harvest of profits:the world empire of

inc.brittany anderson

cargill, inc.• largest privately owned u.s. corporation• owned by two minneapolis based families- the cargills

and the macmillans• worldwide annual sales: approx $12.6 billion

meet the cargills

• william w. cargill– scottish presbyterian– migrated to us in 1830’s– became a captain in the

merchant marines– left the shipping business

in 1857, moved to wisconsin to become a farmer

– three sons began trading grains and built grain elevators and storage units

history

• cargill was often the only grain elevator at major railroad stops– Farmers were forced to accept

prices offered by the company– often grail elevator and railway

owners conspired to fix prices– cargill’s historian admits that

cargill monopolized the grain trade business in south dakota and minnesota and also held other trading positions in wisconsin, iowa, and north dakota

finances• cargill obtained loans from

many small midwestern banks– will made friends with a

prominent milwaukee banker who “backed his friend [multiple times]…to their mutual benefit”

• formed partnerships with other grain merchants – when others would go under,

cargill would purchase their partnership to result in complete owership

saved by infusion• 1906 - william cargill could

not manage the overextended business in the face of the economic recession

• 1909 - most of the company’s properties were placed in receivership

• cargill appeared to be on the brink of dissolution

• 1895 – john h. macmillan, member of a prominent business family in lacrosse, wisconsin married into the cargill family– persuaded credit company to allow

management of the company– introduced the macmillan -cargill

partnership, which forged the destiny of the midwestern grain company

expansion• 1920’s

– Established direct sales offices in the east as well as sales offices in principal european grain centers and argentina

• 1930’s-– 1932: obtained control of new grain

export elevator in albany, new york– mid-1930’s: moved into the chicago

market– 1938: chicago board of trade filed

suit against cargill for manipulating corn market prices.• cargill filed countersuit, claiming

federal government needed to “clean up” the board

• cargill lost legal battle, but won economic war.

• wwii– maritime hostilities ended private

direct exports– government regulated domestic grain

market– established feed milling and

vegetable processing divisions, which moved into domestic manufacturing

– also built tanks for the military

• postwar– us became principal food

manufacturer, while the rest of the world was in disarray

– main us agricultural exports: wheat and flour• 1944: 48 million bushels• 1948: 503 million bushels

teaching “people to eat wheat, who didn’t eat it before”

• western european nations agriculturally rose after korean war began

• 1954: us government “forged perfect instrument for expansion” public law 480– enabled companies to directly

increase export sales– when a market in a country was

opened, direct commercial sales were much easier

– enabled countries to gain entrance to a market at the smallest expense possible

• commodity credit corporation (ccc)– gave one to three year loans to

foreign governments to purchase its surplus grain reserves

– cargill was the first major firm to take advantage of the ccc

• barter program– strategically exchanged grain for war

materials

• 1950’s-– cargill operates at three main points of

collection and distribution of grain: • local elevator where farmer sells grain• subterminals & terminals at the major

transportation crossroads– subterminals used to bypass smaller country

elevators, which are often under control of local coops and located in small communities

• large export elevators located in major u.s. ports

ccc

• accumulation of grain surpluses caused the operation of storage facilities to play a major role in marketing strategies– the federal government controlled these surpluses by

purchasing excess agricultural production to secure prices from falling• cargill stored CCC grain in their facilities in return for

government storage payments• 1958-1968: cargill received $76 million for storing grain

– companies purchased from the ccc reserves when grain was necessary to cover their own marketing needs

transportationwaterways

• late 1940’s: cargill opened a new route to the mississippi river by opening the minnesota river channel– allowed for the bypass of

minneapolis, decreasing costs

• 1950’s: began using inland waterways to transport through shipping subsidiary, cargo carriers– made use of transportation on

the missouri, ohio, tennessee, illinois and mississippi rivers

railway

• 1960’s: pressured interstate commerce commission to restructure railway rates and regulations to make the rail more economical for grain companies– regulations were altered so companies

could take control of the whole train at special rates

• 1968: cargill conceived the concept of rent-a-train (rat)– a company could rent the engine, crew,

and railroad right of way for an extended amount of time

• 1972: companies used control of railway to hold down the price they paid for various grains– lack of shipping alternatives caused local

farmers and merchants to sell at the dictated price.

financing the empire“exporting companies must have sufficient funds to cover the costs of carrying

these large quantities of grain.”

