670 Decades. So the stage was set for the biggest 00:07:25.670 --> 00:07:28.889 transformation yet. In 1969, they moved their 00:07:28.889 --> 00:07:31.230 headquarters from Minneapolis to Decatur, Illinois. 00:07:31.550 --> 00:07:33.649 Placing them right in the heart of the soybean 00:07:33.649 --> 00:07:36.029 and corn country they now dominated. Exactly. 00:07:36.730 --> 00:07:39.350 And then came the Dwayne Andreas era. Which, 00:07:39.449 --> 00:07:42.250 as you noted earlier, is arguably the most important 00:07:42.250 --> 00:07:44.329 and definitely the most controversial period 00:07:44.329 --> 00:07:46.910 in the company's history. This runs from 1970 00:07:46.910 --> 00:07:50.629 to 1997. Andreas is the one who took a massive 00:07:50.629 --> 00:07:52.889 national processor and turned it into a true 00:07:52.889 --> 00:07:56.490 global empire. So what was his strategy? He took 00:07:56.490 --> 00:07:59.709 over as CEO in 1970, and his strategy was just 00:07:59.709 --> 00:08:01.930 audacious. It was aggressive domestic acquisition 00:08:01.930 --> 00:08:04.470 coupled with incredibly rapid international expansion. 00:08:04.829 --> 00:08:07.629 He was also a master at capitalizing on geopolitical 00:08:07.629 --> 00:08:10.170 shifts. Like the Soviet Union needing American 00:08:10.170 --> 00:08:13.550 green. Exactly. He used that to push ADM's reach 00:08:13.550 --> 00:08:16.329 far beyond the borders of the U .S. He was a 00:08:16.329 --> 00:08:18.800 master of politics and business. And the raw 00:08:18.800 --> 00:08:21.180 data from that period is just incredible. I mean, 00:08:21.199 --> 00:08:24.040 under Andreas, the company's soybean exports, 00:08:24.300 --> 00:08:26.980 they didn't just double or triple. No, they soared 00:08:26.980 --> 00:08:29.300 from one and a half billion dollars to seven 00:08:29.300 --> 00:08:31.779 billion dollars. That's not just managing supply 00:08:31.779 --> 00:08:34.159 chains. That is dominating international trade. 00:08:34.299 --> 00:08:36.860 And this expansion was all about control, wasn't 00:08:36.860 --> 00:08:39.940 it? Absolutely. In 1974, they established their 00:08:39.940 --> 00:08:42.419 first international processing footprints. They 00:08:42.419 --> 00:08:44.840 bought soybean plants in Holland and in Brazil. 00:08:45.059 --> 00:08:47.240 They weren't just exporting U .S. grain anymore. 00:08:47.460 --> 00:08:49.820 They were building global hubs. Right. To service 00:08:49.820 --> 00:08:52.200 local markets, to minimize logistics costs, to 00:08:52.200 --> 00:08:54.379 be everywhere at once. And the final piece of 00:08:54.379 --> 00:08:56.679 the puzzle to make them a true multinational 00:08:56.679 --> 00:09:00.120 commodity trader. That came in 1982. That's when 00:09:00.120 --> 00:09:02.679 they bought a portion of the German firm, Topfer 00:09:02.679 --> 00:09:05.649 International. That acquisition was key. because 00:09:05.649 --> 00:09:08.590 it gave ADM this deep, specialized expertise 00:09:08.590 --> 00:09:11.789 in moving raw commodities globally. So they could 00:09:11.789 --> 00:09:14.509 connect farmers in the Americas to consumers 00:09:14.509 --> 00:09:18.230 and processors in Europe, Asia, everywhere. They 00:09:18.230 --> 00:09:20.110 became the central nervous system for agricultural 00:09:20.110 --> 00:09:23.049 trade. It's also really crucial to note the timing 00:09:23.049 --> 00:09:25.750 of Andreas' departure. He stepped down in 1997. 00:09:26.309 --> 00:09:29.090 He was succeeded by his nephew, G. Allen Andreas. 00:09:29.429 --> 00:09:31.909 And that transition happened just one year after 00:09:31.909 --> 00:09:34.350 the company pleaded guilty to the massive price 00:09:34.350 --> 00:09:36.990 -fixing scandal that defined that era. A shadow 00:09:36.990 --> 00:09:38.570 we are definitely going to discuss in detail 00:09:38.570 --> 00:09:41.990 later. But it marked the end of his, what, quarter 00:09:41.990 --> 00:09:45.110 -century reign? A very tumultuous end. Yeah. 00:09:45.190 --> 00:09:47.659 Now, if we look at the modern strategy. From 00:09:47.659 --> 00:09:50.639 2001 to the present, you see this very conscious 00:09:50.639 --> 00:09:53.769 effort to pivot. A pivot away from just bulk 00:09:53.769 --> 00:09:56.110 commodities. Right, toward higher margin, specialized 00:09:56.110 --> 00:09:58.389 products. You see this especially under later 00:09:58.389 --> 00:10:00.889 CEOs like Patricia Wurtz and the current CEO, 00:10:01.129 --> 00:10:03.950 Juan Luciano. Luciano, who took over in 2014, 00:10:04.370 --> 00:10:06.990 he really drove a major restructuring aimed at 00:10:06.990 --> 00:10:09.429 increasing profitability and reducing that commodity 00:10:09.429 --> 00:10:11.129 market volatility. And that meant aggressive 00:10:11.129 --> 00:10:13.929 acquisitions in specialized ingredients. Nothing 00:10:13.929 --> 00:10:16.370 deinstrates this pivot better than the 2014 deal, 00:10:16.529 --> 00:10:19.110 the acquisition of Wild Flavors. The Swiss -German 00:10:19.110 --> 00:10:22.519 natural ingredient company. Billion dollars. 00:10:22.779 --> 00:10:25.259 Yeah. And you mentioned ADM is the invisible 00:10:25.259 --> 00:10:27.980 architect of our food system. Wild Flavors is 00:10:27.980 --> 00:10:30.080 the architect of the invisible taste in that 00:10:30.080 --> 00:10:33.159 food. And texture and color. Exactly. So why 00:10:33.159 --> 00:10:35.620 was that deal so pivotal? Why spend $3 billion 00:10:35.620 --> 00:10:38.600 on a flavor company? Because the margins on bulk 00:10:38.600 --> 00:10:41.940 corn and soybean oil are razor thin. They are 00:10:41.940 --> 00:10:44.320 highly volatile. They depend on weather, on global 00:10:44.320 --> 00:10:47.470 markets, on politics. Unpredictable. Very. The 00:10:47.470 --> 00:10:49.950 future profitability was in specialized, high 00:10:49.950 --> 00:10:52.490 -motion ingredients. Consumers were demanding 00:10:52.490 --> 00:10:55.350 healthier, cleaner labels, natural flavors, functional 00:10:55.350 --> 00:10:58.090 