Cargill: size is everything
1st April, 2003
If you want to understand why globalisation is so destructive, you need look no further than the invisible food giant Cargill. By Brewster Kneen.
‘We are the flour in your bread, the wheat in your noodles, the salt on your fries. We are the corn in your tortillas, the chocolate in your dessert, the sweetener in your soft drink. We are the oil in your salad dressing and the beef, pork or chicken you eat for dinner. We are the cotton in your clothing, the backing on your carpet and the fertiliser in your field.’ (Cargill corporate brochure, 2001).
You don’t see its name on the products you buy. It’s doubtful you’ve even heard of the company. Yet you probably ate food it produced in the last week, if not the last 24 hours. The firm is Cargill – the largest privately owned company in the world, with sales last year in excess of $50 billion. Cargill is the world’s seventh largest food company; only Nestlé, Pepsi, Coca Cola, Philip Morris, Unilever and ConAgra are bigger, all of which (Con Agra apart) you’re probably entirely familiar with. The question is, then, how does Cargill get to be so big without anyone having heard of it?
The corporate leviathan
Until a decade or two ago Cargill was primarily a global trader (and speculator) in bulk commodities (wheat, corn, soya, salt, cotton, sugar, coffee, etc), a primary processor in some of these commodities (i.e., flour milling and corn-syrup and animal-feed production), and a livestock and poultry processor. Hardly the stuff of glamorous ad campaigns and brand-building exercises.
In 1971, on the eve of Russia’s massive grain purchases, Cargill reported that it had annual revenues of $2 billion. By 1982 this figure had jumped to $29 billion, and by 1994 it had nearly doubled to $47.1 billion.
In 1994 a Minneapolis newspaper published figures, obviously provided by Cargill, on the changes in the firm’s business activities between 1970 and 1990. They showed that merchandising (trading in bulk commodities) had fallen from 37.3 to 17.6 per cent of Cargill’s business. Non-merchandising (processing of oil seeds and corn, and flour milling; agricultural products such as poultry, feed and seed; industrial products like steel, fertilisers and salt; and financial services) had increased from 62.7 to 82.4 per cent of its business.
This transformation was engineered in response to changes in the state of global trade. For, in spite of all the current hype about the global market, bulk trade has been slowing globally. As a consequence, the firms that used to be known primarily as trading companies have begun to diversify over the past several years so as to avoid unnecessary competition in the marketplace.
Each of what used to be called ‘the grain majors’ (Bunge, Continental, Andree, Dreyfus and Cargill) has differentiated itself from the other major players in the food sector. (One could be forgiven for thinking that this was all planned centrally, except that might be called collusion.) Bunge, for example, is now the world’s largest oil-seed processor, while Cargill has become the major glucose, fructose and starch producer. What is even more revealing is that to achieve this rationalisation firms have actually swapped facilities, and have formed partnerships or joint ventures with their erstwhile competitors further ‘downstream’.
Cargill’s use of its available capital as leverage to acquire the facilities it needs (or to control the commodity sources it desires) is reflected in its growing list of partnerships and joint ventures.
Cargill has clearly decided that joint ventures – whether with local and regional farmers’ cooperatives or with fellow multinationals like Monsanto, Dow, the Indian company Tata and Mitsubishi – are the way to go. They enable the firm to magnify the power of its capital while minimising risk (something capital avoids like the plague) and maximising control over the supply and price of the raw materials needed for its huge and increasingly complex processing facilities. Of these facilities, Cargill’s corn-processing complex at Blair, Nebraska, is the embodiment of the firm’s complex and highly interlinked network.
Cargill opened its $200m corn wet-milling plant at Blair in 1995. Its original purpose was to produce fuel-grade ethanol, cattle feed and high-fructose corn syrup. Soon a plant to process corn germ into corn oil was added, then a facility to produce erythritol (a sugar alcohol derived from corn) in a joint venture between Cargill and Mitsubishi Chemical. By this stage capital investment in the Blair complex amounted to about $400m.
