Bourne again: a giant agribusiness finds itself back in the dock

ADM is once again besieged - by Hollywood stars and green campaigners
Ian Griffiths
The Guardian,
Wednesday September 3 2008

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 agribusiness.
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.
ADM has 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 values."
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.
Bipolar star
Whitacre 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.
"In 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."
He is 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.
"We 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.
ADM 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
"They 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."
This 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.
"A 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 fuel."
Schubert also points out that ADM is a major indirect beneficiary of the US subsidies for corn and ethanol.
"Corn 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.
But 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.
Those 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.
"We 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."