ingredients. The wild flavors deal instantly 00:10:58.090 --> 00:11:01.610 gave ADM access to that profitable, health -oriented 00:11:01.610 --> 00:11:04.210 food sector. So it reduced the reliance on that 00:11:04.210 --> 00:11:06.830 traditional commodity grind. Dramatically. And 00:11:06.830 --> 00:11:09.009 they just continued down that path. In 2018, 00:11:09.210 --> 00:11:11.659 they acquired the vanilla supplier Rodel. And 00:11:11.659 --> 00:11:14.460 then came that big flurry of deals in 2021 that 00:11:14.460 --> 00:11:17.100 really drove home the new focus. Right. The focus 00:11:17.100 --> 00:11:19.539 on nutrition and specialized feed. Those acquisitions 00:11:19.539 --> 00:11:22.980 were so targeted, a 75 % stake in four pet food 00:11:22.980 --> 00:11:25.779 companies for $415 million. And they bought a 00:11:25.779 --> 00:11:29.240 Serbian soy business, Sojapropane. And, crucially, 00:11:29.440 --> 00:11:32.639 Deerland Probiotics and Enzymes. This is ADM 00:11:32.639 --> 00:11:35.419 moving from simply crushing beans to producing 00:11:35.419 --> 00:11:37.759 these very specific, customized ingredients. 00:11:38.849 --> 00:11:42.129 probiotics, prebiotics, enzymes for both human 00:11:42.129 --> 00:11:44.850 and animal health. And they formalized this shift. 00:11:45.240 --> 00:11:47.919 Internally around 2018, 2019, right, when they 00:11:47.919 --> 00:11:50.639 restructured into those new units. Yes, units 00:11:50.639 --> 00:11:52.759 focused on carbohydrate solutions, nutrition, 00:11:53.120 --> 00:11:55.940 oil seeds, and origination. They're actively 00:11:55.940 --> 00:11:58.279 trying to manage the perception that they're 00:11:58.279 --> 00:12:00.240 just a grain company. Because there's so much 00:12:00.240 --> 00:12:03.000 more now. So much more. And finally, it's important 00:12:03.000 --> 00:12:06.279 to recognize the sobering reality of their global 00:12:06.279 --> 00:12:08.740 picture. The source material noted that ADM saw 00:12:08.740 --> 00:12:11.480 profits rise in 2022. During the global food 00:12:11.480 --> 00:12:13.679 crisis caused by the Russian invasion of Ukraine. 00:12:13.879 --> 00:12:16.559 Yes. While many were scrambling, ADM's logistical 00:12:16.559 --> 00:12:19.460 mastery and their ability to, well, arbitrage 00:12:19.460 --> 00:12:22.059 commodity movements allowed them to profit. It 00:12:22.059 --> 00:12:24.320 just underscores their critical and very profitable 00:12:24.320 --> 00:12:26.820 role in stabilizing essential commodity flows 00:12:26.820 --> 00:12:29.960 during times of intense global instability. Okay, 00:12:30.019 --> 00:12:32.000 so we've tracked the growth and the strategy. 00:12:32.259 --> 00:12:34.559 Now let's really look under the hood at the engine 00:12:34.559 --> 00:12:38.230 itself. How exactly does ADM deploy all this 00:12:38.230 --> 00:12:41.210 infrastructure to generate that $85 .5 billion 00:12:41.210 --> 00:12:44.490 in revenue? Let's drill down into the core business 00:12:44.490 --> 00:12:47.190 segments. And these segments really do reveal 00:12:47.190 --> 00:12:50.009 the industrial mechanism of ADM. They are so 00:12:50.009 --> 00:12:52.409 vertically integrated, they control the process 00:12:52.409 --> 00:12:55.029 from the moment a crop is originated or bought 00:12:55.029 --> 00:12:57.610 from a farmer until the final ingredient is sold 00:12:57.610 --> 00:12:59.610 to a food manufacturer. Let's start with the 00:12:59.610 --> 00:13:02.269 foundation, their traditional core, oilseeds 00:13:02.269 --> 00:13:04.840 processing. This is the historical heart of the 00:13:04.840 --> 00:13:07.500 business. It encompasses the global origination, 00:13:07.820 --> 00:13:11.100 merchandising, crushing, and the further processing 00:13:11.100 --> 00:13:14.039 of a whole range of oilseeds. Soybeans, obviously, 00:13:14.279 --> 00:13:16.940 but also cottonseed, sunflower seeds, canola. 00:13:17.360 --> 00:13:20.840 Flaxseed, palm kernel, deed egg oil. The output 00:13:20.840 --> 00:13:23.320 creates this crucial duality in global markets. 00:13:23.519 --> 00:13:26.500 You get vegetable oils for food, cooking, and 00:13:26.500 --> 00:13:29.019 industrial use, and you get protein meals for 00:13:29.019 --> 00:13:31.370 animal feed. And this segment isn't just a historical 00:13:31.370 --> 00:13:34.389 relic. It is still ADM's biggest revenue generator. 00:13:34.669 --> 00:13:37.289 Absolutely. It proves the enduring power of large 00:13:37.289 --> 00:13:39.750 -scale commodity processing. I was struck by 00:13:39.750 --> 00:13:42.110 the resilience data. I mean, even in the first 00:13:42.110 --> 00:13:44.210 quarter of 2020, right at the start of the COVID 00:13:44.210 --> 00:13:47.610 -19 pandemic, the operating profit for this segment 00:13:47.610 --> 00:13:53.690 rose by $422 million. A 1 .2 % increase. It's 00:13:53.690 --> 00:13:56.440 remarkable stability. especially during a time 00:13:56.440 --> 00:13:59.100 of global market panic. So why is it so stable? 00:13:59.279 --> 00:14:01.480 That stability comes from being essential. I 00:14:01.480 --> 00:14:03.779 mean, no matter the economic climate, people 00:14:03.779 --> 00:14:06.940 and animals need to eat. And processed oils and 00:14:06.940 --> 00:14:09.980 proteins are absolutely fundamental to modern 00:14:09.980 --> 00:14:12.460 food production. Okay, so next up we have the 00:14:12.460 --> 00:14:15.259 highly political and I'm sure highly profitable 00:14:15.259 --> 00:14:17.559 corn processing segment. This is the segment 00:14:17.559 --> 00:14:19.639 that really dictates the ingredients we find 00:14:19.639 --> 00:14:22.299 in a huge range of processed foods. This is the 00:14:22.299 --> 00:14:25.269 sweet side of ADM. The sweets I like. Yeah. This 00:14:25.269 --> 00:14:27.049 involves corn wet milling and dry milling, and 00:14:27.049 --> 00:14:28.769 it's highly concentrated in the American Midwest. 