This paper investigates several ethical issues that surround the operations of Archer Daniels Midland Company (ADM). ADM's impact on the environment is investigated by tracing the production, processing and consumption of corn. Related public health and regulatory issues are also discussed. ADM's response to these concerns is evaluated and several recommendations are given to make the company's operations less harmful to the environment and to public health in general. Finally, price fixing and forced labor issues are discussed to explain the company's low corporate-social responsibility ratings.
Company Overview Archer Daniels Midland Company (ADM) is one of the world's leading processors and distributors of agricultural products for food and animal feed, with additional operations in transportation and storage of such products. Founded in 1902 and incorporated in 1923, ADM is headquartered in Decatur, Illinois, and operates processing and manufacturing facilities across the United States and worldwide (Appendix 2 - Corporate Tree and Global Operations). In 1902, George A. Archer and John W. Daniels began a linseed crushing business. In 1923 the company bought Midland Linseed Products and the Archer Daniels Midland was formed. In 2007, long-time chairman G. Allen Andreas stepped down and was replaced by company CEO and president, Patricia Woertz, who, before joining ADM, worked for Chevron.
Business Overview ADM is principally engaged in procuring, transporting, storing, processing, and merchandising agricultural commodities and products. ADM processes soybeans, corn, and wheat; the three largest crops in the US. With over 270 plants worldwide and over 27,000 employees, ADM's revenues for fiscal 2007 (ending June 30, 2007) were US $44 billion. ADM's revenue generation can be primarily classified into three operations: 1 1. Agricultural Services. (46% of 2007 Sales)2 2. Oilseeds Processing. (31% of 2007 Sales).
3. Corn Processing. (12% of 2007 Sales) Other than the above three business operations, ADM is also involved in other operations such as activities related to processing agricultural commodities into food ingredient products and financial activities related to banking, captive insurance, private equity fund investments, and futures commission merchant activities. These other operations contributed 11% of 2007 sales of the company.
The Agricultural Services operation utilizes the Company's extensive grain elevator and transportation network to buy, store, clean, and transport agricultural commodities, such as oilseeds, corn, wheat, milo, oats, barley, and edible beans, and resells or processes these commodities primarily as food and feed ingredients for the agricultural processing industry. The Oilseeds Processing operation includes activities related to the crushing and origination of oilseeds such as soybeans, cottonseed, sunflower seeds, canola, peanuts, and flaxseed into vegetable oils and meals principally for the food and feed industries.
In addition, oilseeds and oilseed products are used internally or resold into the marketplace as raw materials for other processing. Partially refined oil is sold for use in chemicals, paints, and other industrial products. Refined oil can be further processed for use in the production of biodiesel. Oilseed meals are primary ingredients used in the manufacture of commercial livestock and poultry feeds. Oilseeds Processing includes activities related to the production of natural health and nutrition products and the production of other specialty food and feed ingredients.
The Corn Processing operation includes activities related to the production of sweeteners, starches, dextrose, and syrups for the food and beverage industry as well as activities related to the production, by fermentation, of bio-products such as ethanol, amino acids, and other food, feed and industrial products. ADM's other revenue streams consists of activities related to processing agricultural commodities into food ingredient products such as wheat into wheat flour, cocoa into chocolate and cocoa products, and barley into malt for the beverage industry. ADM's operations also include financial activities related to banking, captive insurance, private equity fund investments, and futures commission merchant activities.