• not even cargill, known as the “cadillac of the grain trade,” does not have sufficent funds to cover the capital necessary to finance the seasonal grain inventories– maintain credit lines with 40+ banks,

including eight of the ten largest u.s. commercial banks• draws on these credit lines to pay for its

purchases

• three chicago based banks are important to financing the grain business– continental bank of ilinois– harris savings and trust– first national bank of chicago

• chase manhattan bank– 1933: john peterson leaves

chase to join cargill as chief financial officer

– no major moves are made without the consultation of chase

– one cargill official noted that hardly a month goes by without a meeting between executives at chase and cargill

– cargill executives deny that chase calls the shots in the business decisions

• not all financial needs are met by lines of credit–when cargill builds fixed assests such as

grain elevators and storage bins, they call upon insurance companies for long term loans–prudential–metropolitan life– john hancock• collect savings of u.s. workers to relend to

corporate interests

public funds sustain the empire

• 1973: duluth- minnesota port authority and cargill announced a $15 million project for constructing new port facilities– cargill did not foot a cent of the bill

• cargill controls most of the flow of grain on the railway system– without owning a single train car

• received millions of dollars in storage payments for holding ccc grains– international trade financed by pl 480

• cargill is “a stunning example of modern corporate capitalism where small amounts of capital are used to control vast financial and commercial empires.”

“the sun never sets on cargill’s corn”

• 1929: first trading offices established in europe

• today: international operations penetrate every corner of the globe– 140 affiliates and subsidaries– international trading

operations directed by tradax• a subsidiary with

headquarters in geneva• performs the same

merchandising functions abroad that cargill does in the states

• cargill buys and exports grains in other agricultural producing countries– argentina: leader in exporting wheat,

barley, maize– canada: maneuvered “free market”

by purchsing national grain company, built large regional terminal elevators

– phillipines: heavy trader in copra and sugar, taking advantage of cheap labor force

– western europe: one of five grain companies controlling the market

– japan: one of the world’s leading grain importers

– latin america: much more susceptible to bribery in arranging grain deals

a multinational industrial corporation

• 1960’s: cargill’s expansion into foreign manufacturing was built on its u.s. Industrial base and foreign marketing network– by 1962, wholly owned nutrena

• Largest feed producer in the u.s.• Operated 27 domestic feed mills• Owned 14 vegetable oil

processing plants

• expansion into agribusiness:– 1965: purchased shaver poultry

breeding farms• A candadian firm shipping breeding

stock abroad

• peru: first international investment– 1960: became major international

distributor of peruvian fishmeal– 1963: purchase of a large fishmeal

plant and fishing fleet

• spain: first soybean processing plant

• 1964: acquired hens company– feed manufacturing company– belgium, west germany, france

• within a decade, cargill became a major player in the vegetable oil and animal feed industries of western europe.

• expansion into agribusiness:– 1965: purchased shaver

poultry breeding farms• a candadian firm shipping

breeding stock abroad• today, uses shaver to form an

integrated pacakge of feed mills and poultry breeding stock

– rapidly expanded feed and food processing operations• established subsidaries in el

salvador, guatemala, phillipines, argentina, brazil, pakistan, taiwan, south korea

• 1968: cargill proposed an integrated poultry operation in korea– included breeding farm,

feed processing plant, processing unit

– received 95% of funding from u.s. government• loan for $500,000 under pl

480• korea cargill was a supplier

to u.s. military forces during and after the korean war

korea cargill• 1968: cargill proposed an

integrated poultry operation in south korea– included breeding farm, feed

processing plant, processing unit

– received 95% of funding from u.s. government• Loan for $500,000 under pl 480

• korean government restricted use of limited foreign exchange – made it difficult to import feed

grains and breeding stock

• korea cargill was a supplier to u.s. military forces during and after the korean war