00:14:29.129 --> 00:14:32.350 The outputs are enormous. Sweeteners like corn 00:14:32.350 --> 00:14:34.210 syrup, glucose, dextrose, and of course, the 00:14:34.210 --> 00:14:37.009 most famous one. High fructose corn syrup. HFCS. 00:14:37.490 --> 00:14:39.730 Their position here is so strong, they were ranked 00:14:39.730 --> 00:14:41.870 second on the top 50 global sweetener companies 00:14:41.870 --> 00:14:45.240 list in 2021. But the importance of this segment 00:14:45.240 --> 00:14:48.519 isn't just about food, right? It's deeply tied 00:14:48.519 --> 00:14:52.039 to government policy and fuel. This is the bioenergy 00:14:52.039 --> 00:14:55.159 connection. Absolutely. The profitability of 00:14:55.159 --> 00:14:58.039 corn processing is massively and I mean massively 00:14:58.039 --> 00:15:01.059 underpinned by the U .S. renewable fuel standard 00:15:01.059 --> 00:15:03.860 and ethanol mandates. So government policy is 00:15:03.860 --> 00:15:06.179 creating a guaranteed market for their product. 00:15:06.399 --> 00:15:09.590 A huge. Guaranteed market. The source material 00:15:09.590 --> 00:15:12.230 noted that ADM nearly doubled its capital spending 00:15:12.230 --> 00:15:15.730 back in 2007 to over a billion dollars, specifically 00:15:15.730 --> 00:15:18.950 targeting bioenergy projects. They are the largest 00:15:18.950 --> 00:15:21.809 ethanol producer in the U .S. So their corn processing 00:15:21.809 --> 00:15:24.149 division is profiting immensely, not just from 00:15:24.149 --> 00:15:26.850 market demand for sweeteners, but from a federally 00:15:26.850 --> 00:15:29.929 mandated requirement to blend bioethanol into 00:15:29.929 --> 00:15:32.370 the nation's gasoline supply. It's a powerful 00:15:32.370 --> 00:15:34.610 symbiotic relationship between corporate scale 00:15:34.610 --> 00:15:37.539 and government policy. It creates a captive market 00:15:37.539 --> 00:15:40.000 for a huge portion of the corn harvest. And they've 00:15:40.000 --> 00:15:43.059 looked beyond corn, too. They have. They're always 00:15:43.059 --> 00:15:45.539 looking for the next feedstock. Back in 2008, 00:15:45.679 --> 00:15:48.039 they explored using Jatropha. which is a non 00:15:48.039 --> 00:15:50.740 -food crop, for biofuel in a partnership with 00:15:50.740 --> 00:15:54.139 Daimler and Bayer CropScience. Their core competency 00:15:54.139 --> 00:15:56.899 is processing, so they can switch feedstock based 00:15:56.899 --> 00:15:59.659 on subsidies, market trends, or political mandates. 00:16:00.019 --> 00:16:02.639 Okay, moving on. We come to agricultural services. 00:16:03.000 --> 00:16:05.799 You called this the invisible behemoth that glues 00:16:05.799 --> 00:16:08.200 the whole operation together. I did, because 00:16:08.200 --> 00:16:10.460 it's arguably the most impressive part of their 00:16:10.460 --> 00:16:13.019 whole operation. This is their massive logistics 00:16:13.019 --> 00:16:15.399 and distribution engine. This is the physical 00:16:15.399 --> 00:16:17.990 infrastructure. All of it. their U .S. grain 00:16:17.990 --> 00:16:21.870 elevator network for storage, their global transportation 00:16:21.870 --> 00:16:24.309 network, which includes their own subsidiary, 00:16:24.309 --> 00:16:26.929 American River Transportation Company. They operate 00:16:26.929 --> 00:16:29.629 massive barge sleets on the rivers. Exactly. 00:16:29.629 --> 00:16:32.710 And ADM trucking and their port operations worldwide. 00:16:32.970 --> 00:16:35.230 If we look at the logistics of moving agricultural 00:16:35.230 --> 00:16:38.190 goods, ADM isn't just moving the grain. They 00:16:38.190 --> 00:16:40.350 are the path the grain takes. They are the essential 00:16:40.350 --> 00:16:42.950 middleman. They buy, they store, they count, 00:16:43.190 --> 00:16:47.570 and they transport corn, wheat, oats, rice, barley, 00:16:47.710 --> 00:16:50.450 and oilseeds. They handle the incredibly complex 00:16:50.450 --> 00:16:52.830 coordination required to get a crop from a remote 00:16:52.830 --> 00:16:55.970 farm, store it securely, clean it to standards, 00:16:56.129 --> 00:16:59.029 move it by truck and river barge, and then load 00:16:59.029 --> 00:17:01.110 it onto an ocean -going vessel that's bound for 00:17:01.110 --> 00:17:03.700 another continent. And their role is to resell 00:17:03.700 --> 00:17:06.579 these commodities either as ingredients to food 00:17:06.579 --> 00:17:09.680 manufacturers or as raw materials for their own 00:17:09.680 --> 00:17:12.460 processing plants. Without this massive logistical 00:17:12.460 --> 00:17:15.619 engine, the global supply chain just it grinds 00:17:15.619 --> 00:17:17.559 to a halt. Finally, we should touch on investor 00:17:17.559 --> 00:17:19.599 services. This isn't generating the physical 00:17:19.599 --> 00:17:21.680 revenue of the other segments, but it reveals 00:17:21.680 --> 00:17:24.630 their financial sophistication. ADM Investor 00:17:24.630 --> 00:17:27.750 Services, Inc. It operates as a registered futures 00:17:27.750 --> 00:17:29.890 commission merchant and a clearing member of 00:17:29.890 --> 00:17:31.910 all the principal commodities exchanges in the 00:17:31.910 --> 00:17:35.009 U .S. Why is that critical? Well, when you are 00:17:35.009 --> 00:17:37.569 buying and selling commodities at the scale ADM 00:17:37.569 --> 00:17:40.329 does, you are exposed to massive financial risk 00:17:40.329 --> 00:17:42.950 from prices that fluctuate every second. So they 00:17:42.950 --> 00:17:45.849 need a way to hedge that risk. An extensive integrated 00:17:45.849 --> 00:17:48.869 financial brokerage arm to hedge against risk, 00:17:49.009 --> 00:17:51.549 manage trades and conduct brokerage services 00:17:51.549 --> 00:17:55.559 globally. It is the necessary financial appendage 00:17:55.559 --> 00:17:58.259 to their physical trading operations. They have 00:17:58.259 --> 00:18:00.019 to play in that market to protect themselves. 00:18:00.359 --> 00:18:03.039 We've established that ADM is this essential, 00:18:03.319 --> 00:18:07.220 massive engine for global food and fuel. But 00:18:07.220 --> 00:18:09.599 when you operate at that kind of scale, the environmental 00:18:09.599 --> 00:18:12.339 consequences of your operations are equally immense. 