A lactic acid plant was also added to the complex (lactic acid is a natural organic acid used as a flavour agent, preservative and acidity adjuster in foods) in a joint project between Cargill and CSM of Amsterdam. The lactic acid plant supplied polylactic acid polymers to Cargill’s EcoPLA plant near Minneapolis, which was really a pilot plant for Cargill Dow Polymers – formed in a joint venture with Dow Chemical. In January 2000, Cargill Dow Polymers announced the construction of a new $300m ‘world-scale facility’ at Blair to manufacture PLA polymers (polymers made out of agricultural products such as maize). The PLA polymer plant was named NatureWorks PLA.
Yet another addition to the Blair complex was Midwest Lysine, a $100m production site that opened in 2000 as a joint venture between Cargill and Degussa-Huls Corp – a subsidiary of Degussa-Huls AG of Germany. Midwest Lysine manufactures the amino acid and livestock feed supplement lysine. The latest addition at Blair is an itaconic acid plant, which supplies the itaconic acid business of the Cargill-owned Cultor Food Science of Finland. Cargill is now the world’s largest supplier of itaconic acid, which is used in everything from the latex backing on carpets to coatings on paper that make water bead up. By now, the total investment in the Blair complex must be at least $1 billion.
While corn milling itself has not changed much in 30 years, former Cargill CEO Ernest Micek has said that the ‘back end’ now ‘looks a lot more like a large-volume drug store’. Micek gave a simple explanation for the more complex product line at Blair: ‘Regular glucose is [worth] about eight cents per pound. Fructose is [worth] about 12 cents per pound… citric acid 70 cents per pound and itaconic acid $1.80 per pound.’
Cargill’s golden rule
Many people still seem to think that the big threat to the family farm comes from corporate agriculture. By this they mean corporations buying up farms, consolidating them and turning the farmers into hired labour. Cargill has always been too clever for that. Its golden rule? Always use the gold of others.
In every one of the firm’s joint ventures, it is obvious that Cargill has the upper hand; though the press releases announcing new ventures always make them sound very much like mutually advantageous partnerships. The announcement for a ‘marketing alliance’ with the 558 growers of the Southern Minnesota Beet Sugar Cooperative (SMBSC) to sell and distribute SMBSC sugar products to food and beverage manufacturers is a good example.
‘This is the latest example of Cargill’s renewed efforts to deepen its relationship with the grower community,’ said Pat Bowe, president of Cargill Sweeteners North America, last December. ‘We are confident this alliance will benefit the co-op members as well as Cargill, as together we seek to serve customers in innovative ways.’
The fact of the matter is that sugar-beet growers in the upper Midwest of the US are in desperate shape and need a company like Cargill to sell their sugar for them. And this deeper ‘relationship to the grower community’ delivers to Cargill a guaranteed supply of the raw materials for its processing businesses.
Over the past few years Cargill has entered into a very large number of deals with small farmer-owned grain cooperatives in the Midwest and the Canadian prairies. Cargill is buying up, at very little cash cost, not the farms but the farmers. Glad to have an apparently stable and reliable marketer of their grains (one which might even buy the grains for itself), the farmers seem eager to trade their independence and entrepreneurial capacity for Cargill’s recognition and Cargill’s price. (The farmers have little choice, in the future, but to take whatever Cargill is willing to offer them.) From Cargill’s perspective, there could not be a better deal: no cash down, and a bunch of vulnerable farmers using their own capital to pay for the storage and handling facilities that the farmers once built themselves in order to escape the clutches of greedy bankers and traders.
While making ‘renewed efforts to deepen its relationship to the grower community’, Cargill is also making a major effort to ‘deepen its relationship’ with wholesale-retail giants such as Weston and Walmart, with food manufacturers such as Unilever and Kraft, and with fast-food outlets such as McDonald’s. To its traditional beef-slaughtering business it has added further processing operations, and now supplies ‘case-ready’ packaged retail beef cuts to Walmart and other big retailers. The result? The disappearance of small slaughter-houses and butcher shops and of the skilled butcher at the meat counter of the US supermarket. As always, the fall-out from Cargill’s strategy is the extinction of small farmers and small/local processors and retailers.
