Ghosts haunt Archer bid

18 Nov, 2012 03:00 AM
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THE ghosts of numerous controversial past trading deals are returning to haunt Archer Daniels Midland (ADM) in Australia as the US food giant continues its $2.7 billion play for GrainCorp.

ADM recently confirmed possible violations to foreign bribery laws following a review of its own anti-corruption compliance program, initiated in 2008 and revealed to US and overseas regulators in 2009.

The latest revelations follow a run of high profile penalties, including a prison sentences totalling more than eight years for three former ADM executives in 1996 - including the vice president - in the wake of price fixing convictions.

In what was then America's biggest anti-trust penalty, the company paid a $US100 million fine after a big FBI investigation into its activities in lysine and citric acid markets.

Authorities in Europe, Canada and Mexico also imposed fines worth more than $US47m.

In 2004 the company paid another $400m to settle a class action initiated by customers such as Coca-Cola and PepsiCo claiming it fixed the price of corn syrup in the early 1990s.

More fines and a $US340m clean up bill were incurred at the same time when ADM was punished for violating the US Clean Air Act at 52 of its US food processing plants.

"These people don't give you a lot of confidence that they're fit and proper to be taking control of our grain storage and port system," said NSW Farmers grains committee chairman Mark Hoskinson.

"It's not a very comforting situation.

"Growers everywhere are questioning how we're going to keep a check on these powerful operators now our market has been opened to them."

The Illinois-based ADM is now confirming certain transactions relating to past grain and feed exports may have been in potential breach of the US Foreign Corrupt Practices Act conducted by the global trading and grain processor its affiliates or joint ventures.

The company has been talking with the US Department of Justice and the Securities and Exchange Commission over possible violations and conceded it could be liable for criminal penalties or ordered to repay profits from contracts involving inappropriate payments.

Grain Producers Australia chairman Peter Mailler said he was not surprised farmers and others were asking questions about ADM, but he doubted if it was alone in deserving scrutiny.

"I don't want to sound too cynical or condone any misbehaviour, but I don't think any international trader is much different when it comes to their attitudes towards getting deals done and putting a priority on generating investor returns," he said.

"The biggest issue we should focus on is how to manage the power these huge grain traders have and their access to our market - and I sense our government hasn't been interested in sensible consideration about how we manage this issue.

"They might portray themselves as relatively benevolent players, but as financial pressures hit these big traders will exercise their power to their full advantage.

"I'm not about blocking or clawing back the market deregulation that's already happened, but we need be serious about mitigating against market power."

ADM has more than 270 different agricultural commodity processing plants around the world and 30,000 staff.

With an annual sales revenue of around $US80 billion, it is one of the world's biggest processors of wheat, corn, cocoa and soybeans, although the US drought slashed net earnings to $1.22b last year.

In the past decade ADM has diversified its earnings stream with big growth strides outside the US, buying regional food processing and trading ventures and a stake in the State-owned Agricultural Bank of China.

In 2002 it began soybean crushing operations in China in partnership with Greatocean Oils and Grains, in which it held a 30 per cent stake.

International operations range from cocoa processing in West Africa and Singapore to a 30pc stake in Asian vegetable oil, sugar, wheat and rice processor Wilmar International and a big share in global farm commodities and processed products merchant Toepfer International.

ADM's new 15pc stake in GrainCorp and its $11.75 share offer to buy the full Australian east coast grain handling, marketing and processing business will attract heightened attention today when GrainCorp's half yearly performance results are announced.

NSW Farmers' Mr Hoskinson said the grain industry was waiting to see just how serious ADM was about lifting its under-priced bid (GNC shares traded around $12.20 early this week).

But more generally it was worried about GrainCorp's partial monopoly on eastern Australia's grain ports "falling into the hands of multi-nationals".

"Growers actually built GrainCorp's ports and handling infrastructure - and have paid for it twice," he said.

"Farmers are wishing there was a way of keeping it locally controlled. Ports used to be considered essential national infrastructure."

ADM 'no different' in US

While Archer Daniels Midland's (ADM) chequered history has fostered growing doubts about its potential impact on Australian farm markets, US farmers are less spooked about their locally-born food goliath.

"Farmers here don't really feel any different about ADM than they do the others," said editorial director of the Farm Progress publishing group in the US, Willie Vogt.

"ADM is one of the big firms like Cargill, Bunge and the rest that are involved in moving grain globally.

"It has a strong local presence in the US and it's respected as a multinational grain company."

While it had been in trouble over price fixing in the feed ingredient market in the past, he doubted if recent government investigations into possible violations of foreign bribery laws were focused just on ADM.

"We have strict anti-bribery laws that are enforced more vigorously from time to time."

US farm industry commentator Alan Guebert said ADM had done much to rebuild its tattered reputation in business and agricultural communities after the 1990s price fixing scandals.

ADM was no longer run on a day-to-day basis by the Andreas family (one of whom was gaoled in the '90s).

It's hard to say if ADM might have returned to some of its former business practices," said Mr Geubert, from ADM's home State of Illinois.

"But given what's at stake in the fast-growing, increasingly consolidated global grain business, perhaps the only thing that's truly surprising in ADM's admission is that rule-breaking isn't more prominent."

He said ADM's move on GrainCorp was no surprise.

"The global grain giants pulled and tugged Australia's farmers, farm leaders and political leaders for a decade until they, finally, got the government to dismantle the AWB so all could walk into the "free market" sunrise," he said.

"Now farmers are increasingly at the mercy of the cartel and deals for further consolidation will certainly weaken their position.

"Unfortunately, there are too few giants too focused on too short-termed shareholder profits."

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READER COMMENTS

x
18/11/2012 6:08:53 AM

Nice people !!-Not for Australia
Ray
19/11/2012 5:40:33 AM

How can our government say we have a sound economy when they want any outside company regardless of financial status or criminal ability to take over our companies & our economies direction . AWB & lindberg were angels compared to some of these corporates coming in to take over our ports !! Money is not needed to be a corporate in Australia , just borrow a 90 day credit note from a broke Greek bank & you are welcome to take over our ports . This shows our true economy has gone to pieces !!!

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Nico on numerous occasions you bag on about following the money trail. Well perhaps you should
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We should pump as much CO2 out as we can - get sea levels rising as quick as possible - more
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Interesting that the mega Corporations like Coles, so vigorously fight for free and open markets