00:18:12.460 --> 00:18:14.670 They have to be. And this is where we shift gears 00:18:14.670 --> 00:18:16.529 a bit and look at the company's environmental 00:18:16.529 --> 00:18:19.069 ledger, which is, frankly, pretty troubling. 00:18:19.329 --> 00:18:21.690 The environmental history of ADM is marked by 00:18:21.690 --> 00:18:25.670 some significant systemic issues that often required 00:18:25.670 --> 00:18:28.589 intervention by federal regulatory bodies like 00:18:28.589 --> 00:18:30.829 the EPA. Let's start with those fines back in 00:18:30.829 --> 00:18:35.730 the early 2000s. In 2001, ADM paid a $1 .46 million 00:18:35.730 --> 00:18:39.170 fine. This was for violating federal and Illinois 00:18:39.170 --> 00:18:41.730 clean air regulations at its Decatur feed plant. 00:18:41.910 --> 00:18:44.029 And more importantly. they were required to spend 00:18:44.029 --> 00:18:46.829 another $1 .6 million specifically on equipment 00:18:46.829 --> 00:18:49.009 upgrades to reduce the air pollution there. So 00:18:49.009 --> 00:18:50.910 it wasn't just a fine, it was a mandate to fix 00:18:50.910 --> 00:18:53.569 the problem. Yes, but that was just the start. 00:18:53.690 --> 00:18:57.670 The larger issue surfaced in 2003, and this involved 00:18:57.670 --> 00:19:00.730 systemic violations across their facilities nationwide. 00:19:01.150 --> 00:19:04.269 This was about the Clean Air Act. It was. ADM 00:19:04.269 --> 00:19:06.730 settled federal air pollution complaints related 00:19:06.730 --> 00:19:08.990 to avoiding the new source review provisions 00:19:08.990 --> 00:19:11.680 of the Clean Air Act. And for those who are unfamiliar, 00:19:12.019 --> 00:19:14.420 the new source review provisions are vital. They 00:19:14.420 --> 00:19:17.039 require facilities to install modern, effective 00:19:17.039 --> 00:19:19.640 pollution control technologies whenever they 00:19:19.640 --> 00:19:22.759 do a major modernization project. And ADM was 00:19:22.759 --> 00:19:25.779 alleged to have modernized plants without implementing 00:19:25.779 --> 00:19:28.819 those required environmental upgrades, basically 00:19:28.819 --> 00:19:30.819 trying to get around the rules. And the scale 00:19:30.819 --> 00:19:32.519 of the settlement that resulted from this was 00:19:32.519 --> 00:19:35.359 just staggering. It was. They paid $4 .5 million 00:19:35.359 --> 00:19:38.589 in penalties. But the bigger cost was they agreed 00:19:38.589 --> 00:19:41.170 to spend hundreds of millions of dollars to eliminate 00:19:41.170 --> 00:19:44.509 more than 60 ,000 tons of pollutants. Pollutants 00:19:44.509 --> 00:19:47.049 like what? Carbon dioxide, particulate matter, 00:19:47.190 --> 00:19:50.849 volatile organic compounds. From 42 plants across 00:19:50.849 --> 00:19:54.779 17 states. 42 plants. So that tells you the failure 00:19:54.779 --> 00:19:57.019 to comply wasn't an isolated incident. It was 00:19:57.019 --> 00:19:59.640 widespread across their entire operational footprint. 00:19:59.940 --> 00:20:03.099 Exactly. Now, turning to climate change, ADM 00:20:03.099 --> 00:20:06.519 reported total CO2 equivalent emissions for 2022 00:20:06.519 --> 00:20:10.319 at over 15 ,000 kilotons. That is an enormous 00:20:10.319 --> 00:20:12.660 carbon footprint. A huge footprint that they 00:20:12.660 --> 00:20:14.779 are now working to reduce. They have set clear 00:20:14.779 --> 00:20:17.720 targets, reducing greenhouse gas emissions by 00:20:17.720 --> 00:20:20.859 25 percent and energy intensity by 15 percent. 00:20:21.660 --> 00:20:24.059 And achieving those reductions relies heavily 00:20:24.059 --> 00:20:26.460 on high -tech solutions. It does, which brings 00:20:26.460 --> 00:20:29.279 us to their ambitious but very troubled foray 00:20:29.279 --> 00:20:32.960 into industrial carbon capture and storage, CCS. 00:20:33.180 --> 00:20:35.500 This is where ADM became a key partner with the 00:20:35.500 --> 00:20:37.900 U .S. government, using massive federal funds 00:20:37.900 --> 00:20:39.859 to essentially experiment with climate mitigation 00:20:39.859 --> 00:20:42.740 technology at scale. The funding came largely 00:20:42.740 --> 00:20:45.559 through the 2009 American Recovery and Reinvestment 00:20:45.559 --> 00:20:48.359 Act via the Department of Energy's ICCS program. 00:20:48.779 --> 00:20:51.460 The goal is pretty simple. proved that large 00:20:51.460 --> 00:20:53.839 -scale industrial CO2 emissions could be captured 00:20:53.839 --> 00:20:56.539 and safely stored deep underground. They ran 00:20:56.539 --> 00:20:59.460 two major projects in Illinois. The first one, 00:20:59.579 --> 00:21:02.299 the Illinois Basin Decatur Project, or IBDP, 00:21:02.660 --> 00:21:05.799 began in 2011. Right. They captured carbon from 00:21:05.799 --> 00:21:08.839 an ADM biofuel facility and injected it into 00:21:08.839 --> 00:21:11.950 the Mount Simon sandstone. a deep saline reservoir. 00:21:12.130 --> 00:21:13.750 And the government put a lot of money into this. 00:21:13.890 --> 00:21:18.630 The DOE contributed $66 .7 million just for that 00:21:18.630 --> 00:21:21.269 initial feasibility study. And at first, the 00:21:21.269 --> 00:21:23.750 results looked positive. Over three years, the 00:21:23.750 --> 00:21:26.609 injection site proved highly effective. The geology 00:21:26.609 --> 00:21:29.349 was accepting the CO2 even more easily than they 00:21:29.349 --> 00:21:31.890 expected. So based on that success, they launched 00:21:31.890 --> 00:21:36.480 a much larger project, the ILCCS, in 2017. The 00:21:36.480 --> 00:21:39.480 goal this time was to inject 1 million tons of 00:21:39.480 --> 00:21:41.619 carbon underground. And to do it in just one 00:21:41.619 --> 00:21:43.720 year compared to three years for the first project. 