Food for nought
Cargill does not really do business in food. It deals in agricultural commodities as raw materials to be deconstructed and reconstructed into value-added products to produce profits for the corporation. It may do this with consummate skill, but we must remember that the globalised industrial system that works for Cargill is a very recent (post-1945) invention. It may have succeeded in making Cargill and a small elite of the world wealthy, but has done so at an increasingly unacceptable cost to the earth, its creatures and the majority of its people. The industrial system may be able to produce quantities of food, but it cannot produce the justice required to ensure that everyone is adequately nourished.
Cargill deals in volume. To get sufficient volume, both when buying and selling, it has to do business trans-nationally and industrially. The scale, as much as the style, of the operation is crucial, and there is a definite threshold beneath which a company like Cargill cannot function even if it wanted to. Therein lies the key to resistance and the pursuit of alternatives.
The refusal to use Cargill’s and others’ hybrid or patented seeds (or highly processed food that has travelled from some centralised production facility), and the rejection of industrial monoculture (franchised fast food) are the beginning of this resistance. The deliberate use of traditional open-pollinated seeds, and the pursuit of diversity and self-reliance are then the basis for building ecologically sound and socially just alternatives.
Around this resistance a new form of ‘open-pollinated’ social
organisation is emerging: communities that thrive on and, in turn, generate diversity and inclusivity. These communities share a recognition of the interdependence of every organism, and commonly identify personal long-term wellbeing with the good of their community and of society as a whole. It’s hard to imagine a place for Cargill, or any other food trans-national, in such a community.
Brewster Kneen is the author of Invisible Giant – Cargill and its transnational strategies.
Cargill’s bosses have always worked to ensure that government policy does not conflict with the company’s interests. First there was William Pearce, a former Cargill vice president for public affairs. He became deputy special representative for trade negotiations in the Nixon administration. In 1972 Pearce was one of the main drafters of the report of the Presidential Commission on International Trade (the Williams Commission), which recommended that other countries should remove their agricultural trade barriers and other policies that supported ‘inefficient’ farmers. In 1974 Pearce was on the Committee for Economic Development, which aspired to develop US domestic agriculture by removing ‘excess human resources’ – i.e., farmers. After that he re-joined Cargill.
Then in 1983 Daniel Amstutz (Cargill's assistant vice president for feed grains from 1967 to 1972, and president of Cargill Investor Services from 1972 to 1978) was made chief policy officer for US farm programmes in Ronald Reagan’s first administration. In 1985 he drafted a proposal for a five to 10-year programme to phase out all government support for farmers; during this period farmers would have to ‘adjust’ either to a free market or to a ‘transition’ out of agriculture. While this proposal failed, it re-emerged 10 years later and was enacted as the US’s devastating Freedom to Farm Act. Since 1989 Amstutz has been working as a consultant for Cargill.
Former Cargill chairman and CEO Ernest Micek was one of 38 members of Bill Clinton's President’s Export Council. The council advises the US president on government policies and programmes that affect US trade performance. He is currently chairman of the Emergency Committee for American Trade, a coalition of US multinationals which lobbies, largely through the World Trade Organisation, for trade liberalisation.
Micek's predecessor as Cargill chairman, Whitney MacMillan, was appointed in 1993 (while still chair at the corporation) to a panel shaping the final negotiations on the General Agreement on Tariffs and Trade. And Frank Sims, president of Cargill Ag Producer Services, is a member of the US Department of Agriculture's newly formed advisory committee on agricultural biotechnology. The committee advises the US government on policy related to the creation, application, marketability, trade and use of agricultural bio-technology.
Adapted from CorporateWatch briefing ‘Cargill – arrogance incorporated’, available at www.corporatewatch.org.uk
HOW BIG IS CARGILL?
• It’s the seventh largest food and drink company in the world, the third largest in the US, the third largest in Europe, the largest in Asia and the largest in South America
• It’s the 16th largest company of any kind in the US, and the largest privately-owned (i.e., not listed on any stock exchange) company in the world
• In 1999, its global sales were US$ 50 billion
• In the US, Cargill is the third largest beef packer
This article first appeared in the Ecologist December 2009
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