Invisible Giant: Cargill and Its Transnational Strategies

by Brewster Kneen

Overview

Transnational corporations straddle the globe, largely unseen by the public. Cargill, with its headquarters in the US, is the largest private corporation in North America, and possibly in the world. Cargill trades in food commodities and produces a great many of them: grains, flour, malt, corn, cotton, salt, vegetable oils, fruit juices, animal feeds, and meat. Among its most profitable activities is its trade in the global financial markets. There are few national economies unaffected by Cargill's activities, and few eaters in the north whose food does not pass through Cargill's hands at some point. Yet Cargill remains largely invisible to most people and accountable to no one outside the company. This is an explosive book that breaks the silence on the true extent of Cargill's power and influence worldwide - its ability to shape national policies, and the implications of these strategies for all of us. Thoroughly revised and updated, Kneen's new book offers shocking new evidence of Cargill's activities since the book was first published.

Product Details

ISBN-13:	9780745319582
Publisher:	Pluto Press
Publication date:	11/20/2002
Edition description:	Second Edition
Pages:	232
Product dimensions:	5.32(w) x 8.46(h) x 0.60(d)

About the Author

Brewster Kneen is Canada's foremost analyst and critic of agribusiness. He has written several books on different aspects of food and its production and also publishes a monthly newsletter, The Ram's Horn.

Read an Excerpt

CHAPTER 1

Mutant Giants

Charles Darwin said, 'It is not the strongest of the species that survive, nor the most intelligent; it is the one that is most adaptable to change.' – Ruth Kimmelshue, Cargill, September 11, 2001

The authoritative trade journal-of-record for the 'grain-based foods' industry, Milling & Baking News, summed up the current situation of this sector of the food system in a blunt editorial in mid-2001:

The international grain industry, the part of grain-based foods that at one time stood as the all-powerful core looming over all other sectors, has experienced dramatic upheaval in the past year or so. Not only has the power of the grain trade, once considered beyond challenge, been diminished in many different ways, but questions are properly being asked about the future of an industry that has been so radically transformed ... How business in grain is done, whether internationally or domestically, has been so hugely changed that it's appropriate to declare that the grain business ruling the 20th and 19th centuries is no more.

When Dan Morgan wrote Merchants of Grain in 1979, there were five global grain companies with similar lines of businesses: Bunge, Dreyfus, André, Continental Grain and Cargill. André (founded in Switzerland in 1877) continues to operate on a much diminished scale after surviving bankruptcy proceedings; Continental Grain (founded by Jules and René Fribourg in France in 1921) recently sold its grain business to Cargill; Dreyfus has narrowed its traditional interests in grain trading and expanded its historic financial risk management function to be a provider of this 'service' to other companies around the world; and Bunge and Cargill are deeply into substantially reorienting their businesses, though Cargill remains the undisputed ruler of the grain trade while also extending its tentacles into every aspect of the global food system. Its 2001 corporate brochure describes 'Our Company':

Cargill is an international marketer, processor and distributor of agricultural, food, financial and industrial products and services. We provide distinctive customer solutions in supply chain management, food applications and health and nutrition.

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 fertilizer in your field.

Now that Cargill has purchased its grain handling business, what is left of Continental illustrates the specialization that has taken place. The company has been renamed ContiGroup Companies Inc. and consists of a cattle-feeding business (the largest in the US), an integrated pork-production business (the third largest in the US), the sixth largest poultry company, and animal feed and aquaculture businesses. At a time when the bottom has been driven out of the pig business, for the primary producers, that is, it should be noted that Conti acquired Premium Standard Farms (pigs) and Campbell Soup's poultry operations recently. The fastest growing segment of Conti's business, however, has been ContiFinancial, its commercial and consumer finance company. Perhaps ironically, this is an area in which Cargill has become much more cautious.

Of its purchase of Continental's grain business, Cargill said: 'We are going to create a much more competitive infrastructure to take grain off the farm and bring it to customers around the world. Producers will get a better price, and consumers will get a better price.' The question farmers have to ask is, why should Cargill want the primary producer to get a better price? The question the public has to ask is, why should Cargill want the primary producer to get a better price? The major motivation for 'globalization' has not been to ensure that the primary producer gets a fair price, stays on the farm and feeds the family and the community, but to provide reliable and cheap access to raw materials, anywhere in the world, for the so-called 'value-adding' activities of the food-system giants.