00:21:43.819 --> 00:21:46.339 So a much faster injection rate. And the public 00:21:46.339 --> 00:21:49.640 investment grew significantly. $141 million from 00:21:49.640 --> 00:21:52.000 the Department of Energy matched by over $66 00:21:52.000 --> 00:21:54.640 million in private funding. This was meant to 00:21:54.640 --> 00:21:56.619 be the commercial blueprint for future industrial 00:21:56.619 --> 00:21:59.220 capture sites across the country. But this is 00:21:59.220 --> 00:22:01.619 where the deep dive reveals the critical contradiction. 00:22:02.559 --> 00:22:05.720 In November 2020, a report from Investigate Midwest 00:22:05.720 --> 00:22:08.079 found that the project had only stored about 00:22:08.079 --> 00:22:11.440 half of that one million ton target. And that's 00:22:11.440 --> 00:22:12.880 not even the biggest contradiction. The whole 00:22:12.880 --> 00:22:14.799 goal was climate reduction, right? Of course. 00:22:15.259 --> 00:22:17.880 Yet carbon emissions from the Decatur facility 00:22:17.880 --> 00:22:20.799 where the capture was actually taking place increased 00:22:20.799 --> 00:22:24.309 during the project period. They went from 4 .2 00:22:24.309 --> 00:22:28.970 million tons in 2016 to 4 .4 million tons in 00:22:28.970 --> 00:22:31.950 2019. Wait, hold on. They spent hundreds of millions 00:22:31.950 --> 00:22:34.450 of public and private dollars to sequester carbon, 00:22:34.589 --> 00:22:37.529 yet the facility's overall carbon output went 00:22:37.529 --> 00:22:39.589 up. That's right. That sounds like the definition 00:22:39.589 --> 00:22:42.170 of a failed climate initiative, regardless of 00:22:42.170 --> 00:22:44.190 whether the technology worked in a vacuum. The 00:22:44.190 --> 00:22:46.369 Department of Energy defended it. They said the 00:22:46.369 --> 00:22:48.450 demonstration that the storage technology works 00:22:48.450 --> 00:22:51.029 was successful and that this knowledge could 00:22:51.029 --> 00:22:53.349 be applied elsewhere. But you were right. From 00:22:53.349 --> 00:22:56.150 a net climate impact perspective, the core mission 00:22:56.150 --> 00:22:58.609 was fundamentally missed. It's like the massive 00:22:58.609 --> 00:23:01.369 scale of their operations just overwhelmed the 00:23:01.369 --> 00:23:04.390 attempt at mitigation. It seems so. And the regulatory 00:23:04.390 --> 00:23:07.250 problems continued right up to the present. In 00:23:07.250 --> 00:23:10.430 September 2023, the EPA issued a proposed enforcement 00:23:10.430 --> 00:23:13.730 order. What for? A notice of violation of the 00:23:13.730 --> 00:23:16.339 Safe Drinking Water Act. A leak was detected. 00:23:16.779 --> 00:23:19.779 Roughly 8 ,000 metric tons of liquid carbon dioxide 00:23:19.779 --> 00:23:23.019 and other fluids had leaked, leading ADM to suspend 00:23:23.019 --> 00:23:26.279 all injections. Wow, so another setback. A big 00:23:26.279 --> 00:23:28.599 one. It just highlights the inherent technical 00:23:28.599 --> 00:23:31.599 volatility and regulatory sensitivity that comes 00:23:31.599 --> 00:23:34.460 with deep well carbon storage, even for a company 00:23:34.460 --> 00:23:37.160 with massive government backing. Now, to provide 00:23:37.160 --> 00:23:39.299 the necessary balance here, we should note the 00:23:39.299 --> 00:23:42.460 massive push into regenerative agriculture that 00:23:42.460 --> 00:23:45.559 ADM is undertaking. Right. Applying their logistical 00:23:45.559 --> 00:23:48.109 skill towards sustainable sourcing. They've committed 00:23:48.109 --> 00:23:50.369 significant resources here. They established 00:23:50.369 --> 00:23:53.490 a partnership with PepsiCo in 2022 to scale up 00:23:53.490 --> 00:23:55.690 regenerative agriculture practices. Things like 00:23:55.690 --> 00:23:57.750 reducing tillage and increasing cover crops. 00:23:57.970 --> 00:24:00.369 Exactly. Across their North American supply chains. 00:24:00.589 --> 00:24:03.430 As of December 2023, ADM had allocated almost 00:24:03.430 --> 00:24:05.789 2 million acres of land within its supply chain 00:24:05.789 --> 00:24:08.369 for this program. And they provide financial 00:24:08.369 --> 00:24:10.670 incentives and technical support to the farmers. 00:24:10.910 --> 00:24:14.109 They do. It's a massive scale. And it proves 00:24:14.109 --> 00:24:16.150 they can be a force for good when they apply 00:24:16.150 --> 00:24:19.259 that infrastructure. It's a necessary counterbalance 00:24:19.259 --> 00:24:21.579 to the industrial pollution and carbon issues 00:24:24.380 --> 00:24:26.640 for many people, provides the ultimate context 00:24:26.640 --> 00:24:29.720 for ADM's culture. Its long, persistent history 00:24:29.720 --> 00:24:33.200 of ethical and legal troubles. This is the company 00:24:33.200 --> 00:24:35.359 that has been in the regulatory crosshairs for 00:24:35.359 --> 00:24:38.299 over a century. And that historical perspective 00:24:38.299 --> 00:24:41.559 is so crucial. We are not looking at isolated 00:24:41.559 --> 00:24:44.160 modern incidents here. We're looking at a century 00:24:44.160 --> 00:24:46.799 -long pattern of anti -competitive behavior. 00:24:47.059 --> 00:24:49.180 And it starts right near the beginning with the 00:24:49.180 --> 00:24:52.079 Sherman antitrust violation in 1920. The U .S. 00:24:52.079 --> 00:24:54.380 Department of Justice sued the National Linseed 00:24:54.380 --> 00:24:56.559 Oil Trust and its co -defendants, which included 00:24:56.559 --> 00:24:58.599 the Archer Daniels Manufacturing Company. And 00:24:58.599 --> 00:25:01.220 the charge was straightforward collusion, price 00:25:01.220 --> 00:25:04.119 fixing, to raise linseed oil prices. And the 00:25:04.119 --> 00:25:07.000 price jump was dramatic. It spiked from 50 cents 00:25:07.000 --> 00:25:10.480 a gallon to $1 .80 a gallon between 1916 and 00:25:10.480 --> 00:25:14.559 1918. That early case just demonstrated the company's 00:25:14.559 --> 00:25:16.920 comfort level with price manipulation and market 00:25:16.920 --> 00:25:20.460 control. It's a very worrying precedent for the 00:25:20.460 --> 00:25:23.140 decades to come. But the scandal that truly defines 00:25:23.140 --> 00:25:25.299 ADM for the public, the one that inspired the 00:25:25.299 --> 00:25:27.980 book and the movie The Informant, is the lysine 00:25:27.980 --> 00:25:31.140 price fixing conspiracy of the 1990s. Oh, yeah. 00:25:31.200 --> 00:25:33.799 This is the ultimate example of corporate arrogance 00:25:33.799 --> 00:25:36.559 just colliding head on with a federal investigation. 