• many employees are veterans of the korean war– “They have an awareness of danger,

a familiarity with hardship and an eagerness to face the future that is inevitable.” –e.c. fuller

– cargill dissatsified with profits in korea• turned to us government

– suggested that korean gov to give special consideration to poultry and livestock industries

– korean government refused• turned to u.s. once again

– asked to defer pl 480 loans

south america

• argentina: – involved since

1929– owns and operates

export facilities– produces hybrid

corn seeds– 1979: announced

$18 investment in a linseed oil and sunflower oil processing plant

• brazil:– attempted to gain foothold in

1947 and 1950’s– cargill agricola established in

1965• by 1970’s produced hybrid

seeds, manufactured seeds, participated in grain merchandising and poultry farming

– became one of brazils largest soybean producers• built one of the world’s most

modern soybean processing facilities in ponta grossa– overseas private

investment corporation lent $2.5 million

– eximbank lent $1 million

cargill and the state• federal and state

governments fund port facilities, grant tax concessions for new capital investments, maintain a legal and financial system essential to the survival of cargill– 1960’s: formed a public policy

committee• formulates positions on key

issues• establishes guidelines for

company representatives who speak on behalf of the company

• ideologies do not stand in the way of business interests– twenty-odd people that run cargill

are “rock-ribbed republicans”– gave money to hubert humphrey

for “every campaign since he ran for mayor of minneapolis”• “it’s a lot cheaper to give humphrey a

few thousand dollars than to fund the republican party”

– walter mondale• played a key role in the u.s. decision

to purchase grain company contracts with the soviet union when an embargo was announced– Cargill was the largest benficiary

cargill in office

richard nixon• 1962:loses california’s

gubernatorial seat; goes to work for wall street law firm mudge, stern, baldwin & todd– one of the largest

corporate clients: cargill

• gained cargill’s support in 1968 and 1972

• william pearce– vp of cargill– drafted williams comission report

• drew up the blueprint of the u.s. dept. of agriculture in 1970’s

• served as deputy special trade rep, with rank of ambassador

• structural corruption– personnel go from the grain

companies to work for the usda or vice versa

• cargill is a member of the us-ussr trade and economic council– retiring president serves as

director of national council for us-china trade

profiteering

• “for the past five years, cargill has consistently earned profits in excess of 20 to 25 percent.”

• cargill uses control of railways and elevators to exploit farmers– no alternative to moving grains– forced to accept price discounts of 10 to 25 and sometimes

$.50 a bushel• 1973: assets increased from $246 million to $352

million– 43% return on assets– $107.8 million

future of grain trade• largest grain exporter in four of the five

leading exporting nations:– argentina, united states, canada and france– it is unclear who is dominant in australia, but

cargill is a major force– cargill hopes to increase market share from 25%

to 35% • investing $150 million/year in grain handling facilities

spreading the profit base/the cargill future

• leslie salt and mbpxl corporation– nation’s second largest meat packer

• Sales of $ 1+ billion

• summit national holding company– insurance firm

• aenco, co.– solid waste processing center

• c. tennant & sons– Large metals international trading firm

• north star steel co.– Manufaturer of steel sheet rolls

• established many subsidaries through cargill leasing inc.– purchased various small businesses around

the world

• approximately half of cargill’s sales now come from activites other than grain trading

• cargill executives are uneasy about how long the government will stay out of the grain business– “i see no way to keep the

government out of the market if we go through another bout of exploding prices.”

• cargill shrouds itself in a veil of secrecy to prevent such an event– publicity about the company’s

operations can only increase public hostility

“ few facets of modern life are unaffected or unreached by cargill today”

• agriculture: – we buy, process and distribute

grain, oilseeds and other commodities to makers of food and animal nutrition products. We also provide crop and livestock producers with products and services.

• food: – we provide food and beverage

manufacturers, foodservice companies and retailers with high-quality ingredients, meat and poultry products, and health-promoting ingredients and ingredient systems.

• financial: – we provide our agricultural,

food, financial and energy customers around the world with risk management and financial solutions.

• industrial: – cargill serves industrial users of

energy, salt, starch and steel products. we also develop and market sustainable products made from agricultural feedstocks.