Cargill, Inc. (1945 - ): Work with Soy
by William Shurtleff and Akiko Aoyagi
A Chapter from the Unpublished Manuscript, History of Soybeans and
Soyfoods, 1100 B.C. to the 1980s
©Copyright 2004 Soyfoods Center, Lafayette, California
Although Cargill is the oldest of America's major soybean crushers, it was the last to enter the industry. By 1984 it was is the largest soybean crusher in the world, with fifteen plants in the US and six overseas, plus five soy oil refineries in the US and plants producing soy flour, soy flakes, and textured soy protein (extruded soy flour). From 1957 until 1980 Cargill was the largest crusher in the US, but in 1979 they were passed by ADM (Now?? Ref??). Cargill is also the world's largest grain trading company, the others of the Big Five being Continental, Louis Dreyfus, Bunge, and Andre. Bunge and Continental are also large US processors.
According to ?? the Cargill organization was founded in 1865 by William H. Cargill as a frontier grain business. Its first elevator was opened that year in Conover, Iowa, at the head of a railway line. Thereafter Will and his two brothers, Sam and Jim, developed a system of country elevators. Their first formal headquarters, from 1875, were in La Crosse, Wisconsin and a north office was started in Minneapolis in the early 1880s. By 1886 Will Cargill had 37 grain elevators along railroad lines strung across southern Minnesota. He soon expanded into North and South Dakota, and southern Iowa. In 1890 the Cargill Elevator Company was formed from a partnership of the three brothers?? Before he died in 1909, Will Cargill had accumulated a large fortune collecting and shipping grain in the Midwest. He had integrated the company by acquiring or building grain storage elevators at key locations, and barge lines, and by working closely with existing railway lines.
After Will Cargill's death, the company hovered on the brink of bankruptcy until 1916 because his son, William, had sunk a lot of money into unwise outside investments. A power struggle ensued between the Cargill heirs and John MacMillan, who had married Will's daughter. MacMillan triumphed and gained majority control of the company, although the Cargills kept a small portion. Today the two families, both of Scottish origin, own 85% of the stock and serve as most of the top corporate officers. Like all of the five major grain companies, Cargill is a private corporation. It does not publish financial statements, there are no public stockholders, and relatively little is known about the company.
During the 1920s Cargill was still a regional grain trading form, with activities centering in the Midwest. In the 1930s, in part because of the Depression, the grain trade stagnated and prices fell. Cargill put its money into the basics of grain storage and transportation. The company got further into the shipping business by creating a subsidiary that built barges to haul grains, including some soybeans, down the Mississippi River. In subsequent decades, Cargill's growth was closely related to its progress in transportation.
In 1942 Cargill first entered the soybean crushing business with the acquisition of expeller plants in Springfield, Illinois, and Cedar Rapids (east), Iowa. In 1943 Cargill acquired Plymouth Processing Company's soybean processing plant, feed mill, and grain elevator at Ft. Dodge, Iowa, to give the company a soybean meal capacity of about 280 tons a day. In 1945 Cargill acquired Honeymead's solvent-extraction plants in Spencer and Cedar Rapids (west), Iowa. Dwayne Andreas, later of ADM fame, resigned as vice-president of Honeymead to become general manager of Cargill's Cedar Rapids operations.
Also in 1945 Cargill acquired Nutrena Mills, a manufacturer of animal feeds. Soybean meal from the Cargill mills was used in these feeds?? During the late 1940s large agricultural surpluses began to develop in the US; getting rid of them would be top priority throughout the Eisenhower administration (1953-61). Surpluses made for dull markets and low profits, so Cargill, like other major grain traders, began to diversify. It moved rapidly to expand its soybean operations. By 1947 the company had five plants using both naphtha and hexane solvents, and expellers, located in the Midwest at Cedar Rapids, Ft. Dodge, Spencer, and Washington, Iowa; and Springfield, Illinois. The capacity of five of the plants totaled 570 tons of soybeans per day, so total capacity was probably about 685 tons (Why??). Storage capacity of the five known plants was 1.6 million bushels. All of the plants produced "Cargill" brand soybean meal and Nutrena feeds and pellets (Soybean Blue Book, 1947). In 1947 the crude soybean oil was sold to oil refiners; Cargill had not yet begun refining. The solvent meal was 44% protein and the expeller meal 41%.