00:25:36.900 --> 00:25:39.299 So what was lysine? It's an essential amino acid 00:25:39.299 --> 00:25:42.279 that's used primarily to enhance protein in animal 00:25:42.279 --> 00:25:45.170 feed. So it's a huge global market. And the U 00:25:45.170 --> 00:25:47.650 .S. Justice Department launched a price fixing 00:25:47.650 --> 00:25:49.690 investigation into that market. And the investigation 00:25:49.690 --> 00:25:52.029 was driven entirely by an insider. Mark Whitaker, 00:25:52.150 --> 00:25:54.829 a senior ADM executive who secretly became an 00:25:54.829 --> 00:25:57.269 FBI whistleblower. The story is just incredible. 00:25:57.390 --> 00:25:59.930 Whitaker spent years covertly recording conversations 00:25:59.930 --> 00:26:03.509 exposing this international cartel that ADM had 00:26:03.509 --> 00:26:06.309 formed with its primary competitors to fix prices 00:26:06.309 --> 00:26:08.990 globally. And the material that came from those 00:26:08.990 --> 00:26:12.779 tapes reveals this. Shocking corporate philosophy. 00:26:13.140 --> 00:26:14.880 I mean, in one of the tapes that was played during 00:26:14.880 --> 00:26:17.740 the trial, an ADM official articulated the internal 00:26:17.740 --> 00:26:20.539 culture perfectly. He said, our competitors are 00:26:20.539 --> 00:26:22.900 our friends. Our customers are the enemy. Our 00:26:22.900 --> 00:26:25.339 customers are the enemy. That one quote just 00:26:25.339 --> 00:26:27.980 became a symbol of corporate greed and anti -consumer 00:26:27.980 --> 00:26:30.480 behavior in the 1990s. It's an astounding thing 00:26:30.480 --> 00:26:34.220 to say, let alone believe. That level of brazen 00:26:34.220 --> 00:26:36.680 hostility toward your own customer base. So what 00:26:36.680 --> 00:26:39.480 were the tangible consequences for this profound 00:26:39.480 --> 00:26:42.720 breach of public trust? They were severe and 00:26:42.720 --> 00:26:46.259 groundbreaking at the time. In 1997, ADM was 00:26:46.259 --> 00:26:50.059 fined. $100 million. Which was the largest antitrust 00:26:50.059 --> 00:26:51.940 fine in U .S. history at the time. The largest 00:26:51.940 --> 00:26:54.940 ever. And furthermore, three top officials, including 00:26:54.940 --> 00:26:57.680 Vice Chairman Michael Andreas, Dwayne Andreas's 00:26:57.680 --> 00:27:00.380 nephew, were sentenced to federal prison in 1999. 00:27:00.880 --> 00:27:02.619 So this wasn't just a slap on the wrist. This 00:27:02.619 --> 00:27:05.200 was criminal prosecution of top management. People 00:27:05.200 --> 00:27:08.279 went to jail. And what adds that layer of, I 00:27:08.279 --> 00:27:10.259 don't know, Hollywood absurdity to the whole 00:27:10.259 --> 00:27:12.680 story is the fact that Mark Whitaker, the FBI 00:27:12.680 --> 00:27:14.900 whistleblower. He wasn't clean either. Not at 00:27:14.900 --> 00:27:17.380 all. He was simultaneously embezzling millions 00:27:17.380 --> 00:27:20.380 of dollars from ADM while he was wearing a wire 00:27:20.380 --> 00:27:22.960 for the FBI. Yeah. The level of internal corporate 00:27:22.960 --> 00:27:25.920 chaos is just almost unbelievable. It's a movie 00:27:25.920 --> 00:27:28.299 for a reason. It is. And the fallout continued 00:27:28.299 --> 00:27:31.640 for ADM for years. In 2005, they settled a massive 00:27:31.640 --> 00:27:34.640 class action antitrust suit related to the lysine 00:27:34.640 --> 00:27:37.079 and citric acid price fixing. They had to pay 00:27:37.079 --> 00:27:40.259 another $400 million. The financial and reputational 00:27:40.259 --> 00:27:43.180 damage was immense. But the company survived 00:27:43.180 --> 00:27:47.079 because it was and is indispensable to the global 00:27:47.079 --> 00:27:49.799 food chain. And beyond domestic antitrust issues, 00:27:50.039 --> 00:27:52.599 ADM has repeatedly faced international financial 00:27:52.599 --> 00:27:55.359 misconduct charges, which reveal the compliance 00:27:55.359 --> 00:27:57.980 risks of operating globally. Let's look at the 00:27:57.980 --> 00:28:00.680 alleged tax dodging case in Argentina in 2011. 00:28:01.019 --> 00:28:03.220 What happened there? Argentina's revenue service 00:28:03.220 --> 00:28:05.779 launched an investigation into ADM and other 00:28:05.779 --> 00:28:09.740 big grain traders, Bungie, Cargill, LDC, because 00:28:09.740 --> 00:28:12.279 global commodity prices were spiking hugely. 00:28:12.400 --> 00:28:14.960 But these companies were reporting minimal taxable 00:28:14.960 --> 00:28:17.380 profit in Argentina. The numbers didn't add up. 00:28:17.660 --> 00:28:20.359 Not at all. The allegation centered on a concept 00:28:20.359 --> 00:28:23.160 that's critical to understand here. Transfer 00:28:23.160 --> 00:28:25.779 mispricing. OK, explain that for us. What is 00:28:25.779 --> 00:28:28.259 transfer mispricing? It involves manipulating 00:28:28.259 --> 00:28:30.579 the price of internal transactions between a 00:28:30.579 --> 00:28:32.720 company's own subsidiaries located in different 00:28:32.720 --> 00:28:36.079 countries. For example, the ADM subsidiary in 00:28:36.079 --> 00:28:39.819 Argentina. might sell grain to an ADM subsidiary 00:28:39.819 --> 00:28:42.460 in a low -tax country, like a tax haven. At an 00:28:42.460 --> 00:28:45.859 artificially low price? Exactly. So the profit 00:28:45.859 --> 00:28:48.319 is artificially shifted out of high -tax Argentina, 00:28:48.480 --> 00:28:50.799 where the value was actually created, and it's 00:28:50.799 --> 00:28:53.539 parked in the low -tax jurisdiction. I see. They 00:28:53.539 --> 00:28:56.059 were accused of submitting full sales declarations 00:28:56.059 --> 00:28:58.779 and inflating costs locally using phantom firms 00:28:58.779 --> 00:29:01.940 just to reduce their recorded profits. The outstanding 00:29:01.940 --> 00:29:04.680 taxes were estimated to be nearly a billion U 00:29:04.680 --> 00:29:07.730 .S. dollars. A billion dollars? Now, the companies 00:29:07.730 --> 00:29:10.369 denied the claims, but it highlights the aggressive 00:29:10.369 --> 00:29:12.529 tax strategies that are often employed by these 00:29:12.529 --> 00:29:14.809 multinational commodity traders. And then there's 00:29:14.809 --> 00:29:17.250 the undeniable violation of the Foreign Corrupt 00:29:17.250 --> 00:29:20.230 Practices Act, the FCPA, which the SEC announced 00:29:20.230 --> 00:29:24.289 in 2013. This is straight up bribery. Yes. ADM 00:29:24.289 --> 00:29:27.210 was charged for failing to prevent illicit payments 00:29:27.210 --> 00:29:29.970 bribes made by their foreign subsidiaries to 00:29:29.970 --> 00:29:32.029 Ukrainian government officials to secure business. 