Harvest of Profits: The World Empire of Cargill, Inc.

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Harvest of ProfitsThe World Empire of Cargill,
Inc.

• By Roger Burbach and Patricia Flynn

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About Cargill

• Cargill, Inc. is the largest privately owned US
  corporation
• Started by two Minneapolis-based families the
  Cargills and the MacMillans who own 85 of the
  companys stock
• If Cargill were placed on a list of the 500
  leading public industrial corporations, it would
  rank 14th
• As of May 31, 1979, Cargills annual sales stood
  at 12.6 billion making it the largest grain
  trader in the world

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Cargills Corporate Origins

• In the 1880s Cargill operated along major
  railways arteries in North and South Dakota,
  Iowa, Minnesota and Wisconsin
• By 1900, Cargills profits allowed the family to
  expand into new, and unrelated, areas
• 1906 began the downturn for the industry where
  Cargill nearly went bankrupt. However, they
  managed to recover and had full done so by the
  1920s

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Expansion

• Cargills use of cut-throat business practices
  and its rapid pace of expansion upset many of the
  established grain trading interests
• By the 1930s, Cargill joined the growing list of
  U.S. companies with foreign operations
• When WWII happened, Cargill profited by moving
  into domestic manufacturing and building tankers
• During the postwar period the U.S. became the
  worlds principal supplier of wheat and flour.
  The exports jumped from 48 million bushels in
  1944 to 503 million in 1948 which led to an even
  larger boom for Cargill

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Cargills Domestic Structure

• By the 1950s Cargill owned three important
  things
• Local elevators where farmers sold their grain
• Terminals at the major transportation crossroads
• Large export elevators located in major U.S.
  ports
• Cargills regional terminals favor the
  large-scale farmers who can buy or contract for
  trailer trucks to haul their grain long distances
  to the terminals where they receive premium
  prices that compensate for the shipping costs

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Cargills Structure Cont.

• In some cases, Cargill has used its control over
  railroads and elevator facilities to exploit the
  farmers. Cargill, railway operators and elevator
  owners would often conspire to fix grain prices
  where farmers were forced to accept price
  discounts of up to 50 cents on each bushel of
  grain sold to Cargill
• During the 1950s-1960s Cargill also used these
  terminals to store the grain surplus the U.S.
  government purchased through the CCC to keep the
  prices from falling. From 1958-1968, Cargill
  received over 76 million from the government for
  storing the grain.

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What is Public Law 480?

• Public Law 480 is a funding avenue by which
  U.S.s food can be used for overseas aid to
• Combat world hunger and malnutrition
• Promote sustainable development (including
  agriculture)
• Expand international trade
• Develop and expand the export market for U.S.
  agricultural commodities and products
• Foster private enterprise

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PL 480 and Cargill

• PL 480 served as a two-pronged instrument in
  Cargills market expansion because it enabled the
  company to directly increase its export sales
• Cargill used PL 480 to whet the appetites of
  many countries and with PL 480 we taught people
  to eat wheat who didnt eat it before
• Once they had opened up the market in a given
  country, it was much easier for them to follow up
  with direct commercial sales.

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Financial Backing

• Financial backing played a crucial role in the
  companys growth
• Cargill maintains credit lines with over forty
  banks and knows how to use the government plans
  to their benefit
• Example in 1973 the Duluth Minnesota Port
  Authority and Cargill announced a 15 million
  project for constructing a new port facility.
  13.5 million came from revenue bonds backed by
  the Port Authority while the remaining flowed
  from federal and state programs. Cargill didnt
  put up any money for the project.

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Cargill and the State

• Cargill loudly proclaims the need for free trade
  and abhors government regulation, but it would be
  virtually impossible for the worlds largest grain
  traders to operate without the support of the
  governmental institutions and organizations
• The companies realize this which is why The
  grain companies are always at the elbow of people
  in the USDA, assuring that they will have the
  legislation they need to continue their operations

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Profiteering and the Future of the Grain Trade

• Today it is the largest private grain exporter in
  four of the worlds five leading grain exporting
  nations (US, Canada, France and Argentina). In
  the fifth (Australia) it is unclear which company
  is dominant, although we know that Cargill is a
  major force in that countrys grain trade
• Not only is Cargill involved in exporting US
  grain, it also buys and exports grain in the
  other major agricultural producing nations.
  Cargill is Argentinas leading exporter of wheat,
  barley, maize, and other grains and through
  Tradax is the leading exporter of grain in
  France.

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In 2008

• Cargill is an international provider of food,
  agricultural and risk management products and
  services with 158,000 employees in 66 countries
• With annual sales of approximately 75 billion
  and growing, were among the worlds largest
  companies. We sell thousands of products,
  operate hundreds of businesses and partner with
  dozens of other companies, many of whom are
  leaders in their industries

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Conclusion

• Cargill knows how to use both public and private
  funds to sustain its commercial empire
• Examples
• Cargill controls much of the grain flow on the
  railway system without owning a single locomotive
• A port in Duluth was built under their
  supervision without Cargill having to put down
  any money
• It received millions of dollars from the
  government paying storage fees
• Much of Cargills international trade is financed
  by PL 480 and other government lending programs

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Conclusion Cont.

• Cargill realizes that the agricultural policies
  of the US government mean widely swinging markets
  with boom and bust periods in agriculture.
  Therefore, it is using its high profits to
  rapidly diversify its holdings. Approximately
  one-half of Cargills sales now come from
  activities other than grain trading.
• For decades, Cargill has shrouded itself in a
  veil of secrecy precisely to ward off this
  possibility it realizes that publicity about
  the companys operations can only lead to
  increased public hostility