The 'value' that is being added is not nutritional, however. It is shareholder value. Read any business paper to see what is valued and reported. It is not farm incomes, community economic stability, the health of the citizens, or equity and justice. The business news is all about returns to shareholders and record profits: 'ROYAL'S PROFIT IS BIGGEST IN CANADIAN HISTORY: Royal Bank of Canada made a stunning $1.82 billion in fiscal 1998, the largest reported pure profit in Canadian history', the Toronto Globe and Mail proclaimed with pride on its front page. And just below it, 'Prairie grain farmers face devastation.' That Royal Bank profit works out to $60 for every man, woman and child in Canada the Globe told us – just about what pig farmers were losing on every pig they raised at the time.

Does Cargill – or Maple Leaf Foods or Smithfield – care, as long as there are farmers willing to go on purchasing pig feed from them or selling pigs to them at a loss so they can maintain shareholder value?

Cargill may be big, but Wal-Mart is bigger, and Cargill is happy to supply 'customer solutions':

Wal-Mart's total sales in the year 2000 were $165 billion. Food sales accounted for 13% of that, or $22 billion. Increasing grocery sales are its top objective and growth vehicle. Cargill is a case-ready pioneer, ready to meet Wal-Mart's objective of handling only case-ready meats.

I have seen no mention of Cargill's relations with Ahold, the giant Dutch food retailer that by the end of 2001 was doing $24 billion in supermarket business in the US and another $19 billion in food service.

While doing the research for the first edition of Invisible Giant in the early 1990s, I discovered that there had been virtually nothing of substance published about the grain trade and agribusiness in general after Morgan's book in 1979. Apparently the corporate sector did not like the negative publicity it had received throughout the 1960s and 1970s and made a concerted effort, with great success, to redirect public animosity toward the state. This was marked, or accompanied, by the ascendency of Ronald Reagan to the presidency of the USA in 1981. Corporations became the good guys and the state the villain. Critical analysis of how TNCs were reshaping the world disappeared. Now, in 2001, the global food system, from seed to supermarket, is in the hands of alarmingly few very large corporations whose primary commitment is to maximizing shareholder value.

This new, updated and substantially rewritten edition of Invisible Giant illustrates how the largest private company in the USA, if not the world, continues to mutate, always with the objective of expanding the control of its business interests and our food. Before proceeding with this story, however, it is worth noting the changes taking place in Bunge and Dreyfus, since they pop up here and there throughout the story.

Bunge

Bunge Ltd was established in 1818 as a grain-trading company in Amsterdam. In 1859 the company moved to Antwerp and in 1884 to Buenos Aries and then São Paulo, Brazil. In the fall of 2001 the company went public with an initial public offering (IPO) of stock, having moved its headquarters from Brazil to White Plains, New York, in preparation for the IPO. The focus of Bunge's business for the past century has been South America, but it is the largest soybean processor in both North and South America and the world's largest exporter of soybeans based on volume. It is a major corn and edible-oil processor, the largest wheat miller in Latin America and the largest integrated fertilizer producer in Brazil. In the year 2000, 35 per cent of Bunge's gross profits were made in fertilizer, 35 per cent in 'agribusiness', 26 per cent in food products, and 4 per cent in 'other', with net sales of $9.7 billion. Net sales for 2001 were $11.5 billion.

In 1998 Bunge operated in ten countries with more than 37,000 employees, had 30 crushing plants, 20 oil-refining plants, 10 hydrogenation plants, 13 packaging plants, one protein plant, more than 200 silos and elevators, three port facilities and 450 barges. Its holdings included:

• 58 per cent of food conglomerate Ceval Alimentos of Brazil, the largest soybean processor in Latin America

• 77 per cent of Serrana in Brazil, the largest fertilizer and phosphates producer in Latin America

• 60 per cent of Molinos Rio de la Plata, Argentina's largest producer and distributor of food products

• 68 per cent of Santista Alimentos of Brazil, an integrated manufacturer of consumer products, baked goods, and wheat flour

• 100 per cent of Bunge Australia

• 100 per cent of Gramoven, one of Venezuela's largest food companies, sold to Cargill in 1998.