00:29:32.349 --> 00:29:34.309 They were operating in a high -risk environment. 00:29:34.730 --> 00:29:37.049 and their compliance systems completely failed. 00:29:37.150 --> 00:29:39.369 And what was the resolution? It was complex. 00:29:39.690 --> 00:29:42.589 A subsidiary in Ukraine pleaded guilty to conspiracy. 00:29:43.509 --> 00:29:46.589 ADM itself entered what's called a non -prosecution 00:29:46.589 --> 00:29:49.269 agreement regarding improper payments in Ukraine 00:29:49.269 --> 00:29:52.529 and separate improper payments by an ADM joint 00:29:52.529 --> 00:29:54.990 venture in Venezuela. So what was the final bill 00:29:54.990 --> 00:29:57.450 for all of that? To settle the SEC's charges. 00:29:57.920 --> 00:30:01.579 ADM paid over $36 million, bringing the total 00:30:01.579 --> 00:30:04.279 paid to settle all the FCPA -related charges 00:30:04.279 --> 00:30:07.200 to over $54 million. It's just another case that 00:30:07.200 --> 00:30:09.200 demonstrates this gap between the corporation's 00:30:09.200 --> 00:30:11.740 necessary role in global trade and the ethical 00:30:11.740 --> 00:30:13.940 compromises that are sometimes made to operate 00:30:13.940 --> 00:30:16.359 within those markets. A very expensive gap. Okay, 00:30:16.380 --> 00:30:18.019 finally, let's bring the scrutiny right up to 00:30:18.019 --> 00:30:20.819 the present day with two major issues, one involving 00:30:20.819 --> 00:30:23.579 politics and one involving their own internal 00:30:23.579 --> 00:30:27.640 accounting. First, the highly questionable Sonny 00:30:27.640 --> 00:30:30.240 Perdue land sale. This was a massive ethical 00:30:30.240 --> 00:30:33.099 red flag. The Washington Post reported that in 00:30:33.099 --> 00:30:37.039 2017, ADM sold a piece of land to a company owned 00:30:37.039 --> 00:30:40.339 by Sonny Perdue. Who was at the time the incoming 00:30:40.339 --> 00:30:42.799 secretary of agriculture under President Trump? 00:30:43.019 --> 00:30:46.339 The timing is key. And the sale price was the 00:30:46.339 --> 00:30:48.819 source of all the controversy. The land was reportedly 00:30:48.819 --> 00:30:52.779 sold at a massive discount. $250 ,000. For land 00:30:52.779 --> 00:30:54.900 that ethics lawyers and real estate analysts 00:30:54.900 --> 00:30:57.599 estimated was worth millions. That does not look 00:30:57.599 --> 00:31:00.359 good. No. Ethics lawyers immediately questioned 00:31:00.359 --> 00:31:02.599 the legality and the ethics of the transaction. 00:31:03.140 --> 00:31:05.420 They suggested the massive discount could be 00:31:05.420 --> 00:31:09.039 interpreted as a gift or potentially a bribe. 00:31:09.339 --> 00:31:11.720 Because ADM is one of the most heavily regulated 00:31:11.720 --> 00:31:14.400 companies by the USDA. And the concern was that 00:31:14.400 --> 00:31:16.880 ADM stood to benefit from ensuring they had a 00:31:16.880 --> 00:31:19.920 friendly secretary of agriculture in place. It's 00:31:19.920 --> 00:31:21.960 a perfect illustration of how corporate interests 00:31:21.960 --> 00:31:24.960 and political access can intertwine in the agribusiness 00:31:24.960 --> 00:31:27.180 sector. And that brings us to the most immediate 00:31:27.180 --> 00:31:29.720 controversy, which is shaking the company today. 00:31:29.799 --> 00:31:32.440 The internal accounting probe disclosed in January 00:31:32.440 --> 00:31:35.940 2024. This ties back directly to that strategic 00:31:35.940 --> 00:31:38.500 pivot we talked about earlier, the focus on the 00:31:38.500 --> 00:31:41.180 high growth nutrition segment. Right. In 2020, 00:31:41.480 --> 00:31:45.299 ADM tied senior executive bonuses to the success 00:31:45.299 --> 00:31:47.319 of this segment, even though it accounts for 00:31:47.319 --> 00:31:49.640 less than 10 percent of the company's total revenue. 00:31:49.799 --> 00:31:51.380 And those incentives are certainly effective, 00:31:51.680 --> 00:31:54.339 at least for the executives. In January 2023, 00:31:54.819 --> 00:31:57.380 the top seven executives collectively received 00:31:57.380 --> 00:32:00.859 shares worth about $72 million for exceeding 00:32:00.859 --> 00:32:02.799 performance metrics in that nutrition segment. 00:32:03.000 --> 00:32:05.180 But that success very quickly came under scrutiny. 00:32:05.359 --> 00:32:09.839 In January 2024, ADM disclosed that the SEC had 00:32:09.839 --> 00:32:12.200 requested information regarding accounting practices 00:32:12.200 --> 00:32:15.079 within that nutrition business. Specifically, 00:32:15.220 --> 00:32:17.740 they were looking at intersegment transactions. 00:32:18.180 --> 00:32:20.240 Let's clearly define that concept for the listener. 00:32:20.339 --> 00:32:22.680 What are intersegment transactions and why would 00:32:22.680 --> 00:32:25.660 the SEC care about them? So intersegment transactions 00:32:25.660 --> 00:32:28.900 are internal transfers of goods or services between 00:32:28.900 --> 00:32:31.039 different operating units within the same company. 00:32:31.160 --> 00:32:34.099 For example, the massive oilseed segment selling 00:32:34.099 --> 00:32:36.299 ingredients to the smaller nutrition segment. 