In 1950 Cargill built its first plant specifically designed to crush soybeans in Chicago to serve US oil and meal markets. It proceeded to open soybean crushing plants in Savage, Minnesota (1954); Philadelphia, Pennsylvania (1955??); and Memphis, Tennessee (1956; a second plant was added adjacent to this first one in 1970). Most of Cargill's plants now used hexane solvent.
In 1957 Cargill began soy oil refining, but for industrial use, at a refinery built adjacent to the Chicago plant. The non-edible oil was used in paints and other protective coatings, and in vinyl products.
In 1955 Cargill made its first major move into the international grain market, so long dominated by the great European firms, by setting up a subsidiary called Tradax in Geneva, Switzerland. In 1959 Cargill/Tradax began shipping grain and soybeans to Europe.
Cargill's soybean processing activities expanded with tremendous speed. By 1957 it had passed all of the huge pioneering soybean processing firms, Staley, ADM, and Central Soya, to become America's leading soybean processor in terms of number of tons of soybeans processed per year. Cargill kept the US lead until 1980.
By 1960 Cargill had added new soybean crushing plants at Norfolk, Virginia (an Atlantic seaport); Sioux City, Iowa (on the Missouri River); and Memphis, Tennessee (on the Mississippi River), to bring the US total to eight. It had phased out its plants at Spencer, Iowa?? (not on a major waterway) and Philadelphia, Pennsylvania (replaced by Norfolk). Clearly the new plants were strategically situated to reach a global market; a new era was arriving. By 1965 new soybean crushing plants had been added at Des Moines, Iowa (on the Des Moines River) and Wichita, Kansas (on the Arkansas River), bringing the US total to ten.
In 1965 Cargill started operating its first overseas soybean crushing plant at Tarragona, Spain. Its first animal feed manufacturing plant had been started in Belgium in 1964, a joint venture. A second soybean processing plant, with 300,000 tons a year capacity, was started at Amsterdam, the Netherlands in 1966, followed by a third, with 500,000 tons a year capacity, at St. Nazaire, France in 1970 (a joint venture with three French firms). The capacity of this latter plant was soon doubled. These three European plants processed soybeans imported from the US. By 1969 Cargill had nine plants manufacturing livestock feeds in foreign countries, five in Latin America, three in Europe, and one in Korea. Cargill's soybeans or soybean meal were used in these feeds.
In 1967 Cargill first began to refine soy oil for food use, by opening a refinery adjacent to its plant at Des Moines, Iowa, for manufacturing salad oil, the most highly refined type of soy oil.
In November, 1969 Cargill disclosed more about its financial and international operations than it had ever done during its 204-year history. Like most of the privately-owned international grain trading companies, it usually operated in relative secrecy. Cargill's sales were reported to exceed $2,000 million during each of the past 4 years; this would place it alongside the top 30 or 40 US industrial corporations which are publicly held. Earnings averaged better than $14 million in each of these years. Then the world largest grain merchant and largest US processor of vegetable oils, Cargill also believed itself to be the second largest producer of animal feeds in the world (behind Central Soya?? Ralston??) with 35 US feed plants and 20 overseas. Employing 9,000 people worldwide, Cargill's net worth was $150 million and working capital was close to $90 million. Highly efficient, with profits averaging less than 1% of sales, Cargill sales abroad had contributed as much as $1,000 million in a single year--the second largest of all US corporations (Feedstuffs, Nov. 1, 1969). Between 1955 and 1965 Cargill had quadrupled its volume of US grain exports. It had been actively involved in PL 480 programs, making cereal-soy blended foods such as CSM and also selling and shipping PL 480 products overseas (see Chapter 45).
The 1970s were a period of tremendous prosperity for Cargill--and some controversy. At the start of the decade the company had expanded the number of soybean crushing plants to eleven by adding new ones in Gainesville, Georgia; San Francisco, California; and Fayetteville, North Carolina. It had also established a new vegetable oil division.
Starting in the early 1970s Cargill began to figure prominently in Brazil's emergence as the world's second largest soybean producer and exporter. Aside from engaging in the soybean export trade, in 1972 Cargill built one of the world's most modern soybean crushing plants at Ponta Gross, Brazil. The plant became a center of controversy in the US for two reasons. First it was disclosed in NACLA's Latin America and Empire Report (1975) that the US government's Overseas Private Investment Corporation (OPIC) had lent Cargill Agricola (a wholly-owned subsidiary of Cargill) $2.5 million to build the plant, and the US export-import bank had helped out with loans totaling over $1 million. Critics asked what the government was doing using taxpayer's money to finance expansion of a multinational corporation. The government's position was that it was working to expand US exports to help American farmers and to generate foreign exchange to pay for petroleum imports. American farmers then asked why the US government was promoting Brazil's soybean industry, the arch competitor of the US soybean industry, since exports of soybeans, oil, and meal compete in foreign markets. No answer.
