Harvest of Profits

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

2. Cargill is more involved in the buying and selling of commodities than in industrial production • Can be compared to leading merchandising firms—would rank forth (just behind K-Mart but ahead of J.C. Penny) • May 31, 1979- Cargill becomes the largest grain trader in the world with worldwide sales at about $12.6 billion

3. History • 1830’s: William D. Cargill becomes a merchant marine in northeastern US—was a captain in the merchant marine. • Sought profits in the slave trade • 1857 moved to Wisconsin to farm • 1860’s: Three sons joined grain trading business and built elevators and grain storage houses in Iowa, MN and Wisconsin

4. Strategies • Formed commercial partnerships w/ other grain merchants to build or control elevators and then bought out the other for complete control • Local farmers often forced to accept Cargill prices for grain b/c they had the only elevator at major railroad stops—especially in So. MN and SD • Conspired to fix grain prices • To avoid the affects of farmer discontent against big business, Cargill sought constantly expand market outlets

5. Expansion at Home and Abroad • Early 1920’s: established direct sale offices in the East—now had a completely integrated trading network which handled grain from small country elevators to final eastern markets • 1930’s: controlled largest grain export facility in the world (Albany, NY) and then moved to the Chicago market • Established feed milling and vegetable processing divisions that moved into domestic manufacturing

6. Postwar Boom • US became the world’s principal food supplier through the United Nations Relief and Rehabilitation Administration (UNRRA) and the Marshall Plan • Wheat and flour jumped from 48 million bushels in 1944 to 503 million in 1948 But… • End of 1940’s—the resurgence of agricultural production in W. Europe lessened the demand for US grain

7. Public Law 480 • 1954- US forged law of gov’t concessional financing for continued expansion of markets • First: enabled the company to directly increase its export sales • Second: Once a market in a given country is opened with PL 480, it is much easier to follow up with direct commercial sales

8. South Korea 1968 Plans an integrated poultry operation with a poultry breeding farm, a large feed processing plant and a poultry processing unit: • 95 % of financing from US gov’t • PL 480 loan of $500,000 from the Cooley amendment that allowed TNCs to use local currency from the proceeds of PL 480 sales to finance the establishment of local subsidiaries • $1 million loan from private trade entity provisions of the PL 480

9. Failure • Exhaustion of Cargill’s PL 480 credits for importing grain and Korea’s restrictions on the use of tis limited foreign exchange, Korea Cargill struggled to sustain operations • South Korea gov’t becomes less responsive to demands of TNCs • Korea Cargill asks for and receives permission to defer payments on its two PL 480 loans

10. “we taught people to eat wheat who didn’t eat it before, particularly in the Far East” –former grain company official “PL 480 enabled the companies to gain entrance into a market at the smallest expense possible” –grain company rep.

11. Other Gov’t Help • Commodity Credit Corporation (CCC) granted one- to three-year loans to foreign governments to purchase its surplus grain reserves • Barter program- exchanged grain for strategic and war materials—provided an effective subsidy for US exports (Cargill) “In some years 70 percent of total U.S. grain exports involved government concessional financing of one type or another.”

12. Domestic Structure Three main points of grain collection and distribution: • Local elevators where farmers sell the grain • Subterminals and terminals at the major transportation crossroads • Large export elevators located in major U.S. ports **Limits the commercial options available to the small producer

13. Transportation • 1940’s- Opened a new access route to the Mississippi River by widening the MN River channel • 1950’s- Used inland waterways for grain transport- making Cargill one of the largest shippers in the US • 1968- “Rent-A-Train” (RAT): Rented the engine, train crews and railroad right-of-way for extended periods of time at special rates **Control of railways=control of price for wheat because local merchants and farmers can’t choose to whom to sell grain and for what price

14. “When one recalls that Cargill controls much of the flow of grain on the railway system without owning a single locomotive, that it received millions of dollars in storage payments for holding CCC grain surpluses which it could buy and sell at a moment’s notice, and other government lending programs, then one has some understanding of how its commercial system is run. The company is a stunning example of modern corporate capitalism, where small amounts of capital are used to control vast financial and commercial empires.”

15. “The Sun Never Sets on Cargill’s Corn” • Cargill operates in 36 countries and has 140 affiliates and subsidiaries • 1960’s and 1970’s: Expansion into less developed countries such as, El Salvador, Guatemala, the Philippines, Argentine, Pakistan, Brazil, Taiwan and South Korea • Is one of five other major grain companies that dominate the grain markets of W. Europe • Favors 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

16. Internationally, Cargill Stands For: • Free trade and rejects gov’t regulation (but it would be impossible to operate w/ support) • PL 480 that enables Cargill to sell grain to the lesser developed countries • Eximbank and loans from Overseas Private Investment Corporation to help set up foreign subsidiaries • American military and econ. Assistance to repressive regimes to help maintain the environment necessary for Cargill operations

17. Domestically, Federal and state governments • finance port facilities • Grant tax concessions for new capital investments • Maintain a legal and financial system that is essential for the survival of Cargill and other monopolistic corporations