00:32:36.420 --> 00:32:40.619 Okay. And internal sale. Right. And if ADM artificially 00:32:40.619 --> 00:32:43.019 manipulated the price of those internal sales, 00:32:43.140 --> 00:32:45.700 say selling goods cheaply to the nutrition segment, 00:32:45.900 --> 00:32:48.900 it could artificially inflate the nutrition segment's 00:32:48.900 --> 00:32:51.579 reported profit margins. And if executive bonuses 00:32:51.579 --> 00:32:54.359 were tied to that specific segment's performance? 00:32:54.839 --> 00:32:56.980 Then internal accounting could have been used 00:32:56.980 --> 00:33:00.000 to trigger multi -million dollar payouts for 00:33:00.000 --> 00:33:02.380 executives. Not a huge problem. A huge potential 00:33:02.380 --> 00:33:04.779 problem. And the outcome was swift and severe. 00:33:05.259 --> 00:33:07.779 ADM immediately suspended its chief financial 00:33:07.779 --> 00:33:10.339 officer and postponed its required quarterly 00:33:10.339 --> 00:33:13.059 earnings and annual filings. But the situation 00:33:13.059 --> 00:33:15.960 escalated dramatically in March of 2024. It did. 00:33:16.099 --> 00:33:18.660 That's when we saw sources report that FBI agents 00:33:18.660 --> 00:33:21.200 delivered grand jury subpoenas to current and 00:33:21.200 --> 00:33:23.640 former employees. Subpoenas authorized by the 00:33:23.640 --> 00:33:26.000 U .S. Attorney's Manhattan office. Which confirms 00:33:26.000 --> 00:33:28.339 that the regulatory inquiry has now formally 00:33:28.339 --> 00:33:31.259 escalated into a criminal investigation. ADM's 00:33:31.259 --> 00:33:33.359 pattern of high -spakes financial and ethical 00:33:33.359 --> 00:33:36.720 breaches is continuing in real time. as we speak 00:33:36.720 --> 00:33:38.660 so when we synthesize everything we've covered 00:33:38.660 --> 00:33:41.039 today the story of archer daniels midland is 00:33:41.039 --> 00:33:43.539 truly defined by these two competing realities 00:33:44.170 --> 00:33:47.190 It really is. On one hand, you have the indispensable 00:33:47.190 --> 00:33:50.809 foundational global agricultural processor, the 00:33:50.809 --> 00:33:53.410 company that masters the complex logistics of 00:33:53.410 --> 00:33:55.809 moving oil seeds and grains across the world, 00:33:55.910 --> 00:33:59.069 refining corn into crucial ingredients, developing 00:33:59.069 --> 00:34:01.750 high -tech nutrition components. They are, as 00:34:01.750 --> 00:34:03.849 we said at the start, literally the hidden engine 00:34:03.849 --> 00:34:06.150 of the world's food supply. They're capable of 00:34:06.150 --> 00:34:08.730 navigating and even stabilizing global crises. 00:34:09.070 --> 00:34:10.650 And on the other hand, you have the corporation 00:34:10.650 --> 00:34:13.800 that... for a century has been repeatedly and 00:34:13.800 --> 00:34:16.119 systematically entangled in these significant 00:34:16.119 --> 00:34:19.019 ethical and legal controversies. We've seen the 00:34:19.019 --> 00:34:21.340 pattern from the early Sherman antitrust violation 00:34:21.340 --> 00:34:24.199 100 years ago to the infamous, almost absurd 00:34:24.199 --> 00:34:27.119 lysine price fixing scandal that landed executives 00:34:27.119 --> 00:34:30.039 in prison. To the recent major S .C .P .A. violations, 00:34:30.360 --> 00:34:33.119 the politically fraught land deal, and now the 00:34:33.119 --> 00:34:35.360 current FBI criminal probe into their accounting 00:34:35.360 --> 00:34:37.780 practices. It's a long and consistent history. 00:34:38.199 --> 00:34:41.219 So for you, the learner, understanding ADM means 00:34:41.219 --> 00:34:43.579 recognizing that this is a systemically important 00:34:43.579 --> 00:34:46.059 entity. They control the flow of raw commodities, 00:34:46.320 --> 00:34:48.980 they manage the logistics through their own transportation 00:34:48.980 --> 00:34:51.619 network, and they create the core ingredients 00:34:51.619 --> 00:34:54.280 for everything from animal feed to specialized 00:34:54.280 --> 00:34:56.639 food additives. They are fundamental to modern 00:34:56.639 --> 00:34:59.230 life. There's no getting around that. And understanding 00:34:59.230 --> 00:35:02.630 their role is vital because it means understanding 00:35:02.630 --> 00:35:06.030 the complex and often murky relationship between 00:35:06.030 --> 00:35:08.969 massive corporate power and government oversight. 00:35:09.920 --> 00:35:13.079 We saw that tension so clearly in the DOE -funded 00:35:13.079 --> 00:35:15.960 carbon capture projects. Yes, millions in government 00:35:15.960 --> 00:35:18.239 funding. But they still failed to meet environmental 00:35:18.239 --> 00:35:20.960 targets and eventually resulted in a regulatory 00:35:20.960 --> 00:35:23.559 violation. And we saw it in the Purdue land sale, 00:35:23.679 --> 00:35:25.920 where political access and corporate self -interest 00:35:25.920 --> 00:35:28.019 just seemed to intertwine to influence policy. 00:35:28.400 --> 00:35:31.119 And this dynamic brings us to our final provocative 00:35:31.119 --> 00:35:34.190 thought for you to carry forward. Given ADM's 00:35:34.190 --> 00:35:36.130 essential integration into the global supply 00:35:36.130 --> 00:35:38.610 chain and its documented history of repeated 00:35:38.610 --> 00:35:41.090 price manipulation, corruption, and environmental 00:35:41.090 --> 00:35:44.170 charges, we have to confront this uncomfortable 00:35:44.170 --> 00:35:47.210 paradox. If a company is both indispensable to 00:35:47.210 --> 00:35:49.309 feeding the world and systemically vulnerable 00:35:49.309 --> 00:35:52.630 to corruption, what effective tools do societies 00:35:52.630 --> 00:35:55.329 have for regulation? Can the world afford to 00:35:55.329 --> 00:35:58.639 let such an enormous engine fail? And yet, can 00:35:58.639 --> 00:36:00.659 we afford to let it continue operating as it 00:36:00.659 --> 00:36:03.219 has? It's a tension between necessary scale and 00:36:03.219 --> 00:36:06.300 public trust that really defines the entire agribusiness 00:36:06.300 --> 00:36:06.619 sector.