A second controversy arose concerning Cargill's role in the US soybean embargo of 1973. In 1975, after the U.S. Senate Subcommittee on Multinational Corporations held brief and inconclusive hearings on the role of these corporations in American foreign policy, it was suggested that Cargill might have helped precipitate the embargo by placing huge orders for US beans via Tradax, making it look like there would be a large soybean shortage. Prices shot up, until on 13 June 1973 a panicky US government sought authority to embargo soybean exports. (Was this also the time of the Great Russian Grain Sale??) On June 20 Cargill canceled the sale of 28 million bushels, but the Nixon administration still instituted the embargo on June 27. After the embargo was lifted, Cargill canceled an additional 28 million bushels in export orders. In total, Cargill canceled 40% of its contracts during that year. Cargill denied that it was a perpetrator of the soybean panic of 1973. It claimed that its orders and their cancellation were justified by the actual supply and demand situation. Regardless, during 1972-73, soybean crushing margins rose to the highest levels in history, three to five times greater than the profit margins one year earlier. All soybean crushers made huge profits. During 1973, Cargill's sales rose 54% to $5,300 million and profits, though still only a slim 2% of sales, nearly tripled, reaching more than $100 million (Youngblood 1973). It was also claimed that Cargill had been able to use the soybean embargo to promote expanded production in Latin America in order to compete with the American export market and increase corporate independence from the US.
Shortly after the soybean embargo the US government established a system requiring the grain companies to report all export orders exceeding 100,000 tons within 24 hours.
By the mid-1970s Cargill handled about 18% of all US soybean exports and 25% of all US grain and soybean exports.
By 1975 Cargill had twenty soybean crushing plants on five continents around the world. In the US, new plants had been added at Minneapolis, Minnesota and Dayton, Ohio, to bring the total to 14. Overseas, new plants had been added at Reus, Spain and Narrabri, Australia, to bring the total to six.
With the immense profits it generated during the early 1970s, Cargill continued its diversification. By 1978, although it was the world's largest grain trading company, only half its revenues came from this activity; the rest came from other agribusiness activities such as selling seeds, chickens, and fertilizers, operating soybean processing and soy oil refining plants, and the like. In 1978 Cargill owned or leased 12,000 "upstream" grain and soybean elevators in the US.
In 1976 Cargill expanded its soy oil refining operations by opening a large refinery at Gainesville, Georgia, next to its soybean crushing plant. The refinery produced refined edible and hydrogenated oils. During the next few years similar refineries were opened at Chicago, Illinois; Fayetteville, North Carolina; and Hartsville, South Carolina, bringing the total number of soy oil refineries to five by 1980 (including the Des Moines refinery). Most of these plants produced industrial soy oils in addition to the refined edible products. In September 1980 Cargill announced that it would build a sixth soy oil refinery at Wichita, Kansas. Located next to Cargill's crushing facility and costing $12.3 million, it would have the capacity for producing 700,000 lb of refined and hydrogenated edible soy oil and salad oil daily.
In 1980 Cargill also produced defatted soy flour and flakes at Cedar Rapids, Iowa, and textured soy protein (extruded flour), industrial soy flour, and soy oil at Minneapolis, Minnesota.
Cargill's international network in 1981 of 15 soybean crushing plants in the US and 6 overseas, ranging in capacity from 10,000 to 100,000 bushels a day, gave the company maximum flexibility and maneuverability in processing and trading soybeans. Cargill had plants in the two largest soybean exporting countries, America and Brazil, and in the largest market for soybeans and soybean products, Western Europe. Thus Cargill can either export raw soybeans from the US and Brazil, then process them into oil and meal in Europe, or process them close to the point of origin and ship the oil and meal anywhere in the world. Few other refiners of raw materials find themselves in such an enviable position.
Cargill's total operations were also spectacularly successful. Cargill and Continental were the two largest privately held companies in the US. In 1976, Cargill ranked 12th in sales on the Fortune 500 (behind ITT) with $10,700 million in sales, 20,000 employees, and 140 subsidiaries in 36 countries (Chicago Tribune, 14 Nov. 1977). By 1980 sales had reached roughly $12,000 million and annual profits had increased 8-fold since 1972. The soy processing operations clearly played a major role in this financial success story.