The president and chief executive officer of Bunge North America, John E. Klein, in an interview with Milling & Baking News, said that before his father Walter Klein took charge in 1959, the company was essentially a grain-trading house. Taking over from his father 15 years ago, John Klein decided to focus strategically on the Mississippi river and its tributaries and continue to reinforce the company's position as a major exporter out of the St Lawrence Seaway with its deep-water grain elevator in Quebec City. 'Today, we have more storage capacity along the Mississippi River and its tributaries than any of our major competitors.'

For a time, Bunge and Continental Grain Co. were engaged in a joint venture for exports, but when it became clear that Continental would not remain an independent company, Bunge established a joint venture with Zen-Noh Grain Corp to export grain from their terminals in Louisiana on the Gulf of Mexico in 1998. The creation of Bunge Global Markets in 1999 was the company's strategic response to privatizations of government buying agencies around the world in the aftermath of the shift from planned to market economies.

Klein estimated the company's soybean market share in the USA at 17 per cent, in third place behind ADM and Cargill. Bunge got into corn dry milling in 1979 with the purchase of the Lauhoff Grain Co. soybean-processing facility at Danville, Illinois, which came with two corn dry mills. Bunge Milling is now the largest corn dry-miller in the USA and probably the world. (For a description of dry and wet milling see page 72, Corn Processing.)

The repositioning and consolidation of the major grain companies, and their increasing collaboration to eliminate competition, is clearly marked by relations between Bunge and Cargill. In May, 1995, the two companies reached an agreement whereby Cargill would acquire Bunge's export grain elevator at Portland, Oregon and swap its river elevator at Osceola, Arkansas, for Bunge's river elevator at Price's Landing, Missouri. Earlier in 1995 Bunge had sold to Cargill 19 elevators in South Dakota, Minnesota, Colorado and Kansas so that Bunge could concentrate its grain operations along the Mississippi River and its tributaries. Bunge was willing to give up its Portland terminal because it did not have upriver origination facilities. Cargill, on the other hand, said the terminal would enhance its ability to serve North American farm customers as well as customers in the Pacific Rim. Later that same year Cargill acquired BEOCO Ltd, Bunge's oilseed crushing and refining operation in Liverpool, England. This enabled Cargill to move into the bottled and boxed hard-fats business in the UK for the first time. In December 1998, Cargill acquired the Bunge Venezuela milling business, Grandes Molinos de Venezuela SA (Gramoven). Included in the purchase was a flour mill, a pasta plant and an edible-oils plant, all near Caracas.

Dreyfus

Established in 1851, Louis Dreyfus & Cie has been owned and managed by members of the Louis Dreyfus family ever since. Current chairman is William Louis Dreyfus. The company is headquartered in Paris. 'Fifteen years ago we really were a grain company', Louis Dreyfus Corp executive vice-president Bruce Ritter told Milling & Baking News. 'Today we see ourselves as a risk management firm. We have diversified into coffee, sugar, rice, cotton, meats, citrus and energy ... We believe we can bring value to any market in the world that has risk. ... Industrial companies today face price risk, sovereign risk, client risk and quality and logistics risk.'

In 1993 Dreyfus formed a joint venture with Archer Daniels Midland (ADM) under which ADM assumed operational control of 46 Dreyfus-owned US grain elevators. This made ADM the largest grain company in the US, measured on the basis of elevator capacity. Dreyfus retained its export elevator in Quebec City.

More recently the company has expanded its US export capacity by buying three elevators from ContiGroup, including a large export terminal in Beaumont, Texas. It also leased the very large Public Elevator in Houston, Texas, and took over Cargill's lease on Pier 86 in Seattle. (We'll come back to these stories in due course.) To complement its new export capacity, Dreyfus has established a series of partnerships with regional companies that source grain for it. In a contrary move, Dreyfus has undertaken a major expansion of its interior grain storage capacity in Canada.