With a worldwide transportation network and more than 270 domestic and international plants, ADM continues to grow and create markets for their products around the globe. (Appendix 1 - Financials, Business segment & Region-wise revenue generation). Every decade since the corporate inception, ADM has added a major profit center to the agribusiness such as milling, processing, specialty feed and food ingredients, cocoa, and nutrition. It has been often said that ADM knows how to grind and squeeze a fortune out of humble plants3. However, the fact of the matter is that subsidies from US government have helped bolstered revenues of ADM. There are three core areas where ADM is helped along by US government program:
1. The Sugar Program - By limiting US sugar production, the government keeps the price high, and so keeps customers like Coca-Cola favoring ADM's maize sweeteners over cane sugar. 2. Maize Subsidies - These make a relatively small contribution to ADM's finances, but with its heavy focus on processing, ADM benefits from the stability the subsidies provide in a volatile market.[DHS1] 3. Ethanol Subsidy - This is by far the most significant, a tax credit to producers of ethanol used as car fuel, amounting to $3.5 bn over 5 years, about half of which goes to ADM.5
ADM pays well to ensure the continuation of such favorable treatment. It has been alleged that ADM's bottom line has always been interwoven with public policy. To reinforce this relationship, Andreas, the former chairman, has contributed impressively to the campaigns of politicians, from Richard Nixon and Hubert Humphrey to Bill Clinton and Bob Dole. For example, in the 1992 election, Andreas and his associates contributed $1.4m to party organizations and $345,000 to individual candidates.6
ADM has been the subject of several major federal lawsuits related to environment pollution. The Company is involved in approximately twenty administrative and judicial proceedings in which it has been identified as a potentially responsible party (PRP) for contamination by material discharged into the environment.7 According to Political Economy Research Institute, ADM was listed as the tenth largest air polluter in the US based on the data of year 2000.
ADM and its impact on environment. Corn To understand how ADM impacts the environment, corn production is a very good place to start. According to the US Department of Agriculture statistics, corn production is estimated at 13,167.74 million bushels in 2007.9 80 million acres of land are dedicated to corn production in the U.S.10 None of this corn is produced directly by ADM. Instead, ADM is a major consumer of this commodity crop and a major provider of infrastructure services necessary to process corn into other products.
Local corn production is usually measured in bushels per acre. In order to increase yield, the fields where corn is grown are treated with fertilizer and chemical pesticides. The fertilizer is used to provide corn with nitrogen necessary for levels of production that are not possible with organic methods. The pesticides are necessary in order to keep genetically identical stalks of corn from being consumed by insects or disease. Not all of this material is used up by the corn, however. Farmers need to protect their yield and oversupply the land with fertilizer to compensate for loss through air or water dispersal11. Excess nitrogen then winds up in local water supplies. Eventually, this nitrogen will work its way down the Mississippi River and into the Gulf of Mexico.
When this material gets into the Gulf of Mexico12, it produces a "dead zone" along the coast of Louisiana. This zone sometimes reaches an area of 8,000 square miles, nearly the size of New Jersey.13 This condition is called hypoxia. It is caused by lack of oxygen and an oversupply of nutrients. Fish and other sea life can not survive in this zone. Algae, however, do remarkably well. Other impacts of corn production are also significant. In order to produce fertilizer to grow the corn, large amounts of energy need to be consumed. Most of this energy is provided by natural gas. This depletes the planet's reserves of fossil fuels and contributes to climate change. The factories where the fertilizer is produced can also cause industrial pollution. In addition, some of the fertilizer evaporates to produce acid rain.
Most of the corn is not consumed directly by people. Instead, it is used to feed animals that are later consumed by people. Cows, chickens and pigs are normally fed corn in order to reduce cost of meat production. Cows, for example, did not evolve to eat corn.15 They evolved to eat grass. When cows are fed corn, they tend to get sick. In order to keep the animals healthy enough to be slaughtered for meat, large quantities of medicine need to be provided to the animals. When cows eat grass their manure is an excellent fertilizer for the grass that they will eat in the future. When cows eat corn, their manure is toxic for grass. Therefore, feedlots need to install waste processing systems or risk polluting the surrounding environment. Ultimately, the animals are consumed by people, but the meat from the corn fed animals is of lower quality than meat from grass fed animals.
Because corn is grown as a monoculture, there is no longer any biodiversity on the fields where it is grown. That means that corn slowly depletes the land of nutrients and requires fertilizer to produce future crops. Since there is no natural way to replenish the nutrients in the soil, the land will eventually be exhausted and unable to produce any more crops. Other corn winds up in processed foods eaten by people. However, much of this corn enters the food supply in highly processed form, such as high fructose corn syrup. This ingredient is generally regarded as a high contributor to various human illnesses, such as diabetes, obesity and heart disease.16 According to the National Institute of Health, diabetes affects over 20 million people in the US and costs the economy $132 billion.[DHS2]17