In October 2001, Louis Dreyfus Corp. and Cargill formed a joint venture called CLD Pacific Grain LLC to combine operations in the Pacific north-west. The business will include ten grain elevators with a total capacity of 15.8 million bushels. Cargill leased its two export facilities in Portland, Oregon, to CLD, as well as its six facilities on the Columbia and Snake Rivers between Portland and Lewiston, while Dreyfus turned over its export facility in Portland and its river facility in Windust, Washington. The announcement of the venture boldly stated: 'Cargill and Louis Dreyfus will continue to compete aggressively against one another for the export business', according to Milling & Baking News, though this notice was not posted anywhere on Cargill's website to the best of my knowledge.

Louis Dreyfus Canada struck an interesting deal in 2002 with Dow AgroSciences to market the specialty canola crops produced from Dow's Nexera seed. Actually, the seed comes from Dow subsidiary Mycogen. Nexera, a non-genetically engineered (GE) canola with an especially healthy oil profile, is rapidly gaining a significant share of Canadian canola production (5 per cent in a bare three years) and Dreyfus is getting in on the ground floor of distribution of identity preserved (IP) specialty crops.

Cargill's World

Corporations operating beyond national boundaries are nothing new but, until the late 1950s or so, they were just that. Then for a time they were referred to as 'multinationals', a term that implies they are composed of, or represent the interests of, many nations. Nestlé and Unilever, Cargill and Mitsubishi, however, neither consist of nor represent many nations. While these collective personalities have to be incorporated under the laws of some land of convenience or tradition, they owe loyalty to no state or nation. They cannot function in the interests of any particular country precisely because they have to serve the interests of the corporate persona and its owners first. They live everywhere and nowhere in a world of markets.

Very few people are aware of Cargill's global activities, and even fewer could describe them, including (judging by the many I have talked with) most of Cargill's own employees. This is no accident. A picture of the whole would be disturbing to many people and would reveal the power of the corporation. Experience suggests it is better to remain largely invisible. Example: the casual visitor to the Hohenberg office in Memphis, Tennessee, would be hard pressed to know that one of the major worldwide cotton-trading companies is a Cargill subsidiary. Example: in many towns and cities the Cargill office is not where one might expect it, but rather in a nondescript office building outside the main business area where there is no indication of Cargill's presence except on the list of tenants in the lobby. More than once, when calling on Cargill executives, from Tokyo to Warsaw, I have been asked: 'How did you find this office?' Example: one comes across a yard full of gleaming tanker trucks bearing the name Transportation Services – but one has to inquire in the office to ascertain that this is a Cargill subsidiary.

(Continues…)

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Excerpted from "Invisible Giant"
by .
Copyright © 2002 Brewster Kneen.
Excerpted by permission of Pluto Press.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

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Table of Contents

Preface

1. Mutant Giants
2. Cargill Inc – The Numbers
3. Origins, Organization and Ownership
4. Policy Advocacy and Capitalist Subsidies
5. Creatures: Feeding and Processing
6. Cotton, Peanuts & Malting
7. Processing: Oilseeds, Soybeans, Corn & Wheat
8. Invisible Commodities
9. E-commerce
10. Coming and Going: Transport and Storage
11. A Typical Story– Canada, and Mexico
12. Fertilizer
13. The West Coast
14. Rivers of Soy - South America
15. Juice
16. The 'Far East'
17. Seeds
18. Salt
19. Only Cargill’s Future?

Periodicals referred to
Endnotes
Index

What People are Saying About This

Harriet Friedmann

The result of (Kneen's) sleuthing is a remarkable amount of information which is frightening but ultimately empowering.

Editorial Reviews

'If you want to understand both the theory and the reality of modern economics, Kneen's impressively researched book is a fascinating place to start' - Red Pepper

'Details the ethos, priorities, strategies and goals of transnational corporations as seen in a single paradigmatic example ... His work is the more amazing given Cargill's general secrecy' - The Boycott Quarterly (US)

From the Publisher